To Maintain the Dollar

November 21, 1960

The most urgent problem that confronts the President-elect is to remove any suspicion or misgiving concerning the future of the American dollar. This issue cannot be postponed until he takes office on Jan. 20. It must be met now. For the dollar and gold are being traded in on every business day in the markets of the world. Their movements between countries, and the quotations on them, will be governed in the next nine weeks not only by what “speculators,” but investors, importers, exporters, and the great central banks think is going to be done about the dollar by the new Administration.

The first need, therefore, is for Mr. Kennedy to reaffirm the pledge he gave during the campaign not to “devalue the dollar from the present rate.” There are several reasons why this reaffirmation is necessary.

The first is to reassure all foreign governments and banks and holders of dollar assets everywhere that the pledge of Oct. 30 was not merely something said to win an election, but a deep determination that can be reiterated now that Mr. Kennedy has nothing to gain from doing so but his country’s honor and prestige.

NO REPETITION OF ’33

What must be at all costs averted is a repetition of what happened between the election of 1932 and the transfer of power on March 4, 1933. On Nov. 4, 1932, four days before the election, Franklin Roosevelt declared in a major campaign speech at the Brooklyn Academy of Music:

“One of the most commonly repeated misrepresentations of Republican speakers, including the President [Hoover], has been the claim that the Democratic position with regard to money has not been made clear. . . . The businessmen of the country, battling hard to maintain their solvency, were told in blunt language in Des Moines how close an escape the country had some months ago from going off the gold standard. But that, as has been clearly shown since, was a libel on the credit of the United States. . . . No responsible government would have sold to the country securities payable in gold if it knew that the promise, yes the covenant, was as dubious as the President of the United States claims it was.”

Yet when President Hoover after the election tried in a confidential letter to get President-elect Roosevelt to give “prompt assurance that there will be no tampering or inflation of the currency” the President-elect refused to give it. Indeed, he refused all cooperation in the interregnum period on the ground that “it would be unwise for me to accept an apparent joint responsibility with you when, as a matter of constitutional fact, I would be wholly lacking in an attendant authority.”

ROLE OF THE FED

Notwithstanding his pre-election pledge, Roosevelt, a few days after his inauguration, asked for and got emergency powers not merely to go off the gold standard, but to make it unlawful for any American to own gold or gold coins, gold bullion, or gold certificates.

That is why a reassertion of the pre-election gold pledge of Mr. Kennedy is so essential now to maintain confidence in the dollar. But while such a reassertion is necessary, it is not enough. Mr. Kennedy must also give assurance that the policies he intends to follow on government spending, taxes, avoidance of deficits, non-interference with efforts of the Federal Reserve to maintain monetary discipline and anti-inflationary interest policy will be such as to make the pledge meaningful.

Responsibility is not, of course, wholly upon Mr. Kennedy to maintain confidence in the dollar. The Eisenhower Administration must co-operate to the full. Above all, the Federal Reserve authorities must cooperate. It was highly unwise of them to reduce the discount rates from 4 to 3½ percent in June, and still more unwise of them to reduce it from 3½ to 3 percent in August. These reductions did not stimulate American business; they chiefly caused further loss of gold, further loss of foreign confidence in our determination to maintain the integrity of the dollar. The discount rate should be restored to 4 percent, both as a practical measure and as a symbol of that determination.