19. An American Opinion on the Gold Clause of the Pinay Loan

I refer to a passage in the monthly circular of the N adonal City Bank, one of the two or three most important American banks. This circular is respected in the entire economic world for its prudence and sureness of its appreciations. It is looked for with im patience by the men in business and those in the government. It concerns itself this time with the Pinay loan, and especially with the gold clause that is its principal characteristic, and here is what it says about it. I quote textually. "These last two decades have been a period of 200 THE TRIUMPH OF GOLD confusion and of doubt in regard to gold. More and more there has spread the sophisticated opinion that gold was a relic of the past, that the belief in its utility was superstition and a myth worthy at most of coarse and primitive peoples 7 but unworthy of advanced societies. This feeling has been reinforced by the closing, during the war, of the gold mines of the United States and of Canada. Some have de clared that it was the prosaic end of an object which came right after love in the list of human desires, but had no longer any use save to fill sick teeth.

"Yet," continues the' circular, "the absurdity of these opinions [the English word "non-sense" is still stronger than the French word "absurdity"] has been brought to light at one stroke by the ,offer in France of a loan with a gold guarantee. It is not through simple affection for the yellow metal that the French authorities have linked the new securities to gold, but for an eminently practical reason. By that the Pinay government hoped to induce the French public to lend its savings to the Treasury, thus avoiding other inflationary types of financing that would risk reducing still more the value of the franc." The American author thus dismisses at the same time the critics of the gold-clause, who considered it reactionary homage to obsolete ideas, and those who stated that it had nothing original, being but a varie ty, like any other, of indexed loans. He replied in advance to those who, taking as a criterium of the success of the loan the quantity of 201 THE TRIUMPH OF GOLD gold it would bring to the Treasury, easily triumphed when that quantity proved modest.

I have always thought, for my part, that the im portance of the choice made by Mr. Pinay resides less in the amounts of metal recovered by the Bank than in the affirmation, at a particularly opportune time from a national and international point of view, that the only valued standard was gold, by reason of its stability in relation to merchandise and its universal acceptance. But the article of the National City Bank does not concern only France. One may suppose that this position, following the meeting in Mexico of the International Monetary Fund and the Bank for Reconstruction, is aimed also, and even more, at Anglo-Saxon opinion which, once more, will have to revise its doctrines on the subject of the best means for returning to this famous convertibility of the currencies, of which everyone speaks now, but whose conditions so few people sincerely accept. Let us hope that the article which we have just quoted will awaken in them salutary reflection.

202 20 [-las the Free Price of Gold Rejoined Its Official Price? (L'Opinion) October 23, 1952) One of the readers of this paper has asked me the following question: "Since the rate of gold in the free markets is very close to the official American rate of thirty-five dollars per ounce, is there still any advantage in asking for an increase in the price of gold in the United States? Is the official rate at which the United States continues to buy gold not confirmed by the free rate of gold?" I would like to reply in the simplest way possible to this question which observation. of the rates of gold must raise quite naturally in the minds of a large number of persons. Let us state, first of all, that the prices of gold in the free markets continue to be quite artificial. They 203 THE TRIUMPH OF GOLD should not be considered as representing the price which gold would bring if the demand were entirely free. I say "if it were entirely free" because, in fact, the number of markets in which the gold is freely quoted is extremely restricted.