Efficient expansion at home, stimulating the new plant and technology that
can make our goods more competitive, is also the key to the international
balance of payments problem. Laying aside all alarmist talk and panicky
solutions, let us put that knotty problem in its proper perspective.
It is true that, since 1958, the gap between the dollars we spend or
invest abroad and the dollars returned to us has substantially widened.
This overall deficit in our balance of payments increased by nearly $11
billion in the 3 years--and holders of dollars abroad converted them
to gold in such a quantity as to cause a total outflow of nearly $5
billion of gold from our reserve. The 1959 deficit was caused in large
part by the failure of our exports to penetrate foreign markets--the
result both of restrictions on our goods and our own uncompetitive
prices. The 1960 deficit, on the other hand, was more the result of an
increase in private capital outflow seeking new opportunity, higher
return or speculative advantage abroad.
Meanwhile this country has continued to bear more than its share of the
West's military and foreign aid obligations. Under existing policies,
another deficit of $2 billion is predicted for 1961--and individuals in
those countries whose dollar position once depended on these deficits for
improvement now wonder aloud whether our gold reserves will remain
sufficient to meet our own obligations.
All this is cause for concern--but it is not cause for panic. For our
monetary and financial position remains exceedingly strong. Including our
drawing rights in the International Monetary Fund and the gold reserve held
as backing for our currency and Federal Reserve deposits, we have some $22
billion in total gold stocks and other international monetary reserves
available--and I now pledge that their full strength stands behind the
value of the dollar for use if needed.
Moreover, we hold large assets abroad--the total owed this nation far
exceeds the claims upon our reserves--and our exports once again
substantially exceed our imports.
In short, we need not--and we shall not--take any action to increase the
dollar price of gold from $35 an ounce--to impose exchange controls--to
reduce our anti-recession efforts--to fall back on restrictive trade
policies--or to weaken our commitments around the world.
This Administration will not distort the value of the dollar in any
fashion. And this is a commitment.
Prudence and good sense do require, however, that new steps be taken to
ease the payments deficit and prevent any gold crisis. Our success in world
affairs has long depended in part upon foreign confidence in our ability to
pay. A series of executive orders, legislative remedies and cooperative
efforts with our allies will get underway immediately--aimed at attracting
foreign investment and travel to this country--promoting American exports,
at stable prices and with more liberal government guarantees and
financing--curbing tax and customs loopholes that encourage undue spending
of private dollars abroad--and (through OECD, NATO and otherwise) sharing
with our allies all efforts to provide for the common defense of the free
world and the hopes for growth of the less developed lands. While the
current deficit lasts, ways will be found to ease our dollar outlays abroad
without placing the full burden on the families of men whom we have asked
to serve our Flag overseas.
In short, whatever is required will be done to back up all our efforts
abroad, and to make certain that, in the future as in the past, the dollar
is as "sound as a dollar."