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Special Message to the Congress on Gold and the Balance of
Payments Deficit. February 6, 1961



To the Congress o f the United States:
The gold outflow of the past three years has dramatically focused world attention on a fundamental change that has been occurring in the economic position of the United States. Our balance of payments - the accounting which shows the result of all of our trade and financial relations with the outside world - has become one of the key factors in our national economic life. Mainly because that balance of payments has been in deficit we have lost gold.
This loss of gold is naturally important to us, but it also concerns the whole free world. For we are the principal banker of the free world and any potential weakness in our dollar spells trouble, not only for us but also for our friends and allies who rely on the dollar to finance a substantial portion, of their trade. We must therefore manage our balance of payments in accordance with our responsibilities. This means that the United States must in the decades ahead, much more than at any time in the past, take its balance of payments into account when formulating its economic policies and conducting its economic affairs.
Economic progress at home is still the first requirement for economic strength abroad.
Certain firm conclusions follow:
1. The United States official dollar price of gold can and will be maintained at $35 an ounce. Exchange controls over trade and investment will not be invoked. Our national security and economic assistance programs will be carried forward. Those who fear weakness in the dollar will find their fears unfounded. Those who hope for speculative reasons for an increase in the price of gold will find their hopes in vain.
2. We must now gain control of our balance of payments position so that we can achieve over-all equilibrium in our international payments. This means that any sustained future outflow of dollars into the monetary reserves of other countries should come about only as the result of considered judgments as to the appropriate needs for dollar reserves.
3. In seeking over-all equilibrium we must place maximum emphasis on expanding our exports. Our costs and prices must therefore be kept low; and the government must play a more vigorous part in helping to enlarge foreign markets for American goods and services.
4. A return to protectionism is not a solution. Such a course would provoke retaliation; and the balance of trade, which is now substantially in our favor, could be turned against us with disastrous effects to the dollar.
Bill C. will love bullet number 3