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DIVERSION OF GOLD
INTO FREE MARKETS
Monetary Fund Report;
New Resources Policy
WASHINGTON, Tues.-Gold rushes by hoarders
after the outbreak of the Korean war and investment
in industrial or artistic projects diverted half the
world's gold production away from international
money markets in 1950, according to the annual
report of the International Monetary Fund.
This happened despite the op
position of the Fund to any
agreement permitting more gold
to flow into free markets. Non
monetary uses claimed three
quarters of the global output in
the second half of last year
after Korean hostilities had
started, compared with a quar
ter in the first six months.
The 46-nation Fund-a United
Nations body operating since
1947 to facilitate the expansion
of international trade through
the orderly exchange of cur
rencies-instructed its staff urg
ently last March to devise more
effective methods of implement
ing its gold policy, the report
said. This was still under con
sideration.
In the last year, the report
said, the sales of gold by South
Africa for industrial and artis
tic purposes increased marked
ly, and part of this gold doubt
less found its way into premium
markets for hoarding purposes.
In addition, France and some
other countries sold gold from
their monetary stocks to abate
domestic and inflationary pres
sures. These supply factors,
contrasting with the supply
situation before the sterling
block devaluations two years
ago, were part of the explana
tion of markedly lower prices
for gold recently, the report
said.
Exchange Controls
Against the notable decline in
the amounts of world gold out
put entering monetary reserves,
the report said, the Interna
tional Monetary Fund was
adopting a new policy for the
use of its huge resources. In
future the Fund would use its
money to help any country
"willing to run greater risks"
in removing exchange controls
and dollar discriminations.
Sterling had become a much
harder currency and exchange
controls, particularly dollar
discriminations, should be re
laxed whenever possible, the
Fund report advised.
The Fund agreement with its
member-countries provides that
by next March-five years after
the Fund started operations
any member-country retaining
exchange controls on current
payments shall consult the Fund
about keeping them.
The report complained that
the Fund's resources have not
been sufficiently used as a med
ium of promoting international
financial stability. In the last
two years the only business
done by the Fund, an institu
tion costing £1,142,800 sterling
a year to run, had been to pro
vide £10,000,000 sterling to
Brazil.
Inflation
Balance of payment difficul
ties were no longer as acute as
they were, but worldwide in
flationary tendencies had creat
ed new problems, carrying the
seeds of future payment diffi
culties, it was stated. The re
port argued that the widespread
upvaluing of currencies would
be as ineffective in solving the
inflation problem as widespread
deflation was for solving the de
flation problem in the 1930's.
The Fund reaffirmed its be
lief in its system of having fixed
par values for currencies of
member-countries and indicated
that fluctuating rates would be
particularly serious to sterling.
Nomination Of
Australian
The name of Mr. W. S. Rob
inson, adviser to Western Min
ing Corporation and an inter
national financier, has been
submitted to the Federal
Cabinet as the technical ex
pert to accompany the Com
monwealth representative (Pro
fessor F. L. Melville) to the
International Monetary Fund
conference.
The Minister for Transport
(Mr. Simpson) said in the
Legislative Council last night
that the deputation on the gold
mining industry to the Trea
surer (Sir Arthur Fadden) last
month had proposed that a
technical expert should accom
pany Professor Melville. The
Treasurer had agreed to submit
the proposal to Cabinet.
Mr. Simpson said that he had
subsequently been advised that
the name of Mr. Robinson had
been submitted as the technical
nomninee.
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