856D.13/5–851: Telegram
The Secretary of State to the Embassy in Indonesia
1206. Pleased learn postponement implementation proposal for gold sales. Possible further approach Indonesian officials in view postponement entirely at your discretion. Of course, US would not wish give impression attempting determine decision Indo Govt this matter or imply Fund gold policy extends purely domestic sales.
Following info may be useful: Value of domestic gold sales as a monetary policy is still controversial. US has generally opposed it, particularly for countries receiving US aid, as being wasteful use of fon exchange. However, in Greece, where public strongly addicted to [Page 647] sovereigns, their pegging by public sale at ceiling price has probably helped keep prices more stable than they would otherwise have been. In China, gold program reportedly involved favoritism for wealthy and insiders and even when sales were public and impartial, program was of questionable effectiveness under rapidly deteriorating conditions. Policy is often in danger of becoming excuse for not taking other more essential, less palatable reforms; once introduced it tends to perpetuate itself and to resist discontinuation.
Mexico has long sold gold coins with results of unknown value. Most Latin American, all Middle Eastern, and certain Continental European countries allow private gold purchases through one channel or another, with results difficult to evaluate. In some cases however motive might be to create additional profitable business for local banking industry.
So far we have not heard reports of the special conditions under which a plausible case might be made for value of such a program in Indonesia.1
- In telegram 1603 from Djakarta, May 16, Ambassador Cochran reported that Mr. Djuanda had informed him that the plan for permitting the private purchase of gold had not been put into effect, and that Mr. Djuanda “thinks final decision against proposal may be taken by govt economic financial comite 17th.” (856G.13/5–1651)↩