47. Memorandum From the U.S. Member of the Board of Executive Directors of the International Monetary Fund (Southard) to the Under Secretary of the Treasury for Monetary Affairs (Baird)0


  • Possible Sale of Gold to the United States by the IMF
I have given some further thought to our recent conversation in your office on the subject of a possible sale of gold by the Fund to the United States, in the light of the prospective substantial drain of gold from the United States to the Fund due to the payments for increases in quota by the United States and other countries.
Since the Fund is not short of U.S. dollars, it would not be legally possible for the Fund to sell gold to the United States in order to replenish its supply of dollars.
The remaining possibility would be an increase in the Fund’s investment portfolio, which at present consists of $200 million in U.S. Treasury bills. I have the following comments to make on this possibility.
A good case can be made for an increase in the Fund’s investment portfolio, in view of the increase in Fund quotas, the consequent decrease in the Fund’s income, and the desirability of increasing the Fund’s reserve accounts.
At the present time the Fund’s reserves amount to approximately $30 million. This is a small figure, compared with IBRD reserves of more than $350 million, and considering Fund assets which will exceed $14 billion after quotas are increased and Fund outstanding commitments amounting to $1.5 billion. It would not be unreasonable for the Fund to have reserves upwards of $100 million. The present Fund investment portfolio yields only $3 million to $6 million per year, depending on the rate of U.S. Treasury bills.
I believe Mr. Jacobsson and the Fund Staff would take the initiative in proposing an increase in the Fund’s investment portfolio, possibly to $500 million.
The following aspects should be considered before I raise this matter strongly with Mr. Jacobsson.
It would probably not be wise to link an increase in the Fund’s investment portfolio with the desire of the United States to obtain gold from the Fund.
Now that other major currencies are approaching full convertibility, there might be a suggestion from other Directors that some of any increase in the Fund’s investment portfolio be placed in currencies other than U.S. dollars.
Now that the Fund has moved from a net deficit to a substantial net surplus position, there might be much lack of enthusiasm among other Executive Directors for an increase in investments. In this event, it would probably not be wise for the United States to appear to attach undue importance to the matter, and to leave most of the initiative to the Fund Management.
If you feel that the possibility of an increase in the Fund’s investment in U.S. Treasury bills would be worth considering, I suggest that we discuss the matter in greater detail in a meeting in your office in the near future.
  1. Source: National Archives and Records Administration, RG 56, Records of the Department of the Treasury, Robert B. Anderson, Subject Files, International Monetary Fund. Official Use Only. Filed with a covering memorandum of June 11 from Baird to Anderson which reads in part as follows:

    “If Frank Southard concludes that he can handle this matter as emanating from the Monetary Fund Board, it seems to me that we should encourage him to try to work it out that way.”