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For Release on Delivery

Statement of Wm. McC. Martin, Jr.
Chairman, Board of Governors of the Federal Reserve System

before the
Subcommittee on Federal Reserve Matters
of the Senate Committee on Banking and Currency

March 29, 1954.

Of the four bills now before this Committee, the one on which
I should like particularly to comment is S. 2332,

This is a bill, as the

preamble states, "To resume the redemption of currency in gold in order
to restrain further deterioration of the dollar and to curb further
inflation. . . ."
Section 2 describes the measure as one to strengthen
confidence in the dollar, to minimize inflationary pressures, to protect
holders of savings bonds, owners of savings deposits and insurance
policies, and those dependent upon pensions, fixed salaries, or wages.
I have frequently referred to the role of the Federal Reserve
System as that of a trustee.
the dollar.

Its cardinal purpose is to help safeguard

Therefore, I would of course subscribe wholeheartedly to

the worthy objectives stated in S. 2332. But as the members of this
Committee know, there is no magic formula and no simple device for
achieving these goals.

Confidence in the dollar rests upon a complex of

important factors of which monetary as well as fiscal policies are an
indispensable part.

In performing its role as a trustee, the Federal

Reserve System's objective is to do what it can not only to prevent
inflation, but also to prevent deflation.

That is why we have traveled

from a policy of monetary restraint when inflationary pressures threatened
early in 1953 to a policy of active ease which has prevailed now for
many months.

- 2-

As I see it, the question before this Committee is this:


it desirable to enact legislation at this time to establish redeemability
in gold now, or, as Section 11 proposes, one year after the date of
enactment of this bill?
It is an easy and familiar tactic to say, "Well, this is not the
time, " if you are against some measure but do not want to say so frankly.
I do not think this is the time for this measure, but I would not go so far
as to say there will never be a time when it might be desirable.


reason for thinking this is not the time is simply that I would see no advantage to be gained, no need for further safeguards, now.
universal confidence in the dollar.

There is

Its value is not being further eroded.

That threat does not hang over us today.

I would see no good reason for

disturbing the present situation by taking this step now, and I would prefer
not to take it.

As I indicated, I can conceive of a situation in which it

might be a definite reassurance.

If the country's solvency were in

question, if we were witnessing a flight from the dollar, then it might help
to regain confidence by making the dollar redeemable in gold as part of a
program of fiscal and monetary reformation.

There might be other

occasions when this measure would be an added reassurance in the minds
of enough people to make itso—


of its inherent merits or

Manifestly, the situation would be entirely different if the

world were at peace, if the fears that now haunt it were banished, and if
there were no iron curtains.


No doubt this step at this time would entail risks.
the Committee to evaluate them.

It is for

Certainly it is worth while to take risks,

even serious ones if necessary, to safeguard the country from even greater

But there is no danger, present or prospective, that this

measure would avert.

I cannot see how the universal confidence that

exists today would be enhanced by this measure at this time.

Under these

circumstances, it seems to me that it is not worth while to take the risks.
I need not assure you that the Federal Reserve System will
continue to do all that it can to minimize inflationary pressures on the
upside and deflationary pressures on the downside.

That is the goal we

all seek.
It seems to me that you have to decide whether you want
S. 2332 before you can decide whether you also want the bills numbered
S. 13 and S. 2364 which contemplate the holding of gold for the public and
the establishment of a free gold market in the United States.

The other

measure before you, S. 2514, in effect proposes the reintroduction of
the bimetalic standard.

I can discover nothing in the history of our

experience with national bimetalism to justify the adoption of such a