The Fund has concluded that it has implied powers to sell a portion of its gold in order to invest the proceeds, on certain conditions, in order to earn income for certain limited purposes.²⁷ The proceeds have been invested in U. S. Government securities ranging from Treasury bills having not more than 93 days to run to 15-month Treasury securities. One of the problems that had to be resolved before the investment program was undertaken was whether the gold value of the securities would be maintained under Article IV, Section 8. Subsections (b), (c), and (d) all refer to the Fund’s currency holdings. However, subsection (a) refers to the Fund’s “assets.” It had already been decided in connection with the application of Article IV, Section 8, to fluctuating currencies that subsection (a) had independent substantive effect and was not merely a preamble adding nothing to the rest of Section 8. It had also been decided in connection with the same issue that “assets” included currency holdings. Therefore, the further problem was whether the word went beyond currency holdings and would embrace the securities in which the Fund would invest. It was of no assistance in solving this problem that the gold value of the non-negotiable, non-interest bearing securities that members may substitute for currency under Article III, Section 5,²⁸ must be maintained in gold value, because Article XIX(f)²⁹ provides expressly that these securities are to be regarded as currency holdings.

The Fund decided that the securities would be “assets” under Article IV, Section 8(a). The normal meaning of the word went beyond currency, and there was internal evidence in the Articles to support this. For example, Article XIII, Section 2(a),³⁰ prescribed the depositories for the Fund’s currency holdings. Section 2(b)³¹ dealt with the depositories for “other assets, including gold.” It was clear from this and other provisions that in the minds of the drafters the word “assets” included currency, gold, and other (unspecified) holdings. It was concluded that there was no case for attributing an artificially narrow meaning to the word “assets” in Section 8(a) which would exclude the securities in which the Fund invested. It was not part of the legal reasoning that in this case the securities would be acquired in effect for gold, i.e., by the sale of gold to the United States and investment of the proceeds in U. S. obligations.

Another question that had to be decided was the party or parties on which the duty to maintain the gold value of the securities rested under Section 8(a). That provision declares that “the gold value of the Fund’s assets shall be maintained” but does not state which entity must discharge this obligation. The Fund itself can call for performance of the obligation and can apply sanctions for nonperformance, although it can do nothing beyond this to maintain gold value. It is conceivable that all members would bear the burden proportionately; but this could mean that the member devaluing or depreciating its currency would place most of the burden on other members, and for them this would be a foreign exchange loss. It was decided that in view of the nature of the obligation, namely to maintain gold value notwithstanding changes in the par or foreign exchange value of a currency, the implication, particularly in the light of the other subsections, was that the obligation had to be discharged by the member that made or permitted the change in the value of its currency.

The Fund’s decisions on investment also deal with the procedure by which the gold value of the securities is to be maintained. It was decided that if there is a change in the par or foreign exchange value of the U. S. dollar while the Fund is holding the securities, the obligation of the United States is to be discharged on the sale or maturity of the securities. That is to say, the adjustment is made between the Fund and the United States when the securities are next turned into dollar proceeds after the change of par or foreign exchange value. The income yielded by the securities, however, is not included in the proceeds that are adjusted, on the theory that the income was not part of the Fund’s holdings at the time of the change in par or foreign exchange value. It has been seen that the obligation under subsections (b) and (c) to maintain gold value relates to currency held by the Fund at the date of the change in par or foreign exchange value. The same principle applies to the maintenance of the gold value of “assets” under subsection (a).

As income not yet realized or due at the date of the change was not part of the Fund’s currency holdings at that date, it is not regarded as part of the value of the securities at that date. Two points must be made in this connection. First, the adjustment of the proceeds of the securities (less income) does not imply any departure from the principle that the duty to maintain gold value applies only to existing currency holdings or assets. It is still the gold value of the securities held at the date of the change in par or foreign exchange value that is being maintained, but as a practical procedure this is done by adjusting the proceeds when next realized after the change. Second, it must not be assumed that income from the investment is excluded by its nature from Article IV, Section 8. It is excluded in the circumstances described only because it was not realized or due at the date of the change in par or foreign exchange value. Once received, however, the income goes into the Fund’s fungible holdings of U. S. dollars, and the gold value of all of them will be maintained if there is any subsequent change in par or foreign exchange value.

Before the investment was undertaken, the question of the effect of a loss was discussed on the assumption that the Fund invested in securities that could be sold before maturity at a loss in relation to the purchase price. It was established that maintenance of the gold value of the securities as assets of the Fund protects the Fund against only one possible reduction in their value, i.e., the reduction that would follow from diminution in the par or foreign exchange value of the U. S. dollar. There is no general guarantee of the value of the securities. Therefore, if it is assumed that the Fund invests in securities that can be sold at a loss before maturity, and that a loss does occur, the decisions do not require that the Fund be compensated for this loss. If there is a change in the par or foreign exchange value of the U. S. dollar, only the dollars realized on sale before maturity will be maintained in gold value, and there will be no adjustment for any loss attributable to the fact that fewer dollars are realized before maturity than the purchase price of the securities. If that risk of loss were to exist, the Fund would have to assume it because nothing in Article IV, Section 8, protects the Fund against losses that do not result from reductions in the gold or foreign exchange value of a currency.