Chapter

Address by the President of the United States of America1

Author(s):
International Monetary Fund. Secretary's Department
Published Date:
November 1962
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Author(s)
John F. Kennedy

This is my first opportunity to take part in your Annual Meetings and to welcome you here to Washington—and I do so with genuine pleasure. For you are concerned with the problems which have been among my primary concerns since the day I took office exactly 20 months ago; and in that time I have learned how vital a role is played by the International Monetary Fund and the International Bank for Reconstruction and Development and its affiliated institutions. The work of the International Development Association is particularly important, and this country fully supports the proposal that the Executive Directors develop a program to increase its resources.

The pioneering practices of the Bank—which have set a standard for others to follow—will sorely miss the services of Eugene Black. I hope he will permit us to call upon his wise counsel in the future, and that the rest of us, in pursuing the goals which he set, will increase our own efforts—including efforts in the industrialized countries to provide greater capital assistance to the less developed areas; efforts also in the industrialized countries to maintain at home prosperous and easily accessible markets for the products of the growing nations; efforts to reach commodity agreements and other arrangements which will help stabilize the export earnings of those nations; and, finally and most importantly, greater efforts in the developing nations themselves to mobilize effectively their own people and financial resources, and to make certain that the benefits of increased output are shared by the many and not by the few.

In addition to these discussions on the role of the Bank, your meetings this year, as they did last year, are giving top attention to the state of the dollar—and that has been at or near the top of my own agenda throughout the last year and a half.

We in the United States feel no need to be self-conscious about discussing the dollar. It is not only our national currency; it is an international currency. It plays a key role in the day-to-day functioning of the free world’s financial framework. It is the most effective substitute for gold in the international payments system. It the dollar did not exist as an important reserve currency, it would have to be “invented”—for a volume of foreign trade already reaching $130 billion a year and growing rapidly, accompanied by large international capital movements, cannot rest solely on a slowly growing stock of gold which now totals only $40 billion.

The security of the dollar, therefore, is and ought to be of major concern to every nation here. To undermine the strength of the dollar would undermine the strength of the free world. To compete for national financial security in its narrowest sense by taking individual actions inconsistent with our common goals would in the end only impair the security of us all.

I recognize that this nation has special responsibilities—as one of the leaders of the free world, as its richest and most powerful nation, as possessor of its most important currency, and as the chief banker for international trade. We did not seek all of these burdens, but we do not shrink from them. We are taking every prudent step to maintain the strength of the dollar, to improve our balance of payments, and to back up the dollar by expanding the growth of our economy.

We are pledged to keep the dollar fully convertible into gold, and to back that pledge with all our resources of gold and credit. We have not impaired the value of the dollar by imposing restrictions on its use. We have not imposed upon our citizens in peacetime any limitations on the amount of dollars they may wish to take or send abroad. We have followed a liberal policy on trade. And we have continued to supply our friends and allies with dollars and gold to rebuild their economies and defend their freedom.

All this we have willingly done. No other country or currency has borne so many burdens. But we cannot and should not bear them all alone. I know that other countries do not expect us to bear indefinitely both the responsibilities of maintaining an international currency and, in addition, a disproportionate share of the costs of defending the free world and fostering social and economic progress in the less developed parts of the world. Concern over our imbalance of payments is not our concern alone—for it is not caused by our own narrow self-interest. Our deficit this year is expected to approximate $1½ billion, a considerable improvement over last year’s $2½ billion and even higher deficits in the years before. But our total gross military expenditures abroad are $3 billion alone. Our dollar aid expenditures abroad are $1.3 billion. The dollar itself is strong, and our commercial trade, excluding exports financed by AID, produces a surplus of nearly $3 billion. In short, our balance of payments deficit is not the result of any monetary or economic mismanagement, but the result of expenditures our people have made on behalf of the people of the free world.

In 1946 the United States held over 60 per cent of the world’s supply of gold. Now we are down to 40 per cent. And during that time we have spent some $88 billion overseas for the defense and aid of others. The European nations alone received some $26 billion in economic aid. The United States as a result no longer has a disproportionate share of the free world’s gold, economic strength—or economic responsibility.

That is why I emphasize once again: these are not American problems, they are free world problems. They are problems which cannot be met by one nation in isolation or by many nations in disarray. They are not the sole concern of either the rich or the poor, of either deficit or surplus nations alone. When burdens are shared, there is no undue burden on any nation. When risk is shared, there is less risk for all. And cooperative efforts to defend the international currency system based primarily on the dollar, and to share other responsibilities, are not, therefore, based on appeals to gratitude or even friendship, but on the hard and factual grounds of self-interest and common sense.

Of course, the United States could bring its international payments into balance overnight if that were the only goal we sought. We could withdraw our forces, reduce our aid, tie it wholly to purchases in this country, raise high tariff barriers, and restrict the foreign investment or other uses of American dollars. Such a policy, it is true, would give rise to a new era of dollar shortages, free world insecurity, and American isolation; but we would have “solved” the balance of payments.

But the basic strength of the dollar makes such actions as unnecessary as they are unwise. They would not only be inconsistent with the role of the United States in the world today; they would, because of the crucial role of the dollar, be utterly self-defeating. All of us here are determined to follow the only other feasible course—not the unacceptable courses of restriction and isolation, or deflation, but the course of true cooperation, of liberal payments and trade, of sharing the cost of our NATO and Pacific defenses, of sharing the cost of the free world’s development aid, and of working together on steps to greater international stability, with other currencies in addition to the dollar bearing an increasing share of its central responsibilities.

We in the United States recognize that our own obligation in this regard includes, as a matter of the first priority, taking action to eliminate the deficit in our balance of payments, and to do so without resorting to deflation or retreating to isolation.

I have spoken frankly at this meeting because these two successful institutions, the Bank and the Fund, have long flourished in a spirit of candor, and have consistently shown a reliable capacity to respond both flexibly and effectively to new needs and new challenges. This spirit of cooperation and candor and initiative will, I know, continue in the future. For only in this spirit can we hope to maintain a sturdy free world financial system, with stable exchange rates, capable of supporting a growing flow of trade and foreign investment free from discrimination and restrictions.

I have spoken frankly, moreover, because I believe the current strength of the dollar enables us to speak frankly and with confidence. Some sharing of responsibilities has already been achieved. Considerable progress in the balance of our international accounts has been made. A new agreement among ten industrialized countries to supplement the resources of the Fund, with special borrowing arrangements of up to $6 billion, has been concluded, and implementing action will be completed by the United States Congress within the next few days or weeks. Less formal arrangements between the major trading countries have also been evolved to cope with any potential strains or shocks that might arise from a sudden movement of capital. These arrangements, I should add, contain within themselves the possibility of wider and more general application, and this country will always be receptive to suggestions for expanding these arrangements or otherwise improving the operation and efficiency of the international payments system.

All of this is ground for confidence—for making it increasingly clear that no extreme or restrictive measures are needed, that speculation against the dollar is losing its allure, and that the economy of the United States can continue to expand in a framework based on the maintenance of free exchange and the early achievement of equilibrium. The expansion in our domestic economy, while not all that we had hoped, has been substantial, and, of equal importance, it has been accompanied by price stability. Wholesale prices for industrial goods are actually lower today than they were during the recession months of 1961.

Nevertheless, I do not underestimate the continuing challenge which faces us all together. The very success of our efforts—the very prosperity of those who have prospered—imposes upon us special obligations and special burdens. Centuries ago the essayist Burton referred with scorn to those who were “possessed by their money” rather than possessors of it. We who are meeting here today do not intend to be mastered by our money or by monetary problems. We intend to master them, with unity and with generosity, and we shall do so in the name of freedom.

Delivered at the Second Joint Session, September 20, 1962.

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