Comments on paper Russian Gold Policy, March 18, 1952

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP75-00662R000100060064-8
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 4
• Document Creation Date: December 9, 2016
• Document Release Date: July 29, 1998
• Sequence Number: 64
• Publication Date: June 9, 1952
• Content Type: MEMO

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Assistant Director, Research and Reports
acting Chief, A/RC
Comments on paperluvaian Go4 ?oU, March 18
2
ppraiaal
4/X10 analysts are of the general opinion that this paper is of
relatively high qie1ity and reflects a reasonable understanding of
the problem with which it is concerned. Certain qualifying comments
have been made and appear belt:* along with a brief, comparative analysis
of Soviet Bloc current gold production, gold stocks, and movements of
gold to the West.
2. 9aintitative Analysis
o. The estimate for ourrnt gold producticn of 300 to 400
o 370 million at the US price of $35 per troy ounce)
bly well with the estimate of $280 million made by an
The papera eatiate for the Russian goldock a minimum
($925 million) considerably below the generally accepted
to 4 billion used by State.
noted that the ratio of production to stocks implied
figures (30 to 40$) is considerably higher than the
7 to 9$4
The total of gold raoventents to the West shown for
million) is less than the general run of eetiiates and
compares with the ORE estimated range of $100 to 300 million.
is interesting to Observe the consistently extreme
of Franz. Pick, NewTork publisher of Pick's World. Currency
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t-
tes of
on
200.250
735-470
70
280
to
280
7-.4%
ld the West, 1950 ,
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These paragraphs all deal with the roA of
There appears to be some confusion
ion gold standard in free markets as
The gold standard can operate only under
ion le that a gold standard country must be
ancis in gold or in an acceptable currency.
ecUld mean la currency that the holder could use
whatever goods he desired from am. country. The other necessary
that the gold standard country must allow its internal price
ectuate in such fashion that a gold inflow or outflow will be
Cre its gold stock is exhaueted.-thus nullifying the first
before it has eccumeleted so auch gold that other countries'
exhauetede-agein nullifying the first condition for the
If these two ccnditions are fulfilled, then the price of
one country will be related to the price of goods in *7 other
uch fashion as to make the currencies of :ll countries mutually
It should be noted that suoh a currency standard would not
eve to be gold based. All countries in a given trading area
to use peanuts?or rubles?and the same reasoning would aPAY
d that the above cited conditions were fulfilled.
Applying these criteria to the situation in the Soviet Bloc,
evident that an announcement that the ruble has a fixed relation
does not mei that the ruble is an international or even intraebloo
currency. An so cumulation of rubles by Hungary cannot be used to beer
anything inside the Bloo unless prior proiieton is made for the transaction
in the economic plea: (It is not clear to what extent the economic plans
are flexible enough to permit unplanned transactions.) By the same teken,
there is no mechanisn whereby a Bloc country running a continuous deficit
in rubles would be able to adjust its price level to reverse the tendency
tavard deficit. Of course it is possible that deficits could be handled
by loans or gifts from the surplus country, just as they are in the West.
But thisvould mean th*t the deficit country halt an over-valued currency
and the marketoncrective mechanism would be rendered inoperative. The
existence of. comprehensive physical unit plan seems to insure that an
international currency standard of any meaning cannot exist in the Bloc
at present. Admitting some flexibility into theelan might modify this
conclusion.
The difficulty of oari7ing on internationalnge wtthut a real
currency unit Is shown by the practice of making tra.noc trade agresaento
in terms of Western currency. The evidence indicates that ruble prices
for iutraeOloc trade are derived by multiplying Western prices by the
rnble.doUazu official conversion rate of 4 to 1. In effect, the Bloc is
lying on the Western free market to determine the value of commodities
and then disguising the mechanism by converting the Western value to rub
4, See W. A. Brown, Jr',
194te Volume I, Ch. 2.
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Gold
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American purchases in the USSR have daIined
not ceased. rept, of Commerce Report Ft 120,
shove that the
price
Lye bee
below mar
nor received
ombined is exactly
tween the two would be
method of changing the distribution
n the Bloc exporter and the Western
on increase of total funds available
the Moo exporter must turn his Western
p who can then ship the currency to the
for subvercive purposes.
1 Enclosure
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WIC/ 1==leite
Distributions
0 & 1 Addressee iv
1 BC file
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