SETTLEMENT OF THE U.S. BALANCE OF PAYMENTS IN JUNE 1965

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80-01503R000100060012-4
• Release Decision: RIFPUB
• Original Classification: C
• Document Page Count: 9
• Document Creation Date: December 12, 2016
• Document Release Date: May 24, 2001
• Sequence Number: 12
• Publication Date: September 8, 1965
• Content Type: MEMO

FedgralReserve System DecIassific i,p ReI Instructions on File
Approved For Release 20022"/ s cj, lg, 0-01503R000100060012-4 Q 1
FEDERAL RESERVE BANK
RESEARCH MEMORANDUM
To Mr. Coombs
From J Karlik and K. Merlo
OF NEW YORK R
0103529 (S__
Date September 8, 1965
Subject settlement of e U. S .
Balance of Payments Division . / Balance of Payments \in June 1965
Copies To Messrs: Hayes) Treiber, Bilby, Garvy, Holmes, Link, Sanford,
Waage, Fousek, Lang, Marsh, Sternlight, Bodner,
R.G. Davis, Geng, Klopstock, MaoLaury, Miss McWhinney,
Messrs. Meek, Schott, Auerbach, S.V.O. Clarke, Deming,
Hein, Reed, Schadrack, and Serex.
.CONFIDENTIAL--(T.
Noll Fop' PUBLICATr. ,^7
?
The United States realized a $?-6 million balance-of-payments
surplus R/during June (see Table I), only $26 million less than that
recorded for May. This performance must be regarded as exceptional,
because our balance normally deteriorates markedly in June, owing
to increased tourist payments and other adverse seasonal factors o In
fact,, the month's surplus was the first for a June since 195 - . It
helped produce a surplus for the second quarter of $203 million, and
caused our international payments for the first six months also to
register a modest surplus (unadjusted).
U.S. monetary reserves rose by $342 million during June
(Table I). This gain stemmed from an increase in our holdings of
foreign currencies. There was a large gold outflow during the month,
but most of this resulted from the $259 million gold subscription
paid to the IMF; the payment established an equivalent claim on the
Fund and thus had no net impact on our reserve position. Our reserve
gain was partially counteracted by a $325 million increase in foreign-
ers' liquid claims. Private foreigners' claims increased by $ 80
1 Calculated as the increase in U.S, monetary reserves less the in-
crease in liquid liabilities to all foreigners. These liabilities
are defined to include foreign official holdings of special U.S.
Government convertible r-onmarketable bonds.
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%Vol
Balance of Payments, June 1965
In millions of dollars)
Liquid claims of foreigners on U.S.:
Foreign countries:
Short-term claims
Official
Private
Total `
+246
+ 83
+329
U.S. Government notes and bonds
Official
Private
+ 14
Total
Total foreign countries
+343
International and regional institutions (exc. IMF):
Short-term claims
U.S. Government notes and bonds
Total international and regional institutions
- 17
Total liquid claims of foreigners on U.S.:
+326
U.S. monetary reserves (signs reversed):
Gold
+313
Convertible currencies
-397
IMF position
-258
Total
-342
Net gains by foreigners ,
September 7, 1965
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million, while official claims rose by $21i6 million. Despite this
Increase in official claims, the growth in U.S. monetary reserves
enabled this country to record a surplus2/ on official transactions
of $96 million, an improvement of $231 million over the May figure.
U.S. Gold and Foreign Currency Reserves
The $313 million June outflow of United States gold was
almost three times that of May, but was still less than the $ 355
million outflow in March. The major portion of the June loss re-
sulted from our $ 259 million gold subscription to the IMP. Among
foreign countries, France continued to take the largest amount, $ 34
million. However, this was the third consecutive monthly decline
in the quantity of "excess" dollars France converted into gold.
Austria made her regular monthly purchase of $12 million, and several
countries, including Brazil, purchased about $2 million worth of gold
to be used for payments to the IMF. The remaining $LO million of gold
sold during June was apparently to U.S. residents for industrial and
artistic purposes. our gold losses were offset to a marginal degree
by a purchase of $5 million from Colombia, which is continuing to
experience payments difficulties.
U.S. holdings of convertible currencies rose by the equiv-
alent of $397 million during June. Sterling-dollar swaps in response
to renewed pressure on the pound accounted for $350 million of this
increase. Purchases of Deutsche marks resulted in an additional
gain of $37 million. The rise in U.S. holdings of foreign currencies
was limited slightly by losses of $3 million in Dutch guilders and
2 Calculated as the increase in U.S. monetary reserves less the
increase in liquid liabilities to official foreigners.
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$ 5million in Canadian dollars. Finally, our holdings with the BIS
drelined by $12 million, primarily as the result of the liquidation
of dollar-Swiss franc swaps.
The $258 million improvement in our IMF position represented
almost entirely the claim on the Fund arising from our 1259 million
gold subscription.
Country-by-Country Review
Once again settlements vis-'-vis the United Kingdom dom-
inated gross monthly changes in these items. Our short-term liabil-
ities to British offficials expanded $251 million, largely as the
counterpart of the $380 million sterling-dollar swap mentioned above.
Private U.K. short-term claims on this country grew by $182 million,
in addition to private purchases of $ 9 million worth of long-term
U.S. Government securities. This gain in non-official holdings
may have resulted partially from the June improvement in Britain's
trade balance, as well as from the possible transfer into the U.K.
of Canadian chartered bank U.S.-dollar assets.
Within Europe, declines in short-term liabilities to Germany
constituted the primary offset to these increases in British hold-
ings. Although sales of marks by German officials to U.S. authorities
totaled $37 million, their short-term claims on this country fell by
$ 92 million. A $79 million drop in private German claims reflected,
in part, a reduction in Bundesbank dollar swaps with commercial
banks; this decrease in outstanding swaps also tended to expand offi-
cial dollar assets. German official losses, which occurred in spite
of these opposing factors, apparently resulted from the need to fi-
nance additional German payments deficits.
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Most other Continental nations acquired short-term claims on
the United States during June. Despite gold purchases totaling $ 34
million, French official claims increased marginally (by $4 million).
French private short-term claims also rose, by $35 million. Continued
strength in Italy's payments was manifested by an $87 million ex-
pansion of its official short-term claims on the United States.
Italian private claims on this country, however, declined slightly
(by $3 million). Swiss official short-term claims grew only $4+
million, but similar private holdings expanded by $97 million. The
only substantial decline was a $51 million fall in Belgian private
short-term claims, partially offset by an $ 9 million rise in sim-
ilar official assets. Some of these gains by Continental nations
might have been the counterpart of German losses and of expenditures
by the United Kingdom from its dollar reserves.
After a small decline in dollar holdings during the pre-
vious month, Canadian authorities relinquished $30 million of dollar
reserves in June, and private residents lost $ 76 million. A portion
of these declines resulted from the seasonal repatriation of U.S.
corporate funds deposited in Canada, but the financing of recent
Canadian trade deficits most likely also contributed to them.
Latin American countries accounted for an unusually large
number of substantial changes in settlement accounts. Argentina and
Brazil each lost about $30 million of official dollar reserves . These
two nations have recently had to contend with heavy debt-financing
burdens, in addition to other payments difficulties. Chilean offi-
cials gained $ 33 million of short-term dollar assets; this increase
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might have resulted partially from the May rise in copper prices,
but most of it probably reflected the effects of import conteo is
that were instituted some time ago. Mexico, on the other hand, lost
$33 million of dollar reserves, and private Mexican short-term claims
on the U.S. fell by $ 8 million. An economic boom accompanied by
some inflation has lately been inducing an unusually high level of
imports into Mexico. Venezuelan official dollar holdings declined
by $ 35 million, and similar private assets dropped $'9 million;
these decreases reflected not only seasonal factors but also re-
payment by the Venezuelan authorities of a $ 10 million long-term
loan.
After a $ 6 million deterioration in May, short-term liabil-
ities to Japanese authorities rose $29 million in June. Private
Japanese short-term claims, however, grew by merely $ 4 million,
after a $ 56 million expansion the previous month.
Alternative Balances
Since there were no special U.S. Government nonliquid
transactions in June, Ithe balance on regular transactions (Balance
1 in Table iii) was the same as the $16 million surplus on regular
and special nonliquid transactions (Balance 2). Similarly, since no
sales of nonmark:table convertible U.S. Treasury bonds occurred, the
surplus on regular and all special Government transactions (Balance
3) also totaled $ i6 million.
With the possible exception of military prepayments, which are
calculated on a quarterly basis only.
OFF.
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The balance on official settlements as calculated by this
Bank (Balance 4) is given by the increase in U.S. monetary reserves
less the increase in liquid liabilities to official foreigners. The
official settlements balance proposed by the Bernstein Committee
(Belance5) is computed in the same way, with the exception that
foreign official holdings of special U.S. Government nonmarketable
nonconvertible bonds and participations in Export-Import Bank loans
are treated in the same manner as liquid liabilities. Also, accor-
ding to the Committee, loan prepayments by official foreigners must
be included in the total as a factor enlarging deficits or reducing
surpluses. Since no loan prepayment, Ex-Im sell-off, or sale of a
special nonmarketable nonconvertible bond occurred during June, both
of the official settlement balances recorded the same $ 96 million
surplus.
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Changes in Foreigners' Liquid:Assets..in the U.S.
and U.S. Monetary Reserves, June 1965
In millions of dollars)
Net foreign
purchases (+)
Changes in U.S. monetary
reserves (signs reversed)
U.S. gains (-) or :losses (+)
- vis-.-vis
Changes in short-
term claims on
of U.S.
Government
bonds and
notes
Gold
Convertible
currencies
and IMF
position
All
Foreigners
Official-
Foreigners
-the U.S.
ate
i
P
Official
v
r
+ 28
+.27
+ 15
+ 1
Austria
Belgium
+ '9
+ 4
- 51
+ 35
+ 34
-42
+ 73
+ 9
+ 38
France
- 37
-208
-129
German
- 92
- 79
8
+9o
y
Italy
+ 87
- 3
+ 3
+
7
- 6
- 2
Netherlands
- 2
+ 23
- 4
+ 4
+27
+23
Norway
+ 34
+ 32
+ 32
+ 2
Spain
- 30
- 20
20
- 10
Sweden
-
+109
+ 4
d
l
+ 4
+ 97
+ 8
12
an
Switzer
dom
d Ki
t
+251
+182
+ 9
-38o
+ 62
9
-
+79
ng
e
Uni
+12
+89
+67
+10
Other Europe
+378
+184
+ 46
-402
t223
+ 22
- 30
- 76
+ 5
-loo
- 25
Canada
- 27
- 29
Argentina
- 29
- 28
+ 2
- 2
-29
-27
Br zit
+ 36
+ 33
Chile
+ 33
+ 3
-26
-12
i
- 7
-14
3
a
Colomb
- 33
- 8
- 41
- 3
5
Mexico
Venezuela
-35
+ 29
-29
+ 4
64
+ 33
-3
+ 29
Japan
- 1
- 20
2
+ 19
All other foreign
_ 3
Total foreign
+246
+ 83
+14
+54
.-397
-17
- 97
International and regional institutions
+259*
-258
+ 1
+ 1
IMF' position
Grand total
+246
+Tb
+ 313
- 16
6
C, S. gold subscription to IMF
September 7, 1965
cn
F~`I
CD
~ffi~
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 Table III
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U.S. Balance of Payments
(In millions of dollars; (+) = deficit)
Commerce Department Data FRBNY data!
1963 1964 1964 1965. 1965
Year Year I II III IV it - IIP~J June
(1)
Balance on regular
6,
+1
021 021
554
+1
+239
- 37
- 16
transactions
+3,287
+3,106
-
595
+595
,
,
,
56)
(+
(- 8 )
(seasonally adjusted)
(+41,70
(+545)
(+ 593)
(+I ~51)
7
(2)
Balance on regular and
special Government
6
4
+17
-203
- 16
nonliquid transactions
+2,670
+2,798
-224
+632
+1,021
+1,3
9
6
(+6
1)
(-253)
(seasonally adjusted)
(+257)
(+582)
(+ 593)
)
(+1,36
9
(3)
Balance on regular and
all special Government
8
8
+1
319
+123
-203
- 16
transactions
+1,967
+2,423
-224
+510
+
1
,
16)
(+640)
(-253)
(seasonally adjusted)
(+257)
(+460)
(+ 390)
(+1,3
(4)
Official settlements
balance
+2,051
+1,244
-451
+518
+ 459
+ 718
- 18
-"39
- 96
(5)
Official settlements
1
6
+ 724
- 8
- 38
- 96
balance: Bernstein basis
+2,258
+1,504
-454
+543
9
FRBNY data for the balance on regular transactions are incomplete since monthly figures are not available for advance payments for
military goods, some debt prepayments, and some Export-Import Bank sell-offs.
Includes latest revisions available at this Bank.
p--Preliminary
r--Revised
September 7, 1965
F
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