Gold bugs
Sir: There seemed to be a slight contradiction between the concern expressed by Nicholas Davenport (September 13), and widely pre-echoed elsewhere, for the present plight of the non-oil-producing 'developing' world, as well as for "the depressed industrial nations who are trying vainly to increase their exports to one another", and his earlier statement that "Mr Healey is surely wise to do nothing (to reflate the UK economy) before the next April budget and to prepare the nation for 'a hard winter'," Surely, the wisdom of allowing us to stew in our own inflationary juice notwithstanding, every little bit could help.
Mr Davenport's remarks were, however, prompted by the recent annual meeting of the International Monetary Fund, and we can perhaps all agree with him that the interim settlement agreed at that conference regarding the future role of gold, and about ways and means of mobilising some of the rich countries' massive gold reserves for the benefit of the world's poorest, does represent "something concrete". Like him, we may nevertheless still have certain reservations on this score, irrespective of whether we are root-and-branch gold abolitionists or regard the yellow metal, perhaps now more than ever, as still the brightest star in the international monetary firmament.
One problem which immediately springs to mind is how the rule that there shall be no net acquisition of gold, through direct sales and purchases on the free market, by the world's richest countries (the Group of Ten) is going to be policed. Whether the policing is done by the Bank for International Settlements in Basle, which has been mentioned in this connection, or by the IMF itself, it clearly will have to be done somehow, unless this particular clause, if not the agreement as a whole, is to be a dead letter from the start. Nor is that issue affected by the fact that one of the "virtues" of the present system of floating exchange rates is that monetary reserves, whether of gold, currencies or Special Drawing Rights, have been made less rather than more necessary.
On the contrary, the disproprtionately big fluctuations in exchange rates to Which that system has given rise, and the growing recognition that rules to minimise those fluctuations must be devised and, where necessary, enforced, further underline the need for effective international supervision. Since the IMF, among its now enlarged assortment of other tasks, is still the best world central bank we have; this means that its powers to administer the present, let alone an (perhaps superior) alternative, system should be suitably strengthened at the earliest opportunity.
W. Grey 12 Arden Road, Finchley, London N3
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