The U.S. Balance of Payments

In the last two years the U.S. balance of payments and the international position of the dollar have undergone sharp and somewhat paradoxical changes. It will be recalled that the bad showing of the balance of payments in the last quarter of 1967 – a record deficit of $6.8 billion (annual rate) – led to a run on the dollar. The Administration panicked and in a dramatic New Year’s address President Johnson proposed, and partly put into effect, drastic controls. Capital export restrictions and certain other controls were severely tightened by executive order; fortunately other measures – an unprecedented tourist tax, border taxes on imports, etc. – were rejected by Congress. In April 1968 at the height of the crisis the international gold pool through which the central banks of the leading countries, the United States carrying the main burden, had been feeding the gold speculators, was closed down and the two-tier gold market was established.