asked the Minister for Finance whether, in view of the growing international monetary and financial crisis arising from the deficit with the oil producing countries and of the flood of depreciating paper currency in the world, he will state why he considers that the role of gold in the monetary system should be reduced.
Ceisteanna—Questions. Oral Answers. - Gold Role.
16.
As I informed the Deputy in the course of my reply on 28th May last to a previous question, there is general agreement in the international community that the role of gold in the international monetary system should be reduced. This is the conclusion of the Committee of 20 on International Monetary Reform, which has just concluded an intensive study of monetary problems, including the gold problem. That committee has had available to it the services of experts from the International Monetary Fund and from all the member countries of the fund.
The supply of gold available for monetary use is variable and uncertain, depending on the level of world production and the demand for gold for industrial, commercial, hoarding and other purposes. It is now accepted that this does not provide a firm basis for the creation or management of international liquidity in modern economies. Instead, the Committee of 20, with whose report I fully agree in this respect, has opted for the adoption of the special drawing right —popularly known as the SDR—as the primary international reserve asset. In this way the volume of liquidity can be brought under the control of the International Monetary Fund and can be regulated by that body in relation to international need and in the interest of the world community.
What I have said relates to the longterm position of gold. It does not mean that the substantial existing stocks of monetary gold cannot be drawn on to meet deficits resulting from the higher oil prices or other reasons. This, however, is a complex question which is still under consideration.
17.
asked the Minister for Finance why the proportion of Irish official reserves held in gold declined from 5.6 per cent to 1.7 per cent between 1969 and 1973, at a time when the free market price of gold was continually rising; the manner in which the gold reserves were disposed of; and, if they were transferred or sold to other countries or interests, if he will give details including the selling price.
The proportion of the official external reserves held in gold declined between 1969 and 1973 because of gold sales valued at £5.1 million in 1970 to the United States Treasury at the then official price of US $35 an ounce, an increase in the Irish subscription to the International Monetary Fund of £4.3 million paid in gold in the same year and because total reserves increased subsequently while the volume of gold holdings remained constant. I may add that:
(i) the free market price of gold did not begin to rise significantly until the second quarter of 1972;
(ii) in official external reserves gold is valued at the official price, currently $42.22 per ounce. The Central Bank's transactions in gold in 1970 were carried out in accordance with an agreement of March, 1968 between central banks to conduct gold transactions only among themselves at the official price;
(iii) the Central Bank has received substantial interest payments on official reserves held in US dollars and other foreign currencies.
Is it true that one of the reasons for the position as outlined in the question and in the Minister's reply is that gold, when held at fixed official price, does not, of course yield interest as do other forms of reserves, as pointed out by the Minister? Would the Minister further agree that it would be in the interests of this country to establish an international monetary system based not on superstition but on a rational system such as SDRs?
The Deputy is entirely right.