A high Treasury Department official told reporters yesterday that additional actions to bolster the dollar are still "under review," but that controls on capital movements have been "completely rejected as unthinkable,"
C. Fred Bergsten, Assistant Secretary of Treasury for International Affairs, said that aa borrowing of foreign currencies from the International Monetary Fund is under consideration "but no decisions have been made on timing." Such currencies could be kept in reserve for market intervention (dollar propping) purposes.
In earlier testimony before the Senate Banking Committee on a proposal for the issuance of gold medallions by the Treasury, Bergsten also hinted that the Treasury might undertake "substantially larger" future sales of gold than are contemplated at the present.
But Bergsten voiced the Carter administration's strong opposition to the sale of gold medallions on the ground that it would merely encourage boarding in a highly speculative item, reverse the trend toward demonetization of gold, and contribute nothing to efforts to control inflation or limit international pressures on the dollar.
The committee heard a wide range of opinions on the gold medallion proposal, ranging from supporting statements by its sponsor, Sen. Jesse Helms (R-N.C.) to Bergsten's opposition, which was echoed by international economist Edward M. Bernstein of EMB, Ltd.
Helms position gained support from Sen. S. I. Hiyakawa (R-Calif.) and from Grover C. Criswell Jr., President of the American Numismatic Association.
On the question of a U.S. tap on its reserve position at the IMF, amounting to about $4.5 billion, Bergsten said after the hearing that if the U.S. borrowed all of it - which it can, unconditionally - the IMF would have to in turn, borrow hard currencies through the General Arrangement to Borrow (GAB). The IMF has about $1 billion available in German marks at the moment.
Bergsten also revealed that the U.S. has so far sold none of the 600 million SDRs (Special Drawing Rights) that it said in March it was prepared to offer for hard currencies Bergsten said that "there has been no need" to sell the SDRs. All told, the U.S. owns 2.4 billion SDRS.
The Helms proposal would require that the Treasury sell least the first 1.5 million ounces of any gold sale in coin-like medallions weighing one ounce and one-half ounce. They would not be legal tender, but would have the Great Seal of the United States, and other Official inscriptions associated with the U.S.
Helms' contention is that this would allow small purchasers who want to buy gold to do so, rather than buying the one-ounce South African Krugerrand, which has been a popular item minted by the South African government. Last year, 1.6 million ounces of the Krugerrands were imported here.
Bernstein said that a one-ounce U.S. gold piece, if technically not a money coim, would become "an attractive form of boarding." In separate testimony, which did not take a strong position one way or the other, Frederic S. Bogart, manager of the gold department of Republic National Bank of New York, agreed that "American boarders will probably favor the medallion over the Krugerrand."
Bergsten and Bernstein argued that the small U.S. buyer has plenty of opportunity to buy Krugerrands and other gold coins at present, and that the Treasury would derice no benefit from the sale of medallions.
Nonetheless, General Services Administrator Joel W. Solomon told Committee Chairman William Proxmire (D-Wis.) that the GSA "is confident it could successfully market" gold medallions, and promised to produce a tentative sales program for the committee's examination in 30 days.
Bernstein warned that even very large sales of gold bullion, held out as a future possibility by Bergsten, would not deal with the basic causes of the dollar decline, "the inflation of prices and costs, and the enormous trade deficit."
Unless these problems are solved, the economist said, "the sale of our gold reserves could have a perverse effect because it would dispose of those of our assets which some solders seem to regard as of special importance for a reserve center."
Helms also scoffed at the utility of gold sales in general, saying that "selling gold to soak up excess dollars is like trying to attack a flood with a sponge."
But he cited as supported of the medallion proposal former Treasury Secretary William E. Simon and Dr. Rudolf Geisler, a seniot economist with the West German bunderbank. Geisler, in an informal opinion, told Helms that the sale U.S. gold medallions would not adversely affect the dollar exchange rate.