By a narrow majority vote, the United States Gold Commission sent its final report to Congress, with a controversial recommendation for minting a gold bullion coin that would compete with South African krugerrands and other popular foreign gold coins.
The coin would be of specified weight, but without a dollar denomination or "legal tender status," and it would be exempt from capital gains and sales taxes. It would carry the words "In God We Trust," and the Great Seal of the United States.
The commission came down flatly against a formal gold standard, which would link the value of the dollar to gold. It said this would not be "a fruitful method for dealing with the continuing problem of inflation." The commission recommended against reintroducing gold into the international monetary system.
The commission also urged study of a "rule"--as an alternative to a gold standard--requiring that the Federal Reserve System maintain the growth of the money supply "at a steady rate."
But Treasury Secretary Donald T. Regan, chairman of the commission, didn't rule out a gold standard for all time. He said at a press conference that "at this time, we shouldn't go on a gold standard or anything approaching it." But he noted that the commission had come down against reducing the U.S. gold stock. This implied, he said, that the United States should maintain some kind of "gold storage" against unforeseen circumstances.
Regan indicated that he had not favored the recommendation for a new "rule" to govern the management of monetary policy, saying he believed that "should be left up to the Fed," although the question of independence of the Fed "deserves study."
The coin recommendation was bitterly denounced by a minority led by Reps. Henry S. Reuss (D-Wis.) and Chalmers P. Wylie (R-Ohio). They predicted flatly that it will die in Congress because a majority of House Banking Committee members have already announced their opposition.
Asked yesterday whether the president might try to establish a gold-money link by administrative authority, Regan said: "It's possible, but not probable. The president will probably defer to Congress to see what it is going to do." But he admitted he had not discussed the matter with the president.
Reuss charged that the 8 to 6 vote in favor of the gold coin proposal was the result of an unexpected switch to that side during a commission session on Feb. 12 by the three Reagan administration officials on the commission.
He noted in a footnote to Volume I of the Commission Report, published yesterday, that the gold coin recommendation folllowed "exactly" a bill co-sponsored by Sen. Jesse Helms (R-S.C.), whose "National Congressional Club expended $4.5 million on the 1980 Reagan campaign."
The Reuss-Wylie criticism of the gold coin makes four basic points:
It will lead to a public belief that Congress in fact is moving toward a gold standard.
A coin "without legal tender status" is a confusing contradiction because the word "coin" usually implies legal tender status. (In response to a question yesterday, Regan conceded that every American coin until the present day has had legal tender status.)
The tax exemption privilege would make the coin a highly desirable speculative asset, draining investments from more productive purposes.
The existence of the coin is a move to a "dual monetary system" that gives a special standing to gold, even without a formal gold standard. Backers of the coin consciously seek such a duality, believing that it will force a degree of discipline on Federal Reserve policy.