Foreign Relations of the United States, 1951, Asia and the Pacific, Volume VI, Part 1

856D.13/4–1951: Telegram

The Secretary of State to the Embassy in Indonesia

top secret

Washington, April 24, 1951—4 p. m.

1149. Concur your views expressed Embtels 1454¹ and 1456,² Apr 19. Dept, Treas and US ExecDir IMF agree that:

1. Domestic gold sales deal with symptoms rather than basic causes of inflation and as indicated urtel may induce rather than discourage flight from currency.

2. Wld regard as preferable utilization of resoures to expand volume of necessary imports.

3. While proposal contemplates sales of gold in domestic market it is possible if not probable that gold wld eventually find its way into Singapore–Hong Kong smuggling trade.

Any such flow of gold into international premium markets wld be contrary to the efforts of the IMF to prevent international transfers monetary gold at premium prices. IMF studying means by which its members may carry out policies pertinent this problem. Believe this shld be considered in view Indonesia’s intentions becoming member IMF. While IMF has not interfered strictly internal gold sales programs of countries, it has carefully scrutinized measures taken to prevent export such gold. FYI US wld not desire sell gold at official prices to countries obtaining foreign exchange from premium gold sales.

You may impress above views authorities concerned in any unofficial manner you deem appropriate.

Acheson

1. In telegram 1454 from Djakarta, April 19, Ambassador Cochran reported that the Java Bank was planning to initiate gold coin and bullion sales to the general public about May 1. His initial appraisal of this contemplated action was that it would have no appreciable effect on lowering existing price levels in Indonesia, and that the profits accruing to the government would make a comparatively small contribution to financing Indonesia’s budgetary deficit, which was the primary source of the country’s latent inflation. (856D.13/4–1951)
2. In telegram 1456, from Djakarta, April 19, Ambassador Cochran said that he had spoken to Foreign Minister Rum regarding the proposed sale of gold and had made strong representations against such an act. The Ambassador believed that the commencement of such a practice would be interpreted as an alarm measure to cheek inflation and fear of the rupiah. He also pointed out to the Foreign Minister that such a move would undoubtedly concern deeply the IMF and other foreign bodies friendly to Indonesia. (856D.13/4–1951)