ON AUGUST 15, 1971, I launched a major effort to restore the strength of the American economy by clamping down on inflation at home and by moving to adjust the free world's monetary and trading systems to the realities of competition in the 1970's.
By that time, the international arrangements set in the post World War II years had become outmoded, leading to recurring international monetary crises and a chronic U.S. imbalance of payments.
The Smithsonian Agreement of December 18, 19711--in which we agreed to propose a change in the par value of the dollar to the Congress as part of a realignment in which other countries increased the values of their currencies--was a significant step forward in our overall effort for a stronger and more competitive U.S. economy.
1 See 1971 volume, Item 401.
That realignment makes American products more attractive in foreign markets and at home, expands export opportunities for American industrial and agricultural products, and creates more jobs for American workers in factories, and on farms and in export-supporting businesses.
The legislation I sign today, S. 3160, the Par Value Modification Act, is necessary for fulfillment of our part of that historic agreement--an agreement that is vital to the economic future of all Americans. I am gratified that this important legislation received overwhelming support in the Congress. It authorizes and directs a change in the par value of the dollar from $35 to $38 per ounce of gold. The change will take effect upon notification to the International Monetary Fund by the Secretary of the Treasury.
The legislation also requires that steps be taken to fulfill our obligations to maintain the gold value of U.S. subscriptions to various international financial institutions such as the International Monetary Fund.
We will soon submit a request to the Congress for the appropriations necessary to enable us to meet this legislated obligation.
This dollar adjustment is a basic point of departure in working toward a new international economic stability. This action cannot--and does not--stand alone.
The strength and competitiveness of our economy also depends on our success in dealing with inflation at home. We are making progress in that struggle, with the rise in the Consumer Price Index in the 6 months ending in February declining to a 3.3 percent annual rate--down from the 4.1 percent rate of the preceding 6 months.
We pledge a strong continuation of the efforts, also launched last summer, to assure the American workman, farmer, and businessman fair access to foreign markets-an access which was limited in the 1960's when a resurgent Europe and Japan, along with a number of other nations, offered increasingly tough competition.
A measure of success has already been achieved in this key area with the conclusion of agreements of value with Japan and with the European Community. We look forward to more comprehensive negotiations this year and next.
The eventual results of all these efforts will be to restore a healthy trade surplus and a strong financial position for the United States. This will be not only in our own interest--but in the interest of a prosperous world economy, a stable monetary system, and an equitable trading order.
International discussions have now begun, leading toward the ultimate objective of a fundamental and overdue restructuring of the entire international monetary and trading system. Conditions have changed greatly since the Bretton Woods agreement of 1945, and we must adapt the system to meet those changes. The Smithsonian Agreement in addition to achieving immediate currency realignments--recognized the need for long-range change, established a reform agenda, and provided for continuing discussions among the nations toward these longer term improvements.
The United States is committed to work with other nations to bring about necessary reforms. However, the long-range international economic issues we face are complex and affect fundamental interests. The ultimate reforms will take, and should take, time to work out. We seek no patchwork. We seek responsible arrangements that will withstand the test of time and which will be fully equal to the magnitude of the problems and opportunities presented.
This international economic reform is not a task that we can or should do alone--it is the mutual responsibility of the entire free world.
The basic significance of the Smithsonian Agreement, and the resulting dollar legislation which I sign today, is that it provides for continued cooperation among our allies and ourselves--and thus strengthens our unity--as we work toward an "open world" based on a more balanced monetary system and a more equitable international trading environment.