Senator BIBLE. I think you made a very credible witness.
Mr. WILLISTON. Thank you.

Senator MALONE (presiding). I hand you a copy of the letter from the Tariff Commission which outlines exactly what happens if this 1934 Trade Agreements Act is not renewed, and we return to Public Law 361 on the principle of fair and reasonable competition.

Now, if any such an adjustment is taken up by Congress of metals or calico or anything else on the basis of the sugar regulation or the wool regulation, that is done entirely by Congress, is it not?

Mr. WILLISTON. I am not too sure of where things have to start. Senator MALONE. I want to assure you that it is done by Congress. Mr. WILLISTON. Might I ask you one thing, Senator? I know I am not supposed to ask Senators questions.

Senator MALONE. You ask anything you want to ask.

Mr. WILLISTON. Could you tell me whether the sugar plan and the wool plan were initiated in the Agricultural Committee of the House or Senate or did they originate in the House Ways and Means or Senate Finance Committes?

Senator MALONE. They originated in the House Ways and Means Committee, I think, although a considerable time has elapsed since the first sugar plan and I cannot answer that exactly. It could have been a suggestion from the Department of Agriculture. I think it was a suggestion of the sugar producers directly to the Senate Finance Committee, and the Ways and Means Committee of the House.

Mr. WILLISTON. I have often wondered because sometimes Agriculture feels they can do things.

Senator MALONE. It has only been recently that they felt they knew everything and as you know it has only been since 1934 that the Department of State has ever had anything to do with regulating the economy of this Nation. That was through the 1934 Trade Agreements Act.

Secretary Acheson and his assistant testified before the Senate Finance Committee that it is hardly possible, Acheson says, to separate the economic structure regulation from the foreign policy, meaning that the State Department could do a better job if they could trade the production for its treaties and agreements.

Mr. WILLISTON. I mentioned that they had done a very successful job from their point of view.

Senator MALONE. They have done a very good hatchet job on the industries of the United States not confined to mining at all. Now then, I can tell you that it is the Senate Finance Committee and the Ways and Means Committee of the House that handle the sugar and wool and will other special legislation, so that if this 1934 Trade Agreements Act is not renewed, referred to in some circles as reciprocal trade, which is not reciprocal at all, as you well know, and is a one-sided thing, simply a division of our markets, if that expires no more agreements can be made and then under certain notice given by the President all of its multilateral and bilateral trade agreements revert to the Tariff Commission, an agent of Congress. Then they proceed on the difference of cost of production. Now then, the Congress can always take up anything.

Mr. WILLISTON. I know that.

Senator MALONE. They can amend the Tariff Act or they can amend any particular duty or work on any particular product so that if the difference in cost of production principle laid down by the 1930 Tariff Act which had been the policy of Congress from 1789 to 1934 prevails then those committees can take up a bill introduced in the Congress, Senate or House, as to special considerations on products which are not exactly acceptable or fitted to just merely a tariff so that the first thing to do is to let it expire in any case.

Mr. WILLISTON. I testified against it before the House Ways and Means Committee.

Senator MALONE. I know you did and I am putting in a statement over there myself. The first thing in any case, if we think that special legislation is necessary, is to just sit still and go back to the Constitution of the United States for the regulation of the economic system of the United States through imports and tariff regulation which reverts to the legislative department where the Constitution puts it and separates again, as the Constitution does pointedly separate, the regulation of the national economy and the fixing of foreign policy. Then as I have already outlined and as the Tariff Commission letter outlines, let them proceed on that principle laid down definitely in the 1930 act and then Congress can take up any special legislation it wants to take up through the consumers or the producers or the suggestion of anybody if they want or on their own recognition. Mr. WILLISTON. Let us hope that that happens and when it comes to the Senate Finance Committee, I know you will do your best to see that it does happen.

Senator MALONE. Thank you. You have made a good witness. Mr. WILLISTON. Thank you.

Senator MALONE. Mr. Huelsdonk. Mr. Huelsdonk, if you have a statement that you want to present, identify yourself for the purposes of the record and then you may either read your statement or submit it for the record and comment on it.

STATEMENT OF L. L. HUELSDONK, SECRETARY-TREASURER-GENERAL MANAGER, BEST MINES CO., INC., DOWNIEVILLE, CALIF.

Mr. HUELSDONK. I think I would prefer to read it as I can read it almost as fast as I can comment on it.

I would first like to thank you, Mr. Chairman, for the opportunity of appearing before your committee and presenting the problem of the domestic gold mines.

My name is Lewis L. Huelsdonk, of Downieville, Calif. I am currently a member of the California State Mining Board and chairman of the gold committee of the Western Governors' Mining Advisory Council. However I am giving this testimony strictly as an individual and independent gold miner.

The gold mining industry of the United States was first forced into an obscure corner of our economy by WPB order L-208 nearly 16 years ago. The results of this order, which deprived many citizens of their constitutional rights, are now well known and great detail at this time is unnecessary-however a short résumé of this action will be helpful in placing sequence to the course of events which led directly to the deterioration of the domestic gold mining industry—

and ultimately to an indirect adverse effect on the entire mining industry of the United States.

Under the stress of war, governmental officials felt that gold had no strategic value in a war economy and that by arbitrarily closing down the gold mines of the United States, thousands of miners could be forced into the mining of other metals. Much testimony subsequent to the war has proven the fallacy of this contention. Only a handful of gold miners were diverted and, as shown by the attached sheet taken from the statistics of the United States Department of the Treasury-war industry demanded enormous amounts of gold over and above their peacetime requirements. These demands were granted by the sale of monetary gold by the Treasury Department and in 1945 (the year the war ended) $102,452,672 worth of gold at $35 per fine ounce was sold into the war economy for industrial use as compared to a 6-year prewar peacetime yearly average requirement of less than $500,000.

Senator MALONE. Let me ask you this at this point: Has not the pressure been on since 1933 that gold was not necessary in our economy?

Mr. HUELSDONK. I believe that you are correct in that. I do not know where that derived from.

Senator MALONE. It was from our own administration.
Mr. HUELSDONK. Yes,

Senator MALONE. Did not Lord Pines, who was a very, very prominent economist, from England, say that the more you owed the richer you were and gold was not necessary?

Mr. HUELSDONK. That is correct. He was one of the drafters of the International Monetary Fund along with Harry Dexter White in bringing this thing about.

Senator MALONE. Could you give us a little information on what instigated that Bretton Woods meeting and the effect of it?

Mr. HUELSDONK. Well, I have the effect of it a little further on in the testimony.

Senator MALONE. When you get to it, elaborate on just what administration.

Mr. HUELSDONK. I can come to that.

This rather conclusively indicates that a mistake was made. However, during "war hysteria" many mistakes are made and although the gold mining industry suffered a knockout blow, they would, no doubt, have recovered without complaint, if they had not been exclusively forced to remain on the floor under a followup of punches from debt management, monetary policy, and inflation.

The second devastating blow came in 1944 under section 1 of article IV of the final act of the Bretton Woods Agreement where foreign monetary advisers proved their skill in negotiations by causing the par value of their currencies to be tied to the United States dollar as a common denominator with gold in such a way that their monetization of our depreciated dollar does, in effect, increase their currency supply (from this source) in direct proportion to the degree of our dollar's depreciation. This is done without inflationary consequence in their own fiscal affairs, because foreign-held American dollars, regardless of their status in purchasing power, are 100 percent redeemable in gold by the foreigner at $35 per fine ounce as an obligation of

our Treasury Department. In other words, the dollar of today, although having less than one-half of the purchasing power of the 1944 dollar, will collect as much gold for the foreigner as the 1944 dollar did. This simply means a trade advantage for the foreigner (if no protective measures are used) because he now receives twice the number of dollars for the volume equivalent of his 1944 exports to the United States; and since the depreciated dollar of today commands the same amount of gold for the foreigner as the 1944 dollar did, he can now receive twice the amount of gold for the volume equivalent of his 1944 exports to the United States for the final settlement of his trade balance.

Senator MALONE. Let me ask you at that point, is it customary and is it not still being done that foreign nations by and large manipulate their money value in terms of the dollar in terms of trade advantage and, generally speaking, is not their fixed price much above the market price, the value of their currency in terms of the dollar?

Mr. HUELSDONK. In my opinion, yes, because by nationally monetizing the dollar they can issue currency in the same terms of gold and, since they receive those dollars even more easily in terms of trade; in other words, for the same product that they sold in 1944 they can sell now and get twice as many dollars and, by nationalizing those dollars, they act the same as gold in foreign reserve accounts. When they use those dollars which they get twice as easily as they could get gold to put in there, the result is that they have a trade advantage because they ultimately settle their trade balances in gold.

Senator MALONE. Yes. Then is it not customary that they fix a definite number of francs in France that they say that the dollar is worth?

Mr. HUELSDONK. I see what you mean.

Senator MALONE. But the black market and state market are often 2 or 3 or 4 times as much as that?

Mr. HUELSDONK. I was in Paris last year and in these other countries where I noticed that I bought francs at around 400 on an average on what they call the black market which is simply the value market of their money. The official price at that time was only 350. On government settlings they settle on the official price and around, I think the actual market value was about 450. I did that for the purpose of finding out what the actual value of the franc was.

Senator MALONE. Then do they not often have 2 or 3 or more official values for whatever they want to do with it whether import or export?

Mr. HUELSDONK. They have a number of varieties of currency depending upon what country they are dealing with and what goods they are buying for the different countries.

I noticed that particularly in Spain.

Senator MALONE. That is all to their trade advantage.

Mr. HUELSDONK. Yes. It will depend upon what advantage they can get in their barter system.

Senator MALONE. I presume you covered this but what is the cure for that? Is it to go back on a standard as we had at one time up to 1933 so that where you traded dollars for francs or pounds you got a piece of paper that represented the same number of grams of gold or ounces of silver and you could bring them home or take them

to a bank because they represented the same actual value in metal? Mr. HUELSDONK. That would be very true convertibility but in my opinion now we have such a short supply of gold that we could never go back to convertibility.

However, it is going to be necessary to discipline the currency of the world.

Senator MALONE. Even if we do not go back on the gold standard, do we not have to recognize these differences in trade?

Mr. HUELSDONK. We are going to have to do it. If we do not, we are going to lose the value of our entire money supply.

Senator MALONE. Are you familiar with the hearings that the Senate Finance Committee is conducting and will take up again on April 1, where it was testified by the Secretary of the Treasury and also by Mr. Martin, who is the Chairman of the Federal Reserve Board that, if all the dollar balances were converted in European and Asiatic nations that are readily accessible to convert and presented, that we would have less than $534 billion worth of gold left? Mr. HUELSDONK. I am quite familiar with those hearings and I quite agree with them because their private dollar balances can readily be converted into national dollar balances and that would amount to around $16.3 billion at the present value which subtracted from our 22-and-some tenths billions would leave around seven-andsome-tenths billions.

Senator MALONE. It took 3 days to get that information from the Secretary of the Treasury and 6 days to wring out the Chairman of the Federal Reserve Board.

Mr. HUELSDONK. I read the testimony and noticed that it was quite a job.

Senator MALONE. I am not an economist but I wanted to make a record so that the economists could study it.

Mr. HUELSDONK. You did a good job in making the record and bringing out the facts. This has dropped our guard and also opened the way for a low blow to the market-seeking American mining industry as stockpile quotas and price supports run out.

Of course, what we are running against now is on account of the advantage of the dollar. Since the dollar has depreciated roughly to 50 percent, it is much greater than that if you use the right indexes.

They are using an index from 1949 now but the last change in gold was 1935 so, to my way of thinking, the index should start in the last index of the price of gold. However, using the 1948 one, the dollar has depreciated one-half which means that where these dollars are being used in monetizing the foreign currency we have a trade of just the difference directly.

Senator Malone. I think they testified the 1948 dollars are worth 47 cents.

Mr. HUELSDONK. Because the Bretton Woods agreement obligates the United States to redeem foreign-held dollars in gold in unlimited amount at the 1934 price, it is impossible for any entirely free gold market to exist in the world today wherein the true value of gold can be resolved.

A further damaging blow was delivered to the gold mining industry of the United States in 1945 when the gold reserve requirements were lowered to 25 percent for the purpose of adding to the supply of