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31St Annual Report of the Bank for International Settlements

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31St Annual Report of the Bank for International Settlements BANK FOR INTERNATIONAL SETTLEMENTS THIRTY-FIRST ANNUAL REPORT 1st APRIL 1960 — 31st MARCH 1961 BASLE 12th June 1061 TABLE OF CONTENTS Page Introduction i Part I - Problems of Economic and Financial Policy in 1960-61 . 3 The United States: the recession (p. 5), anti-recession measures (p. 8), the dilemma of monetary policy (p. 11), the new Administration's policy approach (p. 11); Germany: the boom (p. 13), monetary policy (p. 15)', Italy: the rules of the game (p. 17); the Netherlands: multiple restraint (p. 19); Switzerland: capital exports (p. 21); the United Kingdom: longer-term problems (p. 23), balance of payments (p. 24), economic growth (p. 26); France: balanced growth (p. 28); the international payments position (p. 29): the basic imbalance (p. 30), short-term capital flows (p. 31) Part II - Survey of Economic and Monetary Developments .... 33 I. The Formation and Use of the National Product . 33 Industrial production (p. 33); productivity gains (p. 36); structural economic changes in the last decade (p. 37); economic cycles in the last decade (p. 40); sources of demand and available resources (p. 42); saving and investment by sectors (p. 47) II. Money, Credit and Capital Markets 53 Monetary policy and the structure of interest rates: discount rate policy (P- 54) > reserve requirements (p. $6), debt management and open-market operations (p. 57); the control of liquid assets and the flow of bank credit (p. 60); capital-market activity (p. 62); credit developments in individual countries: the United States (p. 64), the United Kingdom (p. 67), France (p. 70), Germany (p. 73), the Netherlands (p. 76), Italy (p. 78), Belgium (p. 78), Switzerland (p. 79), Austria (p. 80), Finland (p. 81), Norway (p. 81), Denmark (p. 82), Sweden (p. 83), Yugoslavia (p. 84), Japan (p. 85) III. Domestic and World-Market Prices 87 Domestic prices and wages: consumer prices (p. 87), wholesale prices (p. 88), wages (p. 91); raw-material prices (p. 93); raw-material pro- duction (p. 101) IV. World Trade and Payments 103 International trade: trade by areas (p. 103), commercial policy (p. 107); balances of payments: the United States (p. 109), O.E.E.C, countries (p. us), the United Kingdom (p. 116), France (p. 119), Germany (p. 122), the Netherlands (p. 125), Belgium (p. 126), Italy (p. 126) Page V. Gold, Reserves and Foreign Exchange 128 Gold production and markets: gold production (p. 128), the gold market (p. 130); gold and exchange holdings: gold reserves and dollar balances (p- J33)< European monetary reserves (p. 138); International Monetary Fund (p. 146); foreign exchanges: the German and Dutch revaluations (p. 146), exchange markets (p. 147), other exchange developments (p. 152) VI. The European Monetary Agreement 159 Changes in the Agreement (p. 159); operations under the Agreement: European Fund (p. 159), Multilateral System of Settlements (p. 161); management of the European Fund and the Multilateral System of Settle- ments (p. 163) Part III - Activities of the Bank 165 Operations of the Banking Department: composition of resources (p. 166), employment of resources (p. 168), general remarks on the Bank's operations (p. 172); the Bank as Trustee and Fiscal Agent for international govern- ment loans (p. 173); the Bank as Depositary under the terms of an Act of Pledge concluded with the High Authority of the E.C.S.C. (p. 176); the Bank as Agent for the O.E.E.C. (European Monetary Agreement) (p. 177); financial results (p. 178); changes in the Board of Directors and in Executive Officers (p. 179) Conclusion 181 Balance sheet as at 31st March 1961 and Profit and Loss Account for the financial year ended 31st March 1961. LIST OF TABLES AND GRAPHS (Graphs are indicated by an asterisk) Page Part I - Problems of Economic and Financial Policy in 1960-61 Industrial production* 4 United States: Unemployment and hours worked* 6 Gross national product and its components 7 Free and borrowed reserves of Federal Reserve member banks*... 9 Germany : Labour market* 14 Factors affecting the liquidity of credit institutions* 16 Foreign trade* 25 Interest rate differential* 30 Part II - Survey of Economic and Monetary Developments I. The Formation and Use of the National Product Industrial production 34 Centrally-planned economies: National income, production and productivity 35 Productivity and gross national product per head 36 Origin of national product 37 Manufacturing production 38 Share of E.E.C, countries, United Kingdom and United States in combined industrial output 38 Output of capital and consumer goods 39 Expenditure on consumer durables, machinery and equipment 40 Industrial production: Rates of growth and the cycle* 41 Growth and the cycle 42 Gross national product and its components 43 Exports and imports of goods and services 44 Investment and gross national product 45 Gross and net fixed investment 46 Saving, investment and financial surplus or deficit (France, Germany, Netherlands, United Kingdom) 47 France: Government finances 48 Germany: The Federal budget : 48 Netherlands: Central-government budget 49 United Kingdom: The budget 50 United States: Government revenue and expenditure 51 II. Money, Credit and Capital Markets Official discount rates . 55 Short and long-term interest rates* . 58 Money supply, quasi-money and gross national product 61 Capital market: Net new issues 63 Page United States: Net increase in credit and equity-market instruments 64 Financial assets and liabilities, by sectors 65 United Kingdom: Financial surplus of the private sector 69 France: Financial assets and liabilities, by sectors . : 71 Germany: Financial assets and liabilities, by sectors 74 Netherlands: Financial assets and liabilities, by sectors 77 Monetary survey (Italy, Belgium, Switzerland, Austria, Finland, Norway, Denmark) 79 Sweden: Credit market 83 Yugoslavia : Saving, investment and financial assets, by sectors 84 Japan: Financial assets and liabilities, by sectors 85 III. Domestic and World-Market Prices Prices of services 88 Components of price indexes 89 Wholesale and consumer prices and wages* 90 Nominal and real wage rates and earnings 92 International commodity prices 95 World-market commodity prices* 96 Prices of major commodities 97 World production of basic commodities 101 IV. World Trade and Payments Growth of international trade 103 European trading areas 105 Industrial production and exports in Europe and the United States*. no United States: Foreign trade no Balance of payments 112 Short-term capital transactions 114 O.E.E.C, countries: Balances of payments 115 United Kingdom: Imports by groups of products 117 Balance of payments 118 Flow of private long-term capital 119 France : Trade with foreign countries and the franc area 120 Balance of payments 121 Repayments of external public debt 122 Germany : Balance of payments 123 Security transactions 124 Short-term investments 125 V. Gold, Reserves and Foreign Exchange World gold production 129 Sources and uses of gold 130 The London gold "fixing" price* 132 Gold and short-term dollar holdings 134 Gold reserves and short-term dollar balances 135 Page Western Europe: Gold reserves as a percentage of total monetary reserves 137 Reserve positions 139 Gold and foreign exchange holdings* 141 Sterling balances 142 European quotations for the U.S. dollar* 148 Interest arbitrage: New York/London* 151 Official currency values 157 VI. The European Monetary Agreement European Fund: Credits granted 160 Utilisation of credits granted 161 Payments made under the Multilateral System of Settlements 162 Statement of Account of the European Fund 164 Part III - Activities of the Bank Annual balance-sheet totals 165 Memorandum accounts 166 Own funds and deposits 167 Origin of deposits 167 Terms of deposits 167 Liabilities* 168 Cash and investments 168 Gold position 169 Rediscountable portfolio 170 Assets* 170 Time deposits and advances and other bills and securities 172 Total volume of operations 172 Volume of gold operations 172 Volume of exchange transactions 172 German External Loan 1924 (Dawes Loan) 174 German Government International Loan 1930 (Young Loan) 175 Austrian Government International Loan 1930 175 Loans contracted by the High Authority of the E.C.S.C 177 THIRTY-FIRST ANNUAL REPORT submitted to the ANNUAL GENERAL MEETING of the BANK FOR INTERNATIONAL SETTLEMENTS held in Basle on 12th June 1961. Gentlemen, I have the honour to submit herewith the Annual Report of the Bank for International Settlements for the thirty-first financial year, which began on ist April i960 and ended on 31st March 1961. Details of the results of the year's business operations are given in Part III, together with an analysis of the balance sheet as at 31st March 1961. The accounts for the thirty-first financial year closed with a surplus of 27,324,105 gold francs, against 29,064,716 gold francs for the previous year. After deduction of 12,000,000 gold francs transferred to the provision for contingencies and of 350,000 gold francs transferred to the provision for exceptional costs of administration, the net profit amounted to 14,974,105 gold francs, compared with 15,314,716 gold francs for the preceding year. The Board of Directors recommends that the present General Meeting should decide to distribute, as last year, a dividend of 37.50 gold francs per share. In view of the results for the financial year 1960-61, the Board also proposes that, as an exceptional measure, a lump sum should be applied to the reduction of the amount of the undeclared cumulative dividend. This sum, which has been fixed at 7,000,000 gold francs, will represent an extra- ordinary distribution of 35 gold francs per share. The total distribution will thus amount this year to 72.50 gold francs, payable in Swiss francs in the amount of 103.60 Swiss francs per share. Part I of this Report deals with the problems of economic and financial policy which confronted various western European countries and the United States in i960 and the early months of 1961.
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