New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1916-09-29

there may be a great deal Of imam
cial distress. In that case-and II
may be the more likely Of the two
we shall have almost boundless OPP
portunities, but serious obligations
as well. Foreign loans in the Old
and the New World may draw away
our capital at interest rates Tar IN
excess of our own. Our exporters
will have to meet the keen competi-
tion Of other nations, and, even
though at first there will probably
be a strong demand for certain OF
our raw materials, the purchasing
power of many a country will be
found materially reduced. These
are conditions which, in the long
run, may be the cause Of heavy gold
exports from the United States. and
which, if we remain unpreparcd,
may seriously check our progress.
We ought to be prepared, he
thinks, to lose s3OO,OO0,O00 to $780,
100000 gold following the close of
the war, but he finds, on the other
hand, that owing to the scattered
condition of our gold stock we could
not do this without serious difficulty:
Does II not appear ridiculous that
country owning over two billlons
and a half of gold should not be able
to mobilize a larger free gold re-
serve than two or three hundred
millions of dollars-particularly
when it Is apparent that its future
financial and economic growth will
depend upon the extent Of the pre-
paredness" that it can provide IN
this respect?
The free gold reserve of the Fed
eral reserve system at the present
time is only S3SO,OOO,OOO. Mr.. War
burg thinks gold in circulation
should be impounded:
The $500, 100000 to s75O,OOo,0oO OF
gold certificates and gold, in add
ton to other kinds of currency, at
present carried in the pockets OF
the people and in business tills,
should be gradually displaced by
Federal Reserve notes, Mr.. Warburg
contended, thus modifying and
bringing under control gold re-
sources now scattered and more or
less impotent. The exchange Of
SO Federal Reserve note for a SO
gold certificate would not, as some
writer's argued. cause an increase in
circulation or "inflation." but would
strengthen the gold reserve position.
We have now under control only
about S500,000,000, while the coun-
try at large and the banks own
about s2,000,000,000.
Mr.. Warburg takes the ground I'M
reservedly that the circulating me-
dunn of the country-the pocket
money of the people-ought to con-
sist Of silver certificates in small
denominations and Federal Reserve
notes, and of nothing else, which
would mean the disappearance Of the
greenbacks and the national bank
note currency. His views on this
subject will stir up a lot of profitable
discussion. His view on another
subject will stir up something else.
He thinks the work of the Controller
of the Currency and the administra-
ton of the funds Of the United
States Treasury ought to be brought
under the authority of the Federal
Reserve Board. On this point he
says:
The administration OF the Treas
ury funds within the Federal Re-
serve System should be subject to
some control by the board and
emergency relief operations ought
to be carried out through the Fed
eral Reserve banks, and not direct
ly through deposits with member
banks by the Treasury. If at GER
tain periods large payments are TO
be made by the member banks to
the Treasury, there should be an
easy adjustment by having the
money withdrawn strengthen the
Federal Reserve System, leaving it
to the board and the Federal Re-
serve banks, by rediscounting short
paper, to return to the member
banks sufficient funds TO re-
establish the equilibrium. But this
important function of balancing the
scales ought to be the constant care
of the board. under consistent
plan of operation, and not the do
main of the changing and arbitrary
policies and views Of each succeed
ing Secretary of the Treasury. In
a similar way, the boards authority
and efficiency ought to be strength
ened by providing that examinations
and rulings by the Controllers of
flee and the compilation of banking
statistics should be carried on I'M
der the auspices Of the board.
Then the paternal activities Of the
Secretary Of the Treasury would be
diminished and the romantic i'm