New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1917-01-18
Wednesday, January II, 1917

almost as embarrassing as to have
too little. At any rate, the problems
which are presented where the for
mer condition prevails are more dl-
versifed and perhaps TO less diff
cult of solution than those which
prevail where the stock of gold is
inadequate. With the Allied coun-
tries, for instance, the gold problem
consists chiefly in modelling all OF
the metal available and in conserv-
ing it as much as possible after 1t
has come under state control. That,
however. does not necessarily mean
the limiting Of exports in all cases
TO the minimum. Ordinarily gold
used in the settlement of interna-
tional transactions loses part of It's
efficiency. A hundred millions of
gold will pay for just a hundred
million dollars worth of goods and
10 more. whereas as a domestic
credit instrument it is, in practice,
five or six times a. effective. But
its use for credit purposes is pos
sible even after possession of the
metal has been surrendered TO an
other country. Thus, it has been said
that Britain has forced more gold
upon us than was required, while at
the same time preventing the export
Of the metal from this country, in or
der to make the money market so
easy as to insure the success of the
new British loan in this market. But
whether that is true or nct-and
even if true it could not have been
responsible for more than relative
~ small part of the deluge which is
seriously disturbing economic condi-
tons in this country--it is certain
that the problem Of too much gold
is one of grave possibilities for this
country.
The amount added TO the stock
of gold in the United States since
the outbreak of war is, conserva-
lively figured, sufficient to serve as
the basis for at least five billions of
credit. And the great influx began
lust at time when the loaning
rover of the banks had been vastly
expanded through the lowering of
reserve requirements. 1t is, there
fore, not surprising that imitation
has appeared; that prices of labor
and other commodities have ad-
vanced to new high levels. 1t is,
in fact, very much more surprising
that initiation has not assumed
greater proportions in some direc-
tons than has been the case, and
that the situation is not already be-
ycnd the power Of control. Never
theless, the phenomena precedent to
a monstrous imitation, pregnant with
disaster, are in evidence. If the ten
dency in that direction is to be
checked in time, decisive and reason
bly, prompt action is imperative. So
far we have done little but talk
about remedies, though we have had
before us the example of other coun-
tries confronted with the same diff
ficulty, though in less degree. Nor
way and Sweden met the problem by
the simple expedient Of adopting
what in effect amounts to an en-
barge on gold imports, and now
Spain is likely to follow their lead.
We might do the same, and that
would help, but the problem of so
managing the huge supply of the
metal already within our borders as
to avert the danger would still press
for solution.
Many schemes TO accomplish that
end have been put forward re-
Gently. II has been suggested, for
example, that the extension of I'M
[ limited credit TO foreign countries
would relieve the situation at home,
but considering that time is Of the
essence that is hardly practicable,
even if it were desirable, which is
by no means certain. Probably the
best proposal which has yet been
advanced is that which would place
control of the gold supply, or a
large part of it, in the hands Of the
Federal Reserve Board, by giving
that body the power to increase the
reserve required to be kept by men,
Der institutions with the Reserve
Banks. Certainly there is no good
reason why that should not be done.
To regulate effectively the credit
position, it is essential that control
of gold be centralized, so far as that
is possible, without imposing hard
ships on the banks. Obviously, it is
with the Reserve Board that control
should rest. Nor is the proposal TO
give the board the power, as an
emgency measure, to increase the re-
serve requirements of member banks
any less meritorious. Under the
Federal Reserve act they have the