The Birmingham age-herald., 1918-01-16
WHAT THE REASON IS

There are several reasons for the desire of the federal reserve board that the
 gold now held in the United States as well as that which will be received
 within the next 12 months from American
 mines, be hoarded by the federal reserve
 banks or by the treasury department. One of these reasons is to be found in
 the certainty that hereafter we shall re- ceive little or no gold from foreign coun-
 tries Payments which must be made by
 other nations to the United States will be in the form of credits and will in-
 volve on the whole bookkeeping of very
 large extent.
 TOW in money gold little over $3009, 0O0- 900. That is about $30000o,00O more than
 We possessed year ago, but there seems to be little or no chance that our stock
 of gold will be increased excepting by , the output of American mines in the year 191S
 The federal reserve board regards it as of the utmost importance that our stores of gold be thoroughly mobilized.
 so that they can be made available as a basis for credit, and for new issues of paper money. Some disposition has been noticed in the past year on the part of some of the people to hoard gold. and some apprehension has prevailed lest if the war be prolonged, this disposition in-
 crease.
 THEN AND NOW
 The present-day situation In respect to
 gold is radically different from that which prevailed during the adminstra- ton of Lyman J. Gage as secretary of the treasury under Presidents Mckinley
 and Roosevelt The extraordinary and sudden change in our international trade conditions following McKinley's inaugu- ration, and the moral effect occasioned by the adoption of the single gold stand ard in the first year of his adminstra- tion caused phenomenal flow of gold into the United States. This happened also at a time when the American mines were increasing production of gold and when the Alaska development began. In the opinion of Secretary Gage it was the wiser part to force large propor- ton of this gold into general circulation He urged banks to pay gold out through the paying teller's window and in other ways, referring to the prevalence in Eng land oi the use of gold in denominations below five pounds for every day pnr- poses But earnestly as Secretary Gage urged and strenuously as he advised the .istribudcn of gold among the peop,e, h. found it impossible to secure a laI ge distribution.
 Almost everybody preferred paper | money to gold. and it frequently hap 1 pcHtO tHdl WHICH d pdylIlS Ieller passed gold through a window to a customer who had offered his check, the customer declined to receive 1t, saying that he preferred paper. now that he knew that l the paper of the United States was just as good as gold. The Secretary was obliged to abandon the effort and there 1 followed gold certificates in small de- nomination, the kind of paper money which is commonly called "yellowbacks" l Now in a little over half generation 1 of time, the government and the federal reserve bank are taking precisely the op- pesite stand from that which character l ized Secretary Gage. For they are ask ing the banks to retain the gold in their vaults ard to pay out paper money in place of it. This action reflects not merely present day conditions, but con | tingencies which may arise in that very l difficult period of financial readiust-
 ment which will begin immediately after | the close of the war.