New-York tribune., 1918-12-02
Back to Sanity"


1t is thus that Tho London Economist
refers to the proposals, just made public,
of the English governments Committee
on Currency and Foreign Exchanges af-
ter the war. The United States, it is
needless to say, is not the only country
which has felt the disturbing effects of
depreciation of it's currency during the
war.
In fact, in percentages, the United
States is we'll down in the list. Where
our wholesale prices have increased,
roughly, 100 per cent, those of England
have gone up 140 per cent. The interest
lies in the fact that in England, as in this
country, imitation has largely taken the
subtle form of an imitation Of bank de-
posits. 1t is true that England has is
sued nearly billion of uncovered paper
But its bank deposits have risen more
than three times as much.
The process has been simple As with
US, the government has levied heavily
upon the banks, and the money SO OBJ
tanned it has paid out to contractors and
sellers of goods. These borrowings of
the government promptly reappear on the
books of the banks as deposits" In this
way English bank deposits have been
swollen by something like $3,3OO,OO 900.
AS with US, there has been a practical
withdrawal Of all gold from circulation,
and for the time being the finances Of the
country have been practically upon a
paper basis
But England, as the worlds banker,
cannot afford to continue this one day
longer than the wars necessities demand.
Last January q committee was appoint
ed, consisting of it's most distinguished
bankers and at least one eminent econo-
mist, Professor Pigou of Oxford, and
with Lord Cunlitfe, head of the Bank of
England, as chairman. In the interim
report just presented this committee ad-
vlses an Immediate return to gold pay
ments, which means, of course, taking the
embargo off gold exports, though it does
recommend that "such coin and bullion
shall be obtained from the Bank of Eng
land" Government borrowings are to
stop at the earliest possible moment The
amount of paper money is to be limited
and a sinking fund is to be established to
reduce the floating debt. Money needed
for reconstruction purposes is mot to be
provided by the creation of new credit"
And "the shortage of real capital must be
made good by genuine savings.
1t cannot be made by the creation of
fresh purchasing power in the form Of
bank advances to the government
We hope the recommendations of this
distinguished committee will not go un-
noticed by our Treasury Department, and
especially by cur Federal Reserve Board.
We have no further need to Conserve"
our gold. We have a huge redundancy
of gold, and, in the judgment of some of
our most clear-headed fnanciers, unless
we get rid Of some of it, it is bound to
raise hob with the expansion of our for
eign trade. 1t is further evident that the
Federal Reserve Board ought not to de-
lay by another month the raising of the
rediscount rate to point at least level
with, if not above the current CONNER
cial rates, thus removing the present
strong temptation to bankers to redis-
count with the Federal Reserve banks
and make a profit by the transaction.
One cannot but contrast the sanity and
courage evidenced by the English COM
mittee with the timidity and irresolution
which prevail at Washington 1t is to
be hoped that the President will very
soon find for the Treasury a financier
who has time to grapple with these prob
lens, as Secretary McAdoo has not had,
and the understanding to meet them eff
fectively. For upon this, in very consid-
cradle part, depends our prosperity for
the next two or three years.