Evening star. [volume] (Washington, D.C.) 1854-1972, 1919-02-08
WOULD ELIMINATE
SHIPMENT OF GOLD
Federal Trade Board Plans
Development of Interna-
tionaI Exchange Fund.
OUTLINED IN 1918 REPORT

Willingness to undertake develop
change fund, to facilitate financial
transactions between nations without
actual shipment of gold, was ex-
pressed today by the federal reserve
board in its report for 1918. This ar
lrangement would be similar to that
now maintained by the board to set
tile balances between banks within
the United States.
The fund might be developed among
the entente nations and a few lead
ing neutrals, but it is conceivable
that all civilized countries may event.
ua1ly be participants" said the board.
The gold would. be deposited in trust
in some government bank or banks
to guarantee exchange obligations,
and it was proposed that the fund
should be limited to current CONNER
cial and exchange transactions
Trade Balance Settlements.
This is one of the suggestions for
future financial development growing
out of successful domestic war oper-
alton of the federal reserve system,
which the report reviewed in detail.
Referring to the settlement of trade
balances in this country through the
federal reserve clearing channels, the
report said:
The successful operation of the
gold settlement fund has suggested
the possibility of avoiding shipments
of gold from one country to another
in settlement of balances arising out
of ordinary commercial transactions,
and the board is ready. if authorized
to do SO, to undertake negotiations
looking to the establishment of an in
ternational gold exchange fund, or to
assist in any way in its power in ne
gotiations which may be begun by a
government department looking to
that end. The board believes that
worked out until stable peace has
been assured and the report added:
Success Seems Assured.
Assuming that the leading nations
of the world will be at peace for
long period of years. there seems to
be no reason why an international
of this kind should not
operate as efficiently as our own gold
settlement fund. which has cleared
enormous transactions between dis
tant sections of country of vast
area.
.'The saving of loss and expense in
cident TO abrasion and transportation
charges and interest on gold trans
ferred Will be enormous, and the ad-
vantage to the commerce of the world
will be incalculable."
The report disclosed for the first
time extensive operations of the Fed
eral Reserve Boards system of regu-
Iating foreign exchange transactions
for the past year to prevent dealings
on enemy account Agents were main
tained at all cable Offices, and these
worked in close cooperation with
enemy transactions. Total purchases
and sales of demand and cable ex-
changes between dealers in the United
States from February 20, 1918. when
the regulation became effective. to
December 31swere $5,158, ,000, 900, of
which s3.737 200. 600, or 7s per cent, |
were for exchange on Great Britain.
What System Accomplished.
The report told in cryptic financial |
terms how the federal reserve system
operation with the Treasury in tre-
mendous war tasks of raising liberty |
loans, floating certificate issues, set |
Ting trade balances discounting bill |
lions OF commercial paper. assisting in |
the rationing of capital and providing !
a free channel for flow of credits to ali |
parts of the country where they were
most needed.
Owing to war exigencies, said the |
report, the Federal Reserve Board !
felt it to be its duty to assist in max |
ing effective the policies determined /
upon by the Secretary of the Treasury. |
however inconsistent some of the
steps necessary to be taken might be /
with principles which usually govern |
in normal times. 1t added: within i
a few months the country's war financ- /
ing will have been completed and the
board can then deal with the problems /
incident to bringing our credit struc- /
ture and our banking operations back /
to a normal basis"
The ability of the country to alb
sorb investments has proved to be |
far greater than had been anticipat- I
ed" said the report, "and our credit I
structure. although expanded. is un- 1
shaken. We have no currency prob |
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