New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1919-02-09
Gold Exchange
Fund Is w anted
To Aid Nations
Federal Reserve Board Re-
port Expresses Willing
ness to Develop the Plan
Would Abolish Shipments
Other Suggestions Made for
Financial Growth; Great
Saving Seen for Countries

WASHINGTON, Feb. Willingness
to undertake development of an inter-
national gold exchange fund to facil-
tate financial transactions between ma
lions without actual shipment of gold
was expressed to-day by the Federal
Reserve Board in its report for 1918.
This arrangement would be similar to
that maintained by the board to settle
balances between banks with the
United States
The fund might be developed among
the Entente nations and few leading
neutrals, "but it is conceivable that
all civilized countries may eventually
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 commercial and eX-
change transactions
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 pos
sibility of avoiding shipments of gold
from one country to another in settle
ment of balances arising out of ord-
nary. commercial transactions, and the
board is ready, if authorized to do so, to
undertake negotiations looking to the
establishment of an international gold
exchange fund, or to assist in any way
IN Its power in negotiations which may
be begun by & government departing mt
looking to that end. The board believes
that definite plans cannot perhaps be
worked out until stable peace has
been assured.
Saving Would Be Enormous
Assuming that the leading nations
of the world will be at peace for a
long period of years, there seems to be
no reason why an international ar
rangement of this kind should not op-
crate as efficiently as our own gold
settlement fund. which has cleared
enormous transactions between distant
sections of country Of vast area.
"The saving of loss and expense incl
dent to abrasion and transportation
charges and interest on gold trans
ferred will be enormous, and the advan-
tage to the commerce of the world will
be incalculable
The report disclosed for the mrs,
time extensive operations of tho Fed
eral Reserve Boards system of regu-
latlng foreign exchange transactions
OF the past year to prevent dealings on
enemy account. Agents were main.
tanned at all cable Offices and these
worked in close cooperation with other
government agencies to detect enemy
transactions. Total purchases and
sales of demand and cable exchanges
between dealers in the United States
from FEBRUARY 20, 1918, when the reg
ulation became effective, to Decembe1
81 were Sb,158 100000, of which S3,737,-
oo0,o00, or ~ per cent, were for ex.
change on Great Britain.
Financing Completed Soon
The report told in cryptic financial
terms how the Federal Reserve
system in this country functioned
in cooperation with the Treasury
in tremendous war task CT rails
ing Liberty loans, floating GER
titicate issues, settling trade balances
discountng billions of commercial pa.
per, assisting in the rationing of cap
ital and providing free channe
for flow of credits to all 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
necessary to be taken might be with
principles which usually govern in nor
NAL times" 1t added:
"Within few months the country's
war financing will have been completed
and the board can then deal with the
problems incident to bringing o1r credit
structure and our banking operations
back to normal basis.
"The ability of the country to alb
sorb investments has proved to be fal
greater than had been anticipated,
said the report, land our credit struct-
urc, although expanded, is mistaken
We have no currency problems, ant
conditions are not comparable with
those which existed at the close of the
civil war True, the purchasing power
OF money has declined, but this is due
to the urgent and abnormal demand
for goods and services and the accom-
-panying expansion of credit and cur
rency."
Expects Extension of Credits
The board prcdicteds that banking
credits now concentrated in this coun
try soon would be extended through
the world with the development of for
eign trade. Attention was called tt
the fact that even during the war strair