Omaha daily bee., 1919-02-09
GOLD EXCHANGE
FUND FOR WORLD
is POSSIBILITY
Development of International
Plan Without Actual Ship
ment of Precious Metal
is U. S. Plan.

Washington, Feb. 8.-Willingness
to undertake development of an in
ternstional gold exchange fund to
facilitate financial transactions be-
tween nations without actual ship
mcnt OF gold was expressed today
by the federal reserve board in its
report for 1918. This arrangement
would be similar to that now main
tanned by the board to settle bal
ances between banks within the
United States.
The fund might be developed
among the eptente nations and a
few leading neutfals, but il is CON
ceivable that all civilized countries
may eventually be participants, :"
said the board. The gold would be
deposited in trust in some govern
ment bank TO guarantee exchange
obligations, and it was proposed
that the fund should be Limited to
current commercial and exchange
transactions.
This is one of the suggestions for
future financial development grow
ing out of successful domestic war
operation Of the federal reserve sys-
EN-. which thc report reviewed in
ietail,
Clear Enormous Transactions.
Assuming that tho leading ma
lions Of the world will be at peace
Tor long period of years" said the
report, there seems to be no rea-
son why an International arrange
ment of this kind should not oper-
ate as efficiently as our own gold
settlement fund, which has cleared
enormous transactions between dis
tant sections of a country Of vast
area.
THE saving Of loss and expense
incident TO abrasion and transporta-
ton charges and interests on gold
transferred will be enormous and the
advantage to the commerce Of the
world will be incalculable.
THE ability of the country to alb
sorb investments has proved far
greater than anticipated, and our
credit structure. although expanded,
is mistaken. We have no currency
problems, and conditions are not
comparable with those which OK
istcd at tho close of the civil war"
Extend Banking Credits.
The board predicted that banking
credits now concentrated in this
country soon would be extended
through the world sjith the develop
ment Of foreign trade. Attention
was called to the fact that even dur
ing the war strain the gold reserve
maintained against federal reserve
notes never fell below 90 per cent,
though only 40 per cent was re-
quired by law. This was interpreted
as Indicating healthy condition
necessary as a prelude to financing
81 foreign trade.
Warning against danger in the
postwar readjustment, the board
said:
Drastic contraction would be fol-
owed by results no less disastrous
Than those which would attend I'm
hue expansion, and the process OF
lefation must therefore be permit
ted to work themselves out in a
gradual and orderly manner. Dis
count rates, which have been based
ON the rates borne by the govern
mentissues, must for the time being
continue with regard to treasury
requirements. but when the war
obligations Of the governments have
been digested. and the invested as
sets of the federal reserve banks
have been restored to a commercial
basis, rates can be established with
reference to the commercial require
ments of the country"
Liberty Bond Figures.
An idea Of the service rendered by
the federal reserve system in connee-
ton with war financing may be
gained from the report that since
.he war began S3l 100000 of
Liberty bonds and certificates of in
debtedness have been subscribed for
and collected through the IL re-
serve banks
Discount operations between the
reserve banks during the year were
reported as S655,63S,00O.
Despite the big strain on the re-
serve system, the so-called free gold,
al surplus OF reserves on December
~. 1918. was reported as $528, 100000.
Aggregate net earnings of the
banks were $55, 10000 last year
The federal reserve system now
includes $50 state banks and trust
companies with aggregate capital
and surplus OF $750,000000 and ag-
pregate resources of only $,339,0 |
ll0 the hoard renorted-