The Bridgeport times and evening farmer., 1920-01-24

of gold parties, without which a countrys trade and growth will re- main subject to fatal handicap. eve may expect some countries to aim for a direct return to a free gold stand ard, while others may have to choose the indirect route of gold exchange standard.)
 "But, it is claimed, there may not be gold enough to serve as a basis for the worlds financial structure, par ticularly in view of the phenomenal increase in prices.
 '"Time does not permit dwelling at length upon the question of the fu- ture trend of prices and to inquire whether we may not hope, in due course, to witness a, substantial reces- sion. Let us bear fin mind, however, that the more perfect the machinery of credit, the more insignificant be- comes the necessity of settling in ac- tual gold. Where national credit, in dustrial enterprises and banking sys- tems are established on a sound basis adverse balances can be satisfied in many other ways than by payment in actual gold. If Government credits and commercial conditions are sta bilized, we may confidently undertake the stabliization of exchanges with the existing gold supply. Unless Govern ment credits and commercial condi- tions are stabilized, we could not stabilize exchanges even if an addi-
 tional billion dollars of gold were
 poured into the world.
 And that indicates the road we
 shall have to follow if we wish to wend our way out of the present la
 byrinth. We are living in an era where the production of money and 7 ton of goods has decreased. In or der to emerge we must produce less credit and money and produce more i goods.
 If governments adopt a rigid poli-
 cy of preventing the further issue of 1 government securities and money for i the purpose of covering current de- 1 iciencies, they will take the first and most effective step in combating the 1 decrease of production, the rise in ! prices, and the fall of exchanges. If ] they will not, or cannot, adopt such l a course, they are headed for insol- vency and social and economic dis | ruption.
 l Where gold payments have been
 suspended and foreign exchanges have 1 become demoralized, the restraining 1 influence once yielded by gold must l be exercised at this stage by rigid | budgets. When by curtailing expen- 1 allure and by increasing current rev. l enues the issue of government loans i to cover current deficiencies has come l to a stop, when the floating supply of l undigested government securities has 1 gradually been absorbed, the time will 1 again be ripe for an effective control l of money markets by the central 1 banks And when central bank rates 1 are thus once more effective and the l foreign credit of a country has been restored the moment will be at hand 1 when the resumption of gold pay i ments may be considered, and with
 that the stabilization of foreign ex- l changes. Whenever that point is l reached, a country may be deemed l to have completed it's economic con-
 vaIescence. The first step in this di- rection must be the establishment of
 honestly balanced budgets.
 l "A country's ability, without addi- 1 tiona1 borrowing, to balance it's reg ular budget is the test of it's solvency.
 The character of this test at this junc-
 1 ture will decide the measure of its l future credit; and upon that, in turn, | will largely depend it's power to re- habilitate it's commerce and trade and 1 its foreign exchanges"