Indiana daily times. [volume] (Indianapolis [Ind.]) 1914-1922, 1920-07-02
LIBERTY BONDS.
GOLD RESERVES
IN-U. S. SHRINK
Reduction Since Armistice
Totals S3S4,OO0,0O0.
By DIR. PRANK NJ. SURFACE

WASHINGTON, July AT the end
Of the calendar year of 1913 the total
stocks Of gold IN the banks and public
treasures OF the United States amounted
10 So, 165, $4,000, or about 40 per cent Of
the worlds stock in similar positions.
OF this amount nearly oue-third, or
S1,152 $4,000 had been added TO our
stocks through the excess Of Imports
during the four years Of the war.
Since the early part of 1873 we bave
teen exporting gold far in excess or
cur imports. The total excess OF ex-
ports in 1919 WIS S291 .651 900.
For the five months of 1870 ending
May 81 the excess OF exports has been
50. 4CS 0eO, making q total decrea SC In
our gold reserves since the armistice OF
1884, 0J9 .0CJ or approximately One-third
OF the amount gained during the war.
Imports of gold in the lass five months
have amounted to nearly S98,oOOOO,
considerably larger amount than was
imported in the twelve months Of either
I91S or 1919.
This is due TO the shipments Of gold
from England in anticipation of the pay
nient Of their share Of the Anglo-Freuch
loan.
For the first three months of 1920 the
excess Of exports over imports Of gold
amounted to between S300O0,000 and
S40,0O0,0O0 q month, but in Apru and,
May there was an excess Of imports
month, due entirely to imports from
ENGLAND.
The principal exports of gold since the
armistice have been 70 Argentina, Japan,
HOngkong, China and British India, in
the order named.
This gold is being sent to the Far East
and to South America chiefly TO pay for
our excess Of imports from these re-
giOns.
with the exception of Spain we have
sent no significant amount of gold to
Europe. because we already have n large
trade balance in that part of the world.
Although there has been n rapid de-
cline in our gold reserves during the last
year and q half. there is as yet no cause
for serious worry. The large Increase
in the stock of gold during the war was
used as a basis for the vast body OF
loans during that period. II our credit
expansion decreases along with our loss
of gold the whole effect Will be beneficial.
1t must be remembered that under the
federal reserve system the contraction
Of credit must occur at a much more
rapid rate than the decrease in gold.
The main bulk Of our gold reserve is in
the federal reserve banks. Every gold
dollar deposited there serves as a basis
Of $3.50 in liabilities. When deposited
10 the credit of member bankS each dol
lar of such liability may serve as a basis
Of cTedit extension of from S7.50lto Sf40O.
Consequently a single gold dollar IN
the federal reserve banks may serve as
the basis of as much as $500 Of credit.
The federal reserve act provides that
whenever the gold reserves held against
federal reserve notes fall below 40 per cent
the federal reserve board shall stabl!sh
a graduated tax. which shall be added to
the rates of interest and discount thus
giving an automatic check on credit
operations. Since credit must be con-
tracted twenty to thirty-fve times as
fast as the rate of loss of gold this oper-
alton may involve some difficulties.
The federal reserve deposits Of COLA
have approached so close TO the 40 per
cent mark that It has been necessary to
take some steps toward contraction.
In addition to our exports OF gold there
of this metal.
Ii being estimated that in 1919 about
S10G0 60. $50 was used in the production OF
manufactured articles.
On the other hand the production of
gold has decreased over 40 per cent in
recent years.
A partial check on the use of goAd in
the trades could be brought abo at by
increasing the price of gold bars at the
mint. This price is $20.67 per ounce
which is the same as that charged before
the war.
It is alleged that this price is less than
the present cost Of production. of new
gold.
The further expected importation of
gold from England will prev snt any, Sc
riOus depletion Of our stock, in the i'm
mediate future.
1t is believed that this wkll give suffi-
cient time for the measures adopted to
the federal reserve boar1 to contract our
hank credit to L safe nargin.-Copyfight
1920.