New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1920-07-06
Bankers Oppose
Bonus for Relief
OF Gold Producers
American Bankers Associa-
ton Committee Says Nc.
Fadden Bill Would Men.
ace Monetary Standard

SNN 1'AOAACG0A Ot0A1udhU
a committee appointed by the Amer.
lean Bankers Association to study the
McFadden gold bill, which would give
bonus to producers of the metal, in
statement issued yesterday expressed
its unalterable opposition to the con-
tents of the legislative proposal. The
bill provides for tax Of fifty cents a
pennyweight for all gold used in indus
try, and would pay a premium of $40
an ounce to producers up to 1925 to
compensate them for the high cost of
mining.
In presenting its reaction against
the bonus the committee, which con-
sists Of George M. Reynolds, Lawrence
E. Sands and A. Barton Hepburn, says:
eve may pass briefly over the diff
culties Of administration Of such an
act; the danger that frauds would be
practiced upon the government; the
difficulty Of distinguishing virgin from
old gold melted down. Gold which diff
fcrs from other gold merely in having
o special history, and which, by virtue
Of that special history rather than its
intrinsic qualities commands high
premium, presents an anomaly incon-
sstent with the normal functioning of
free gold market and the normal
functioning Of the gold standard. The
temptation to manufacture history in
stead Of mining gold would be very
great.
again, the provisions in the McFad-
den bill introducing the index number
Of commodity prices as a basis for fix
ing tho rate Of taxes on gold manu-
facture and of premium on gold min
ing constitutes an opening wedge for
the general introduction of the index
number as standard of value in the
United States in accordance with Pro-
fessor Irving Fishers plan for 'stabil-
izing the dollar 1t is beyond the
province Of this paper to deal with
that plan in extenso. Your committee
believes in the gold standard and does
not believe in tampering with it or in
condition Of the worlds monetary af-
fairs. There is, moreover, another COM
mittee of the American Bankers Asso-
citation, which is to make a detailed re-
port upon the project. We shall con-
tent ourselves for the present with
pointing out that if this index number
standard is to be adopted it should be
considered on it's own merits and not
introduced by the back door as
feature of the McFadden bill.
Danger to Gold Standard
"The greatest objection of all, how
ever, lies in the danger which this
measure would involve for the gold
standard itself. Nearly all of the
European states are on a paper basis.
Only few of the smaller countries of
Europe are even approximately main
tanning the gold standard. The United
States, par excellence and Japan as
we'll, stand out conspicuously as ma
tions maintaining the gold standard.
All the world believes that our dollars
are as good as gold. All the other ma
items OF the world are struggling and
hoping to get back to the gold stand
ard. We enjoy a proud preGm incnce in
this respect. and it should be zealously
guarded and maintained. The belief
which obtains in the world to-day that
our dollars are as good as gold must be
maintained The whole world must be
convinced that money can be deposited
IN this country at any time and with
drawn at any time in any form which
the depositor may elect.
Normal Conditions Needed
increase Of gold mining will return
with normal conditions. 1t must not
be forgotten, however, that part of the
automatic working Of the gold stand
ard depends upon an increase in gold
production when prices are low and
upon a decrease in gold production
when prices are high. Increased gold
production in a period of low prices
and low costs makes it easier for
prices to rise again, while diminished
gold production in periods of high
prices and high costs tends to reduce
prices and costs again.
Moreover, the industrial consump-
ton of gold tends to increase in a
period of high prices, since the price
OF gold does not rise as other prices
rise, while in q period Of low prices
the prices of gold manufactures are
relatively high, and purchases OF gold
manufactures consequently tend to
diminish. Variations in the consump-
ton of gold thus also work toward
diminishing the supply Of free gold
when prices are too high, and toward
increasing the supply when prices are
too low, thus tending to correct both
the rise and the fall of prices. In this
feature of gold production and con-
sumption we have one of the STABILIZE
ing factors in the gold standard. The
McFadden bill proposes to strike at
this automatic regulator and correct
i've. 1t would aggravate the very con-
dltions which it seeks to remedy"
Motors Compete with 'Rickshas