New-York tribune., 1920-10-24
Explain Stand
Against Fisher
'Stabilization ,
Bankers Assert Professors
Plan Would Lead TO Drain
ON i. S. Gold Reserve
III Periods of Stress
Is Called Impracticable
Would Endanger Financial
and Monetary System,
Is Report of Committee

posal for stabilization of the dollar
the currency commission of the Ameri-
can Bankers Association explained it's
objections to its recent report to
Richard S. Hawcs, president.
The commission devoted much time
to- a study of the plan as we'll as to
arguments on both sides, it says in its
report. Continuing, the report says of
the decision reached:
ut is our conclu.ion that Professor
Fishers plan, though interesting and
ably worked out, is wholly mpracti-
cable, and would involve grave dangers
to the stability of our financial and mon
etary system. 1t would lead to foreign
drains on our gold in any period of
crisis, since the plan calls for tighten
ing the gold behind the dollar when
prices fall, and foreigners, foreseeing
this, would draw down their balances
in this country and sell dollars
short before the government could
make the change.
Would Perpetuate Suffering
"The plan would also make difficult,
if not impossible, the maintenance of
gold redemption in periods of rapidly
rising prices. If adopted at the pres
cnt time it would perpetuate all the
suffering which recipients of fixed in
comes have experienced as a result Of
the rapidly rising prices of the war.
1t would be wholly out of the question
for the United States alone to adopt
it, as Professor Fisher proposes, and
almost no other great country is in a
position to meet gold obligations on
demand.
Had the plan been in operation at
the outbreak OF the great war in 1914
it would have broken down, as Pro
fessor Fisher now admits 1t could
not, therefore, have prevented the war
time rise in prices, and consequently
most of the claims which Professor
Fisher has made for it must be aban-
doned.
"The great economic evils Of the war
have grown out of wastcful ,onsunptiou
and destruction, decentralization and in
terruption of transportation. and the
withdrawal of many millions of men
from production, the whole combining
to create great scarcities of goods. No
change in the monetary system could
have prevented this evil. The plan
could not, therefore, have been rem
edy for social distress and dscontent
Change Is Opposed
Professor Fishers plan involves the
modification of contracts calling for
payment in gold coin of the United
ness by substituting the stabilized
dollar for the dollar of fixed weight
and fineness. Your commission is not
in sympathy with this feature Of the
plan.
"Our judgment is, therefore, def
nitcly adverse to Professor Fishers
plan.
"Our judgment is further definitely
adverse to the proposal that the Ameri-
can Bankers Association should me-
morialize Congress to appoint com
mission to investigate this matter and
to determine whether a law embodying
the' plan should be adopted by Con-
gress. We believe It is unwise to
agitate changes in the gold standard at
the present time. Proposals looking
toward the creation Of new currency
systems divorced %rom the gold stand
ard are being made in many places.
Many of them are Of an extremely wild
and dangerous character.
professor Fishers plan, to be sure,
retains the element of redemption of
gold, even though in a varying amount
of gold. But there are many proposals
which involve the abandonment of gold
altogether and the creation of fiat
money pure and simple. 1t is our view
that the banking profession should set
itself firmly against agitation of any
schemes of this sort.
Disputes Expected
"The next ten years will see a pro-
longed contest between the defenders
of sound money and the advocates of
unsound plans, especially in Europe,
and it is our view that the banking
profession of the United States should
concern itself with the maintenance in
the United States and restoration in
Europe of the old-fashioned gold
standard, rather than with any effort
to introduce rehnements and novel
ties"
James B. Forgan, chairman of the
board Of directors of the First National
Bank of Chicago and vice chairman Of
the commission, in signing the report
adds:
"While it is possible that DR.. Fish
er's plan might work out if established
under normal conditions and if a guar
anry could be had that normal condi-
tions would permanently prevail, am
satisfied that it would break down
whenever conditions came under any
abnormal stress, and would be a him
drance rather than a help when facing
such sudden abnOrmality of conditions
as were produced by the war and which
still continue.
Doubts Effect on Prices
"Under our present system of gov
ernment gold certificates OF fuctuating
redeemable value would, as do the pres
cnt gold certificates of definite value.
practically all find lodgment in the
Federal Reserve banks as the basic
reserves for the credit structure which
has been built up in the shape of
Federal Reserve notes, Federal Reserve
deposits and the deposits OF the mem
Der banks. The actual circulation Of
these gold certificates themselves would
be practically nil. | cannot, therefore.
believe that a fluctuation, restricted to
l per cent a month, in the value of
the gold forming the reserve basis for
such structure OF credit as now ex-
lists, would have much, f any, effect
on the prices of goods and merchandise
for which these various forms of cir
credits are exchangeable.
when credits are expanded to the
extent they now are and as long as
can be bought and paid
for, not by the gold certificates them
selves but by credit Instruments for
which the gold certificates are merely
deposited as a small basic reserve. no
slight change in the value Of the metal
represented by these certificates will
IN my opinion, have the desired effect
of lowering or raising the prices of
Mi5.Wintor N;il;,o,x,