The Topeka state journal. [volume] (Topeka, Kansas) 1892-1980, 1921-04-30
PILING UP GOLD.

Imports of gold in this country since
March, 1920, have exceeded exports
by approximately $500, 100000. The
movement has grown steadily since
the first of the year, the imports in
exports. This figure was exceeded
only once during the twelve months,
the imports in October, 1920, incident
to the payment of the Anglo-French
loan, having produced an excess of
500, 100000. But gold as a source of
good or evil in its relation to business
has been shorn of much of its former
power by the establishment of the fed
era1 reserve system.
Fears or hopes-according to the
point of yiew-that the heavy move
ment of gold to this country will force
a revival o. initiation, says a bulletin
issued by the American Exchange Ma
tionaI bank of New York, are SEEM
ingly due to a lack of appreciation of
the function of gold in modern sys-
tenn of credit such as the federal re-
serve system.
In the days of haphazard banking
and credit, from which these appre-
tensions arise, gold was potent agent
for good or evil and it acquired a rep
utation to that effect which clings to
it to this day. This reputation arose
from the fact that inasmuch as gold
was the universal medium of exchange
any increase in the supply in the
hands of individuals arising out of
new discoveries of gold or out of the
activities of the merchants of a coun-
try which resulted in so-called ia
vorable balances" that were paid in
gold, Immediately increased the pur-
chasing power of the individuals and
put them into competition in the mar
kets against other buyers. which, of
course, resulted in an advance in
prices.
The effect of contemporaneous in
crease in the purchasing power of a
number of individuals upon prices was
often disastrous to the community,
producing great hardships among the
poor, especially when the purchasing
power thus created was used to in
crease the consumption of luxuries or
export goods of which the supply was
limited. Even the owners of the in
creased purchasing power were ulti-
mately harmfully affected, for their
own activities in the market soon cut
in half their ability to buy. Gold was
at such times a powerful agent of de-
which men found it impossi-
BILE to curb.
At the time Of the first great mod
ern discoveries of gold the world was
devoted to agriculture and trade in
home products. 1t needed but little
money, and even a small increase in
the gold supply had the effect of up
setting the economic organization.
With the development Of industry and
the growth of the demand for capital,
the supply of gold became inadequate
to the demand and the modern device
of utilizing gold as a reserve and prac-
tically limiting it's function as a me-
dunn of exchange to international
trade was slowly evolved.
In order to develop the maximum
credit power from the limited supply
OF gold, it became necessary to mo-
bilize it. That result was attained in
this country when the federal reserve
system was brought to its present
form. AS long as gold was scattered
about in the vaults of thousands of
banks it retained some of its old power
fer evil, and if that condition obtained
now, there would in reality be a basis
for apprehension.
Under the federal reserve system,
gold is the power which manufactures
credit, a power that can be turned on
and off at will. There is a loss when
the plant is not being run at full ca
pacity just as there is a loss when a
steel plant is not being run at full ca
pacity; but steel plant will not be
run when there is no market for its
product and neither will a credit
plant.
1.-THE loss incident to a shutdown
of the credit plant" says the banks
bulletin, falls upon the stockholders
of banks just as the loss incident to a
shutdown of steel mills falls on the
stockholders of the mills. The idea
that banks can go on making money
while industry remains at a standstill
is fallacious, as this. analogy plainly
shows. The analogy also indicates the
answer to the question, What is to be
done with the increasing gold supply?
The answer is. nothing"
Almost everybody has suffered from