The New York herald., 1922-02-08

price levels of various countries 1t can
| by no means be. said to be an ideal
means of payment, but under normal
conditions it has been very effective IN
preventing the price level of any one
country from falling too markedly out
Of line with that of others.
when currency and credit systems
are erected upon a gold basis loss OF
gold following imports tends to check
the process of further credit expansion.
and the knowledge that gold may be
wanted for export is under all circun-
stances a deterrent to indefinite credit
expansion.
Gold Denudation Process.
"In short, Observation-Disclosures and
sales tend to offset one another except
to the extent that occasional adverse
balances can be covered by means of
gold shipments. However. If there is no
attempt to maintain the gold standard
or to link gold in any way with the in
ternal price level, the process Of gold
denudation can go on to the point OF
exhaustion. In fact. that is what has
virtually happened in a number of coun-
tries. Originally the rising interest rates
that would accompany an outflow OF
gold would check such movement. But
II credit expansion by means of paper
issues goes ahead unrestricted by the
reed of redemption, >either immediate or
prospective. no effect upon interest rates
need cnsue.
Discussion OF the Initiation now ex-
isting in Europe leads to the question
whether so-called gold exchange stand
ard might not be employed and the re-
view urges that artificial methods of
controlling exchange operations are Of
no permanent value.
THE statement is plainly made that
the great accumulation of gold in the
United States at the present time is
gravely dangerous. the review stating
the case as follows:
at is evident from all that has been
said that the United States has an in
terest in the introduction of some form
of gold standard as a means to the re-
sumption of trade relationships through
the effective stabilization Of exchange
At present. furthermore. the abnormal
concentration of gold in this country is
a source of danger. because it is false
guide in matters of credit policy--no
longer an index of the outside limit Of
legitimate credit expansion. Considera-
tions of national interest alone are
therefore. sufficient reason for careful
weighing of proposals looking to re-
distribution of the gold supplies Of the
world and involving a return of some
part of the gold held by the United
States for use elsewhere.
Guarantees Necessary First.
NO proposals of any sort should,
however, be entertained until far reach
ing guarantees of fiscal reform have
been secured from the countries that re-
quire aid. Otherwise the assistance
would be detrimental to the extent that
it would lead TO the postponement of the
necessary fiscal reforms which must be
made preliminary to the rehabilits tion
Of currency systems and the reestablish-
ment OF stabilized exchange relation
ships
The review closes with a sketch of
the present international balance situa-
ton in which 1t is shown that:
In November, 1921, detailed esti-
mate of the net unfunded balance due
to the United States from abroad was
presented. Exclusive of the war time
debts of foreign Governments to the
United States Government which amount
to $4,000. 900 900. roughly speaking. II
was estimated that on October 1, 1921,
there was owing to private creditors in
the United States a net unfunded bal
ance OF SO, 900. 900. During October.
3
merchandise exceeded imports by little
less than 5000. 900. and for the same
period net imports of gold and silver
We're but slightly short of $125,o00, 900.
leaving a net addition to our unfupded
balance from visible sources of s175.-
! 900 900.
When. however, the remaining or
invisible items in the balance are taken
into consideration and summed up il is
| likely that they constituted a net debit
| for the three months of between SITS
| 000.0 and $200.0O0.000. The result is
| that the visible items during these three
months have been fully offset or pos
sibly little more than offset by the
| invisible elements in the balance, leav-
/ ing the former estimate substantially
unchanged and. If anything, slightly re-
| duced at the close of 1921. In view OF
I all the available facts. therefore, it seems
| fair to take S3.400, 900, 900 as the ap-
| proximate amount of our unfunded in.
/ ternational balance on January l.
/ 1922"