Evening star., 1926-12-15
MEN AND MONEY
BY NJ. S. Rukeyser.
fCopyright. 1026.l

orthodox systems Of money standards
may lead to a call for part OF the
gold which gravitated to this country
in unprecedented volume between
1915 and 1924.
Europe unauestionably has a hun
ger for gold. and will take an in
creasing share of the new output OF
the mines and possibly of Americas s
accumulation.
In the United States economists
have accustomed us to the idea that
too much gold in the vaults is waste
full, and yet If the precious metal
should begin 20 flow out in huge
quantities the psychological effect
would be depressing.
If there should be a heavy outflow
of gold the practical effect OF the
repatriation of Old World gold which
came here during the war and post
war period, on domestic commodity
and security prices and on business
prosperity will depend on the policies
Of the Federal Reserve authorities.
If the reserve system, either through
rediscounts or through purchase on
The initiative of the reserve banks Of
Government securities in the open
market freely substitutes reserve
credit for gold. the practical effect
of gold outflow on business will be
slight. However, If the reserve au-
thorities transfer the initiative to
member banks and compel them to go
into debt at the central banks If they
wish to continue the present body of
credit in existence. the banks. par
ticularly those in the large cities, are
likely to bring pressure on borrowers
10 fhnf m The
most obvious place for liquidation
would be in the stock market, which
at present is absorbing more than
So, 900 900, 900 In credit--an amount
which a number of competent econ
omists consider unduly large.
Factor in DeflatiOn.
The outflow from the United States
Of $400 ,000. 900 in gold in 1919-192O was
factor in causing the subsequent
drastic deflation in this country. On
the other hand, the later influx, par
ticularly between 1922 and 1924, laid
q basis for the credit expansion, which
has been so important a factor in the
present economic expansion, particu-
larly In security and real estate
values.
If we show net losses of gold during
the next few years, it will be either
because European countries, which
have returned to a sound money
standard, wish to build up their gold
accumulations for reserve purposes.
or because fresh imitation here Of
commodity prices will attract huge
imports, which will be paid for partly
in gold.
The best banking opinion In Wall
Street holds that we are probably at
the peak of accumulations, and that
during the next few years America
may we'll show net losses of gold-and
can well afford to. The American
Federal Reserve authorities are in the
saddle and can mitigate the tenn
porarily adverse effects on trade of
substantial gold movements.
An outflow of gold is contingent on
the probability that America will be
willing to continue to make long term
and short term loans overseas. If this
extension of credit should stop, of
to take gold.
Assured Leading Place.
AS a matter of fact, Americas new
economic supremacy assures 1t lead
ing place in the world gold market
for many years. Though there may
be some loss of gold, America will not
return to it's smaller pre-war holdings
Of the precious metal. If France
stabilizes it's currency in 1927, 1t Is
likely to be in the market for gold.
and will probably be inclined to alb
sorb more of the yellow metal than
Germany has in the last two years.
Gold is something of fetish for
the human race. If people were en-
tirely rational, less arbitrary money
standards might be evolved. But gold
has a strange hold on the imagination,
and clamor for hard money has
arisen among the responsible business
and banking leaders of Europe. At
the moment soft money pleas, includ-
ing the high-brow demand for a man.
aged currency, are in disrepute. The
financial statesmen abroad have wisely
held that they ought to re-establish
their currencies along sound, ortho-
dox lines before giving consideration
to new-fashioned refinements which
have been urged.
Imitation, or printing press finance,
which for a number of years was In
favor in Europe, has been thoroughly
discredied by expe erience. Imitation Is
temporarily workable, but it eventu-
ally gets to the end of its rope and
brings a whole array of complications
and troubles
The sight or gold In circulation and
the knowledge that 1t Is in bank
vaults gives the public a sense Of con-
fidence which can be realized in no
other way thus far devised. Inhab.
itants of another planet might smile
at this fact.
Most of the central banks of Eu-
rope now have larger gold accumu.
lations than before the war, despite