The Washington times. [volume] (Washington [D.C.]) 1902-1939, 1928-05-25
BANK
! HEAD TALKS
GOLD Loss
BY RICHARD HATTON

1nere has been q very general
discussion in recent weeks, especi-
lly by financial publications, Of
the outflow OF gold from the United
States. Official records Indicate this
eountry has been losing gold to other
countries steadily since last Septem.
Der. and the reaction OF financial
a writers covers q wide range of opin-
Jon on the subject. It is. therefore,
5nteresting to get the viewpoint OF
s5overnor Roy Al. Young, OF the Fed
erAI Reserve Board, as given Mn
the May issue OF Dollars and Sense.
fhe official publication OF Wash
angton Chapter, American Institute
Of Banking.
Stating that since last September
We have lost 5000. 900 in gold,
a0yernor Young continues:
Ihis loss might well have coca.
eaonsd much concern IL we had not
u become somewhat accustomed to
SEEING gold move In and out Of the
cOuntry In large volume. Even 30.
persistent flow OF gold in or out
Df the country is bound to be at
Any time q matter Of some concern,
since It Intimately involves the bank.
ing situation OF the country. With
regard to the recent outflow OF gold
we may, however, observe that 1t
has been anticipated. and 80 far az
possible provided for. Furthermore,
extending our review over the past
three Or four years, roughly, to EN-
bracs the period since 1924, it may
be remarked that our net loss Of gold
during this period, about 100000
p0O, has been in smaller amount
than many bankers and economists
In this country and in other coun.
tries In 1924 expected 1t to be.
systeu's History
In sense the history Of the
Federal Reserve System may b
written around gold. Since the es
kabltshmsnt of the system in 1914.
our stock OF monetary gold has i'm
ereased from $3.50 100000 in 1914
: OF $A,s00 900, 900 at the end OF
March. 1928, the increage amount
ing to 81, $50, 900, 600. This gold
came to us during the earlier
period, prior to nur entry into the
war, from European beligerent
countries which were in need of
war supplies. and sent gold to pay
for them, and it Immediately be
came the basis for expansion OF
credit Ia this country to provide
Tor the requirements of business at
. q time when Industrial activity was
increasing rapidly in response to
war demands. The period follow.
Ing. roughly from April, 1917, to
June, 1919. including the period Of
our participation In the war, was
( 80. IL
znents. During the greater part OF.
this period, in fact, an embargo on
sold exports was in effect.
OFF Gold STANDARD
'.In this period our monetary gold
MAS modified BY being concentrated
an the Federal Reserve banks. where
"a became the basis for q further ex-
pansion Of bank credit utilized in
Enhancing the war. Following the
lifting Of the embargo on gold ex-
norts. we lost some $3.50. 900. 900 of
gold to countries which had accumu-
lated balances in the United States
during the embargo period and with
drew these balances partly In gold.
From September. 1920, to the end Of
1924. gold flowed continuously into
AuE Qu1C6A Gl4IG8s IAAS AAC@ AOkAlNAO8 ~
our gold supply aggregatinS 81, $780,
900, 900. This gold came to US largely
from Europe, in payment for food
and raw materials, which was obliged
TO export gold in order to balance its
accounts. During this period Eu-
rope was off the gold standard; It's
currencies were not redeemabIe, and
gold In effect ceased to be the basis
. OF its credit and currency. Since
1924 the gold flow In and out has
been in smaller volume giving for
the three and 4 quarter years to date
o net outflow Of some $4,000, 900.
This later period II one which
may be broadly characterized as one
in which gold movements have taken
place in response largely to central
bank policies. In the early postwar
period We suffered the inevitable
after-effeet OF the war expansion. In
this trying period, however, the Fed
sera1 Reserve system proved beyond
question ifs sterling worth. BY lend.
> ing literally 1t contributed in no
ANAL way to the orderly liquidation
OF the war expansion.
Fine Achievement
In the following period of large
gold imports our bank members
used a large part Of the new gold
10 reduce their borrowings at the
Preserve banks and in 80 doing they
Facilitated return to normal credit
conditions, while the remainder pro-
yided the basis of q substantial in.
crease of credit at a time when in.
6ustry and trade were expanding
q rapidly.
I'VE have experienced gold move
Iments in and out of the country in
tabnormally large volume, and we
have learned something of the
I Irower of our banking system to
meet these movements without se-
rioUs interference with the orderly
conduct of commerce and industry.
IL is an achievement of which
American bankers may well he
proud to have taken much of the
worlds gold, in exchange for needed
supplies. raw materials, and food
and TO have 20 utilized this gold as
to be prepared now to take our
Part In rehabilitation OF the world 4