Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-01-26
GOLD SEAJUSHE[D
SOUNDBYBANKERS
Credit and Prosperity Are
Not Endangered by Large
:. Recent Exports.

The recent heavy Withdrawals OF. gold
from the United States seem to have
been due chiefly to the withdrawal by
individuals abroad of money loaned in
the New York call market and return
of miscellaneous funds attracted here
in past year. This Is the opinion of
Potter l. Co, New York investment
bankers. VINO. have just completed a
study of the gold situation. Even should
there be a further loss in gold. which,
1t is stated appears to be doubtful be-
cause Of the favorable position of the
European central banks, such loss. in
their opinion, would not endanger
credit or business prosperity. The re-
view Of the gold situation as presented
by the bankers, says, in part:
Conditions Improving.
Considerable discussion and even
uneasiness have occurred recently in the
financial world because the United
States, during November, December. and
the first part of January, has been,
losing gold, at q time when gold
normally tends to come in rather than
90 out. The total amount withdrawn
from October % to January IA was
about .SI25, 0o0, 900. Though this amount
seems large in figures, 1t Is actually less
than 8 per cent of the total United
States gold stock Of $4,275 ,00o, 900. The
movement appears to have ceased and
exchange rates would seem to indicate
that state Of comparative equilibrium
in gold supplies of the nations may
have been reached.
1.-THE lower money rates which have
prevailed here since the break IN the
stock market in October November, and
the prospect of lower rediscount rate,
have had the effect OF returning to its
natural homes much Of the wandering
gold which has been attracted to us in
the past Is months, through our high
call loan and rediscount rates.
Since the United States has apparH
entity an ample, or even overabundant,
supply of gold, this withdrawal does
not mean high money rates here, al
though It may tend to check very easy
money, which is probably wholesome
thing. Our present reserve ratio
(January 49, is 75.4 per cent OF gold
against outstanding bank notes, etc.
which is far above the legal reserve OF
40 per cent.
Gold Supplies Normal.
"Gold supplies, for the first time since
the World War, seem to be approxi-
mately normally distributed among the
various nations and are likely TO hold
so for, some time, with only the usual
fluctuations due to transfer OF COM
modities In trade and credits m minor
international financing. We may in the
next few months lose more gold. Per-
haps so, but unless it goes out all at
once within the space of a few days, 1t
is hardly likely that this would have
much effect on our domestic financial
markets; and even If gold should go out
rapidly, the Federal Reserve Banks
would be fairly certain to buy United
States Government securities In Sufn-
Gent amount to offset and smooth out,
through this release of money, any sud
den effect on our money markets of
such Withdrawals.
I'VE have more gold than we need,
according to many authorities, who fur
thsr say that we could lose $500, 000, 600
more without endangering credit and
business prosperity. The free gold
above our legal reserves and other spe-
cial requirements now amounts to about
500. 900, 900, while It has been estimated
by those IN closest touch with the
money market that $500, DOC, 900. Is all
that is needed to finance geur business
and credit. s.5.t.
but are we likely to lose this eolda
Great Britain's gold holdings. are
slightly above the level Of fl5o,00e, 900
recommended by its experts Gthe Cum
1llC COllllLl1SSlOAlDs EkdllCC AldS y AC1CAN We
far above requirements. is creditor
nation and can hardly want more gold
Just now because of the tendency 1t
would have to raise prices within the
country, and there Is much agitation
there now about high commodity price
levels. The ReichSbank in Germany
has built up ample gold reserves, and
the reduction OF its rate on January -
would seem to indicate confidence in
the situation and no desire for addi-
tional gold except as The result of IA
vorable loans to G--Tnan enterprise
negotiated abroad.
Reason fO:- Exports. !,
1.-THE real reason we have had an
outflow Of gold in the past 10 weeks
seems to- be the Withdrawing by indi-
Niduals abroad of money loaned fn' the
call loan market, which no longer has
an Immediately profitable field here,
and, as a result of lower and less at
tractive money rates, the return home
of miscellaneous gold attracted here
from all sources in the past two years
and which was undoubtedly forming a
basis for credit imitation, together with
window dressing over the year end.
1T, therefore, looks as though we
could count on comparatively stable
gold conditions for some time to come
and presumably equally stable prices
and credit"