Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-11-27
BY JOHN F. SINCLAIR.



BY JOHN F. SINCLAIR.
Special Dispatch to The Star.
NEW YORK. November 27.-"The
United States is on gold standard
basis Just what does that mean?" asks
r. H.
Gold is the same price in every part
of the world. It never varies. If a
miner works alone in small Montana
mine this Winter and RECEIVERS 100
ounces of gold he can take it next Spring
to the United States Government Assay
Office and receive S20.67 an ounce
S2.067 for his Winters work.
Gold is always worth S20.67 an ounce
in the United States because 81 Is one
twentieth of an ounce of gold. Just as
a quart of milk is always worth two
pintS of milk because a pint is one
half of a quart. Gold is thus stable
merely in terms of itself, not in terms
Of other things.
The truth is that the purchasing
power of money has always been un-
stable" SAYS Prof. Irving Fisher. The
fundamental reason is that q unit Of
money. as at present determined, is not
as IT,. should be-a unit Of purchasing
power-but unit of weight"
Price Lever.
So il this unit weight of gold has
widely varying purchasing power-and
history proves that 1t has--tllen money
itself. based on purchasing power, has
always been unstable.
The price level has never been
stable. In England, between 1925
and 1s46-5O, wholesale prices fell Is
per cent; between 1860 and 1871-75
they rose 25 per cent; between 1915
and 1894 -98 they fell 40 per cent, and
between 1894-9S and 190e-13 they rose
by 80 per cent. Other countries record
similar conditions.
Gold. as a basis for currency issue.
was recklessly diluted during the war
and this in turn inflated prices, result
ing in the violent deflation of 1s2o-2l
and the secondary -def1ation of 1929 30.
But does the gold supply look SUM-
cient to maintain an expanding world
trade In the future? Prof. Gustav Cas-
sci, in 1921. wrote:
We have to reckon with the feet that
the worlds production of gold has be-
come definitely insufficient for the rate
of progress which we used to regard as
normal before the war"
According to the reckoning of the
Cassel school, unless new gold mines
can be opened to provide an increase
of at least per cent annually in the
present gold supply the world is faced
In the next few years with the prospects
of falling prices. This view Is shared
by several well known American econ
omists.
Urges Control Of Output.
But that opinion is not unanimous.
Prof. Lehfeldt. British economist in his
volume, Controlling the Output Of
Cold" issued in 1925, came to the con-
cluSion that fall in the value Of
gold was more probable than q rise.
And he has been the chief and con-
sistent exponent of plans for the inter-
national control Of gold output to sta
Billie prices. i
He says: The output would have to
be placed under the control of some
authority that could, take long views
and act In the interest of the world In
stead of that of the shareholders in
the mines"
ID. H. Robertson. another British
economist, probably summarized the
position of gold in world trade as well
as any one when he said in his book on
Money"
Gold is a fetish. but 1t does the
trick. If we decide to acouiesce
silently for the present in the nnainte-
nance OF a gold standard OF the world
by our own country, may we not at
least hope that the monetary authori-
ties OF the world will do their best by
collective action to prevent the misbe-
havior Of gold"
So long as people out of 10 in every
country think the gold standard is the
best. that standard is going to be con-
tinued.
Fisher Proposals..
The plan of Irving Fisher better to
stabilize the purchasing power of the
dollar was embodied in the Goldsbor-
ough bill Of 1922, presented to Congress.
Here are the f1ve phases It attempted
to cover:
l. To abolish gold coins and to con-
vert our present gold certificates into
gold bullion dollar certificates" entt-
Ting the holder, on any date. to dollars
OF gold bullion of such weight as NAV
be officially declared to constitute a
dollar for that date.
2. To retain the free coinage" !. e..
the unrestricted deposit of gold. and
TO retain also the unrestricted redennp-
ton OF gold bullion dollar certificates.
3. To designate an ideal composite
or oods-dollar." consisting of rep
resentative assortment of commodities.
worth, at the outset. a gold dollar of
the present weight, and to establish an
index number" for recording. at stated
times, the market price of this ideal
goods dollar In terms of the gold bull
lion dollar.
4. To adjust the weight Of the dollar
de- the gold bullion dollar at stated
intervals, each adjustment to be pro-
portioned to the recorded deviation of
the index number from par.
.. To impose a small "brassaRe" fee
FOR the deposit of gold bullion and pro-
vide that no one change in the bullion
dollars weight should exceed that fee.
In addition TO these features should
be mentioned the tacit assumption that
the United States retain a sound bank
ing system. Without such. the effective
ness Of the sterilization plan would be
lost.
The Strong Bill.
In 1925 Representative Strong Of
Kansas introduced a bill to amend the
Federal Reserve act A. follows
Paragraph D. section l4-To estab-
lish from time to time, subject to re-
view and determination of the Federal
Reserve Board, minimum rate OF dis
count TO be charged by such banks for
each class Of paper. which shall be
made with a view to accommodating
commerce (and business. ="
And TO add, instead and promoting
stable price level for. commodities In
general"
II was the idea OF Congressman
Strong that all the powers of the
Federal Reserve were to be used for
promoting stability in the price level.
Hundreds of pages of testimony were
given to the Banking and Currency
Committee Of the House, but the bill
failed to pass.
Now all the plans 20 far suggested
by Fisher, Keynes. Snyder, HaWtrev.
CaSSel and others TO improve the en-
niafncu Of the nnId cAnrInrl IL. ..A-I..