Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-10-08
STABILITY OF GOLD
| BASIS IS STRESSED
Bankers Believe Nations
Will Return to Former
Currency Standard.
BY DONALD C. BOLLES.
written for the Assoeiated Press


NEW YORK, October s.-wall Street
bankers find distinct announcement IN
the determination Of foreign countries
to keep their currencies anchored to
gold where possible.
Currency imitation has traditionally
been regarded in Wall Street as an eco
nomic evil eventually bringing serious
consequences, despite the fact that it
may bring temporary boom.
England's temporary suspension of the
gold standard was viewed in MANY QUAR-.
tiers as constructive in that it may cor
rect an untenable situation resulting
from what is now widely regarded as
an overambitious effort 10 return the
pcuno 10 pre-war gold parity In 1925.
May Help England.
/. The suspension of the gold standard.
however, is viewed as constructive only
as 1t may help England to find a sup
portable level at which it can again
mitch It's currency to gold. It was not
surprising to Wall Street that the Scan
dinavian countries followed England's
example. In view Of their close financial
relationship to London. But the de-
termination of such countries as Hol-.
land and Japan to stick to gold has
been regarded as gratifying.
The late Benjamin Strong, who guided
the New York Federal Reserve Bank
from its birth to stature far beyond
what had been conceived for it by its
founders. asserted in 1926 that zone of
the great menaces to the trade of a
country like the United States is de-
preciating foreign exchange"
Strong who probably more than any
other American helped nurse the cur
rency systems of foreign nations. de-
bilitated by the World War, back to
health, said that unstable money con-
dltions have the effect of reducing the
real wages of labor and Temporarily
and artiflcially increasing the margin
OF profit on export goods
In every case where stable monetary
conditions can be established through
out the world" he once said. that
menace of an artifcially and unhealthy
stimulated competition in export goods
Will be reduced. 1t is a type of COM
petition for which the workingman
alone pays. and is one of the cruelest
1nJuStices which the world has suf-
fered as result of the war"
Strong contended that the impor-
lance OF re-esta blishing currencies on
a gold basis. especially England. could
not be exaggerated. and asserted that
IL meant the elimination of specu-
latlve hazards in international pur-
chases and sales Of goods which have
been restricting and whitening influ-
ence upon trade ever since the war
started"
Gold Basis Almost Universal,
The stability of currencies by the
nations OF the world was gradually
achieved and by 1929. when the stork
market crashed. all but two or three
nations had placed their currencies
on fixed basis of exchange in gold.
A manufacturer in the United States
selilng goods TO customer in a for
elgn country for delivery six months
hence knew exactly what he would re-
celVe for his merchandise. If he did
not wish to accept the customers for
elgn currency he could taxi il to the
AHountry's central bank and ~onvert il
A7to gold. and, if he de. 20 shin II
Ia me or buy American dollars.
l)uring the last two years the flush
OF alealth has gone from the cheeks of
the economic world and governments.
like many banks, have found the de-
mands upon them too severe. The
flight of capital from foreign countries
has depleted supplies of gold that in
normal times were adequate. The re-
suit has been that all but six nations
Of the Vorld that were on the gold
standard in 1929 have been forced
to desert it.
Wide fluo uations in the dollar value
Of the pourA1 sterling and other cur
-encies DIVORCED from the gold standard
nave resulted A popular pastime these
days is to guess at what level the
pound sterling will eventually settle.
Some have sugga sted So. others believe
It will be at not Jess thar rs per cent
OF its old parity OF S4.865s.
Production C,,sts Reduced.
No important Wall Street banker has
thus far expressed any belief that Eng
and and other countries will not come
back into the fold as soon as conditions
permit. but many eye rather obviously
the effect of the period of uncertainty
upon world trade recovery
Production costs, most important of
which Is wages. have been reduced in
that have cut loose from the
gold standard. giving them an ad-
vantage In exports, but tending to cur
tail imports. But. If history repeats.
prices will rise in those countries,
wages also will advance and ultimately
the advantage in world markets will
vanish.