The Indianapolis times. [volume] (Indianapolis [Ind.]) 1922-1965, 1931-09-22
COLD STANDARD
is A GUARANTY
FOR CURRENCY
0utgrowth of Supply and
Demand Law With Its
Rarity as Basis.
~ United press

Rarity as Basis.
By United Press
NEW YORK, Sept. 22.-The gold
standard is the backing of coun-
trys currency by gold, a sufficient
quantity Of which is held in reserve
so that the currency can be held
TO its fixed value.
If country declines to permit
the withdrawal of gold, as in the
present case Of England, it's cur
rency loses its standard value
abroad.
To understand gold standard it is
necessary to recall the old law of
supply and demand-the law which
Richard Whitney, president of the
New York Stock Exchange, recently
said has been violated to bring the
present depression.
Gold is rare; therefore the de-
mand is great.
In the old days man bartered one
commodity for another AS civili-
cation advanced and manufacture
became more diversified, a means of
exchange had to be hit upon. Gold
was taken, because a small amount
would be valuable on account of its
rarity, ease Of handling, etc.
Given Fixed Value
Eventually, it came to have
fixed value and commodities fluc-
tuated. If commodities were plen-
tiful, the same amount of gold
would buy more than If they we're
iare.
A county on gold standard fixes
the price of gold in relation to its
currency and keeps the ratio. In
the case of Great Britain, the pound
sterling was worth $4.865s in gold.
1t meant, theoretically, that if one
took certain amount of sterling to
the Bank of England, he could buy
a certain amount of gold of a GER
tain fineness fixed by law.
BY the law of 1925, which brought
the British government back to gold
parity, the price of gold was fixed
roughly at $40 a fine ounce. That
meant for every $40 worth of ster-
ling, the purchaser could obtain one
fine ounce of gold.
The British government, how
eever, set the smallest amount of
purchase of gold at 400 ounces. 1t,
therefore, meant the country was
not on strictly gold basis.
U. S. Is Classic Example
The United States presents the
classic example of a gold standard.
Our gold dollar weighs 25.8 grains
and contains 1922 grains of fine
gold. No single gold dollars are
coined on account of the size, but
this is the standard.
The currency law of 1900 makes
it the duty of the secretary of the
treasury to maintain all other forms
of money at parity with gold.
The gold standard calls for free
coinage of gold. If a person brings
to a United States mint $4,000 worth
Of fine gold he will be. given $4,000
worth of gold coins.
Under the British act Of 1925, the
Bank of England stood ready to
sell bar gold to any person who
makes demand in that behalf at
the head office of the bank during
Office hours of the bank and pay
the purchase price of pounds II
shillings 1917 pence (roughly $50
per troy ounce of gold of the stand
ard Of fineness prescribed for gold
coin by the coinage act of 1870"
Value Is Fixed
That regulation fixed the value of
gold. The pound sterling, therefore,
had a definite ratio to gold. If the
pound declined, 1t would buy the
same amount of gold in England as
it did before
Englishmen and others could take
the deprecated pound to the Bank
of England. buy gold at the fixed
rate, ship the gold abroad, and re-
ceive currency of other countries
and thus make profits in proportion
to the amount which the pound was
down.
If all transactions were made in
Great Britain, the pound sterling
would remain fixed at a certain fig
IRE. But payments must be made
for goods received from all countries
of the world. Therefore, the pound
must have ratio to all other cur
rencies.
If exports are greater than inn
ports, money will come into Great
Britain. That money will be in the
form of gold. Britain will have
favorable balance of trade.
Currency Value FIuctuates
AS gold comes into a country .-.e
value of its currency rises in pro-
portion to that of the country ship
ping the gold, for that country is
losing the metal and therefore is
in a weakened position.
When the trade balance Swerves
around the other way and more
goods are taken into the country
than are sent out, the country in
question must ship gold to make up
the difference in the value of the
exports and the imports.
When gold leaves the country 1t
has tendency to reduce the value
of the exchange and thus work