Evening star., 1932-10-05

written IN currency. Wnen tney
abandon the gold standard, and gold
goes to a premium. the relations Of
their domestic debtors and creditors
are unchanged, because both he who
pays and he who receives use the same
been forced OIL the gold standard, you
in this city woild have sold your prod
uce for deprecated currency. You
would be paid your bank deposits and
your insurance policy in currency, but
you would have to pay premium on
such of your debts as are written In
gold. The Federal Government, many
of the States. the municipalities, to
meet their obligations, would need to
increase taxes which are payable in
currency, in order to pay the gold
premium, provided of course they did
not repudiate.
I believe I can make clear why we
were in danger of being forced of even
with our theoretically large stocks OF
gold I have told you Of the enormous
sums Of gold and exchange drained
from us by foreigners. You will real
ize also that our citizens who hoard
Federal reserve and some other forms
of currency are in effect boarding gold,
because under the law we must main
tain 40 per cent gold reserve behind
such currency. Owing to the lack in
the Federal Reserve System Of the
kind Of securities required by the law
for the additional SO per cent Of cover
age Of the currency, the reserve sys-
tenn was forced to increase their gold
reserve up to rs per cent Thus with
81 500, 100000 OF boarded currency,
there was in effect over ST .00O, ,00O, 900
OF gold boarded by our own citizens.
These drains had at one moment re-
duced the amount of gold We could
spare for current payments to point
where the Secretary of the Treasury
informed me that unless We could put
into effect remedy. we could not hold
to the gold standard but two weeks
longer because of inability to meet the
demands Of foreigners and our own
citizens for gold
Administration Kept Cool.
Being forced of the gold standard
in the United States meant utter
chaos. Never was our Nation in
greater peril, not alone in banks and
financial systems money and currency.
but that forebode dangers moral and
social chaos, with years of conflict and
arrangement.
In the midst CT this hurricane the
Republican administration kept a cool
head and rejected every counsel Of
weakness or cowardice. Some Of the
reectionary economists urged that We
should allow the liquidation to take
It's course until we had found bottom.
Some people talked of vast issues Of
paper money. Some talked OF sus-
pending payments of Government is
ta1l af
counsel of national defense Some
talked foolishly Of dictatorship, any
Of which would have produced panic
itself. Some assured me that no man
could propose increased taxes in the
United States to balance the budget
in the midst of depression and sur
vive an election.
We determined that we should not
enter the morass of using the printing
press for currency or bonds All hui
man experience has demonstrated that
that path once taken, cannot be
stopped, and that the moral integrity
Of the Government would be sacri-
feed. because ultimately both cur
rency and bonds would become value
less
We determined that We would not
follow the advice of the bitter-end
liouidationists and see the whole body
of debtors of the United States
brought to bankruptcy and the saw
ings OF our people brought to destruc-
ton We determined We would stand
up like men and render the credit of
the United States Government i'm
pregnable through the drastic reduc-
tion Of Government expenditures and
increased revenues until we balanced
our budget We determined that If
necessary we should lend the full
credit of the Government. thus made
impregnable, to aid private institu-
tions TO protect the debtor and the
savings of our people. We decided
upon changes in the Federal Reserve
systems which would make our gold ac-
tive in commercial use and that We
would keep the American dollar ring