Evening star., 1933-10-23
The New Money Policy.

The New Money Policy.
AS frank and as clear as the Presi-
dent attempted to make himself last
night, he must have left the over
whelming majority of his vast radio
audience bewildered and somewhat con-
fused when he described the new cur
rency plans he has adopted for the
Nation-as "a policy and not an ex-
pedient.'
The reason for this is that while
the President stated his objectives in
terms which recurrent emphasis of late
by the apostles of new doctrine has
made familiar, the method proposed for
reaching such an objective is new and
untried. There is nothing inherently
dangerous in the adoption of new
theory. But in this case the theory
adopted involves a conception of money
value, or a standard of money value,
that runs counter to the conception es-
tablished by the economic thinkers of
many generations The disturbing ele-
ment is found in this conception. and
not in the clearly advantageous goal
which the President hopes to reach
through its application.
Heretofore prices have been measured
by standard which, as long as it was
adhered to, remained fixed. The prices
OF the thousands of commodities meas
ured by this standard have gone up
and gone down, their rise and their
fan varying with the elements influence
ing their supply and demand. But the
standard remained fixed. The Presi-
dents plan, in short, is to adopt
variable standard of measurement. The
price of gold, heretofore fixed by
statute, is hereafter to be fixed ar
bitrarily and from time to time by
the President and the Secretary OF
the Treasury. When the price OF gold
goes up, the value Of paper dollars
will by so much be deprecated. When
the price of gold goes down, the value
Of paper dollars in terms Of gold Will
appreciate This is analogous, some OF
the authorities hold, to the physical act
Of adding to or reducing from time to
time the gold content of the dollar.
The theory behind this practice is
that the price level of commodities can
be made to rise and fall by manipulate
ing the standard of value by which
prices are measured. To a degree, the
correctness of the theory Is obvious, be-
cause if the dollar depreciates in value.
It merely means that the prices of COM
moditieS, measured in dollars, in
crease. But if the truth Of the theory
is up to a certain point obvious, the
inherent dangers of applying that theory
are equally obvious. Some of these
dangers are apparent today. The price
of things bought by the wage Garner
Ia increasing and threatening to in
crease ahead of the ability of many
wage earners to buy them. At the same
time, the prices of agricultural commodi-
ties sold by the farmer, although higher
now than they were, have begun de-
cline which has aroused the farmers.
To appease the farmers the price OF
gold may be increased and the value
Of paper dollars deprecated. That
would bring to the farmers, according
to the theory, higher prices. But it
will also increase the prices OF other
commodities including those bought by
the farmer. Added to the uncertain
ties of the rise and fall of prices
measured by fixed standard. there
will be the additional uncertainty OF a
wavering money standard.
In connection with the Presidents
specific plan of working toward
managed currency" the success OF
certain Of its mechanical features
remains to be tested by practice. The
Reconstruction Finance Corporation is
privileged to. buy, at the price estab-
lished by the President and the Secre-
tary Of the Treasury, newly mined gold,
but nothing is said about selling that
gold in any domestic market. The
newly mined gold in the United States
represents small proportion OF the
amount of gold held by the Govern
ment. The R. F. c. can also buy and
sell gold in the world market. BY
this method the Government evidently
plans to prevent the sudden apprecia-
ton of our dollars in foreign exchange,
with accompanying slumps OF world
commodity prices in terms of those dol
lars; likewise to prevent undue dollar
depreciation which would skyrocket
world commodity prices. 1t has not
been demonstrated to certainty. how
ever, that the rise and fall of COM
modify prices always follows in approx
innate ratio the rise and fall OF gold
prices. The R. F. c. operation in
buying and selling gold will serve as
An experiment in this form Of price
control The results will doubtless
determine the extent Of later moves
toward q managed" currency.
Those who disagree with the Presi-
dent and doubt the practical applica-
ton of the new theories to which he
subscribes will, nevertheless, sincerely
wish him success. At the same time,
they hope and pray for the exercise OF
the courage and determination neces-
sary to turn back to tried and proven
theories regarding 'sound money
should the experiment now undertaken
proceed toward and become involved in
those dangerous complications which
experience suggests must be met.
There Is such q strong Nationwide
desire for recovery from the present