Evening star. [volume] (Washington, D.C.) 1854-1972, 1933-04-20
Off Gold-What Next!

rency Is In some nXeQ ratlO 10 tne sup
DIV of gold and can be exchanged at
any time for gold, that nation Is on the
gold standard. When the nation, to
conserve its gold supply or for other
reasons. suspends the right Of ex-
changing currency for gold, it leaves
the gold standard and, instead OF
anchoring its currency to the metal,
manages its currency and seeks to pre-
serve some stability in value OF COM
modities as measured in terms OF cur
rency; in other words, to seek the con-
troll Of prices by controlling or man
aging the issue Of currency.
When, on March 4, this Nation sus-
pended the right of individuals to ex-
change their currency for gold and
made 1t an illegal act to hoard gold, at
the same time placing an embargo on
shipments of gold abroad, it tacitly
went off the gold standard. The meas
ures taken then were recognized as
temporary but effective precautions
against a situation which might have
found everybody seeking to convert cur
rency into gold at the same time,
situation that no longer exists.
Countries have been forced on the
gold standard by an actual shortage OF
gold or an actual inability to meet de-
mands for payment in gold. In this
country there is q superabundance OF
gold, and this country enjoys a favor
able balance Of trade, selling more to
other countries than 1t buys. 1t might
have been able to continue indefinitely
on the gold standard.
But it has formally gone of" the gold
standard now by renewing embargoes
Temporarily lifted since March r.
on shipments Of gold abroad, leaving
the American dollar, so to speak, to
shift for itself and to find its own level
in relation to the currency Of other
countries The immediate effect is to
raise the price of commodities. If the
dollar goes down in value, it requires
more dollars to buy commodities than
before, which means that the price
goes up.
The real purpose of our leaving the
gold standard without being really
forced of is not at the moment clear.
It is obviously a part Of the admins
tration's program to lift prices and re-
vive trade. But its significance cannot
be judged until it is viewed against the
background Of the other parts of the
program, whatever these may be.
This country's going of gold leaves
only the currencies Of France, Switzer-
land, Belgium and Holland anchored to
gold. Other important currencies are
managed" Gold IS the only success
full medium of international exchange,
and the so-called maladjustment Of
gold distribution, with France and the
United States possessing most of it, has
brought new complications in world
trade. There are some who believe that
the United States has left the gold
standard in order to be placed in a
better bargaining position with foreign
powers in some arrangement to restore
the gold standard everywhere and to
reinstitute gold, with possibly a reduced
ratio between gold and the currency it
supports, as a relatively stable medium
Of international exchange.
There are others who see . direct
relationship between leaving tie gold
standard in favor of a managed cur
rency and forthcoming imitation. The
great danger in managed currency is
that its management will be directed
by the politicians. Imitation has beer
compared with "shot in the arm"
The immediate effect on prices is arti-
fetal stimulation-and talk of imitation
Is enough to drive some prices up-but
the aftermath is a harmful and dam
aging relapse. Great Britain has guarded
against one form Of imitation in man
aging its currency by rigid balancing
Of the budget. The President is oo-
viously adopting the same safeguard,
refusing the deceptive way out OF
deficits by the printing press and
harshly v and courageously - insisting
that outgo in spending be brought to
the level of income.
II imitation is understood merely as
bringing about an increase in prices 1t
can be accomplished through expansion
Of credit or through actual debasement
Of the currency. The Presidents am
y against debasing the currency by the
artificial and highly dangerous expedi-
ents that are championed in some con-
gressional quarters, and to raise prices,
which is accompanied by employment
and buying by making more credit
available for restoring purchasing
power. There are many who argue that
controlled imitation is necessary. The
Presidents problem, with which he will
be wrestling now for some time to come,
= d to control It, Once managed cur
rency" becomes unmanageable, or CON
trolled imitation" gets out Of control,
the result is disastrous.
Believers in sound money" who
know by experience or study Of the
evils and dangers Of deprecated and
depreciating currency and Of the dim
Guilty Of checking the process Of cur
rency debasement when once it is under
way, will watch with anxiety as well as
p hopefulness the results Of the Presi-
dents bold experiment.