Evening star., 1933-06-04
PARLEY MAY FORESTALL
WORLD IMITATION RACE
Currency Sterilization at London Would
Prevent Disaster and Give Time
for Cure, Economist Holds.
BY THOMAS NIXON CARVER,

conferences since the World
War. There is no instrument
l. of precision known to the
economist by which the results
can be measured. The conferees have
either frittered away their time on
non-essentials or the various govern
ments have been unable to profit by
their findings. With several of the
leading governments now in the hands
of virtual dictators, better Cor worse)
results may be expected.
There are three outstanding ques-
tons which the coming World Economic
Conference may profitably consider.
They are, in the order Of their economic
importance, the question of stabilizing
currencies, of reducing trade barriers
and of general revision of war debts
Other questions there are of vast i'm
portance, but these three call explicitly
for international cooperation.
The question of stabilizing the cur
rencies is particularly acute, because
three of the leading governments, those
of Germany, England and the United
States, have definitely repudiated their
promises to redeem paper with gold.
This reputation has shaken the con-
ddence of the people not only in the
solvency but in the honor of their own
governments. Until that confidence is
restored the motive for boarding gold
will be so strong that nothing except
threats of Jail sentence by dictatorial
government can stop it.
If any one doubts that our Govern
ment has repudiated its promise, let
him read what is printed on every Fed
eral Reserve note: "Redeemable in
gold on demand at the United States
Treasury" etc. Or let him read what
is printed on a $40 gold certificate, if
he can find one. This certifies that
there have been deposited in the Treas
ury OF the United States of America.
$40 In gold, payable to the bear
er on demand" Take one of these
warehouse receipts to the Treasury and
ask for your gold. You will not only
not get your gold, you will lose your
certificate
1t is obviously futile for any govern
ment in the position of having repudi-
ated its own promises to try to build
up its credit structure. Unless the
credit structure can be built I'D the
only way to raise prices is by imitation.
Initiation may be of several kinds. For
the countries which have suspended
gold payments, the two available meth
ods nov open are first, a managed cur
rency and, second, a return to a gold
standard with devaluated dollars,
pounds or marks. OF these two the
latter is infinitely to be preferred.
Managed Currency Feared.
A managed currency is a distinct
possibility, but somewhat dangerous
one. The "hard money men of an
older generation were so vehementIy
opposed to greenbackism as to DENY
the possibility of stable currency
which was not redeemable in coin.
Ihey overlooked the fact that when
the Government accepts it's own notes
IN payment of taxes, duties and in the
purchase CT postage stamps, this will
give It's notes some value Again, when
lt declares the notes to be legal tender.
that will add to their desirabiIity and
lner value. If the Government will
exercise confluence, and not issue too
many notes, they can be hoated and
Kept at fairly stable purchasing pow-
er. Sweden and England are now
cessfully.
England has never, since the Ma
poleonic period, had an infiationist
party. We have had several. More
Jnan once the question of imitation or
oenation has been the principal issue
IN pontlcs. II We now embark on the
experiment of a managed currency it
is altogether likely that the Question of
imitation will, for a good manv wears
to come, be the principal issue in everv
congressional and every presidential
electlon. One party will declare for
further imitation, the other party will
oppose. The purchasing power of your
ooilar VIII be determined by the out
come Of elections. This will add to
the uncertainties of business. enlarge
the held for the speculator who thrives
on business uncertainties, prevent the
pulolng up Of an adequate credit struc-
ture and oemoraliZe business in general
Inere is widespread belief that the
country which initiates its currency
gains an advantage in international
traoe over the countries which do not
II that be true, we are likely to start
lively competition in imitation when we
start the policy of a managed cur
rency. 1t is so easy to initiate bv
merely printing S3,000,000 900 of paper.
since II cannot be redeemed and thus
feep on a parity with gold. such
large issue Of new currency would de-
preclate our dollar and initiate prices
Ii that gives US an advantage in inter
national trade, competing nations will
Ieel compelled to initiate their prices a
nttle more. In order to keep our ad-
vantage we shall have to go them one
petter, and so the merry race to perdi-
uon VII! proceed. 1t Is the possibility
OF THIS KIND of international competi-
uon that makes the present currency
situation an international problem.
Does imitation give us an advantage
IN international trade? In so far as it
reduces the cost of production. it NAV.
II there are heavy fixed charges which
can be paid in deprecated money while
prices OF products are going up, and
II wages lag behind prices, initiation
may reduce cost Of production rela-
lively to prices. Again, in SO far as
the rates of foreign exchange are slow
In adjusting themselves. there may be
an advantage in international trade
to the country which initiates
The other method of imitation that
OF returning to a gold standard with
devaluated monetary units, may also
agreement. OF course, as every one
knows, devaluating the dollar merely
means putting less gold in it.
Standard Could Be Cut.
Instead of defining a dollar at 259
grains of gold nine-tenths fine. it could
be defined as 20 grains, 18 grains, l6
grains, or any other number, depending
upon how violently the Government de-
sires to initiate prices. With less gold
in the dollar, a given quantity of gold
in the Treasury could redeem larger
number of paper dollars. This would
make the resumption of gold redemp-
ton measurably easier.
SO long as the. policy of paying gold
dollars for paper dollars is continued,
every paper dollar in existence would
have the same purchasing power as the
number of grains of gold in the gold
dollar. The less gold in the gold dol
lar the less the purchasing power of
every dollar and the highers the prices
of other commodities.
What is to prevent this country from
returning to a gold standard with a
devaluated dollar without waiting for