Evening star., 1933-03-10
The Ebb and Flow of Gold.

Evidence that the recent rush to
withdraw funds from the banks of the
country was a manifestation Of form
of hysteria has been supplied by the
events Of the past two days, when
there has been q steadily increasing
flow of gold back into the banks. The
Withdrawals were due to unreasoning
fear of loss. The return of gold Is due
to the fear Of penalties under the law
which was enacted yesterday by Con-
gress on the recommendation of the
President.
1t is estimated that as much as $780,
100000 in gold has been "recaptured"
by the Federal Reserve system thus far
this week, up to the close of
yesterday, and that by the end of the
week no less than a billion in the yell
low metal will have been restored to the
vaults of the banks and the Treasury
Most Of this gold has been taken out
recently. Some of it has been IN hoard
ing for weeks, perhaps for months.
The act just passed by Congress pro-
vides fine of $4,000 or imprisonment
for not more than ten years. or both,
for persons or organizations under their
control retaining gold for what is tech
nically called hoarding-that is. with
drawal from the financial institutions
where it ordinarily lies as the basis of
the currency of the country. These
penalties may apply in the case Of
small sums as well as large.
1t has become evident within the
past few days that the Government is
in position to trace these gold with
drawals. Persons attempting to offer
gold as legal tender may be reported
Lists are kept Of those withdrawing
gold and next week the Federal Re-
serve Board will receive them from the
Reserve System banks, from trucking
companies and from safety deposit
companies. As redeposits of gold are
effected names will be removed from
the lists. It is due to a spread OF the
knowledge Of this situation, in large
part, that the rush to redeposit gold
has taken place.
Fear of loss caused the Withdrawals
of gold in the first place. Fear Of pun
ishment Is causing the restoration of
the gold to the vaults Out of this
alienation Of emotions comes whole
some confidence in the substantial Sc
curity of the currency system. From
it, too, comes better understanding
of the function Of gold as the basis of
the system. Technically, gold GER
tif1cate issued by the Treasury is a
promise to pay to the holder the
equivalent in face value Of the note in
the actual metal money. Actually, in
practice, that promise is merely a
guarantee of the validity Of the note
as token of value.
Some time ago the Bank of England
needed gold to maintain the then es-
tablished gold standard of the cur
rency of Great Britain, and an ap-
peal was made to the people to sup
ply the metal for that purpose. An
enormous flood of gold flowed into the
banks, not only in the form Of coins Of
the realm, but articles of jewelry and
ornament, some of them of greater
value as objects Of art than the actual
value OF the metal itself. This re-
spouse to the call for the metal which
then was the basis of the circulating
medium of the country was an inspir-
ing indication of the faith of the peo-
pie. This present restoration of gold
to the vaults of the American monetary
institutions is to be regarded as a SIM
liar reaction of confidence, which Is
more valuable than the gold itself.