The Indianapolis times. [volume] (Indianapolis [Ind.]) 1922-1965, 1933-12-20

standard, written by the leading
the government which is today tt
fender of the gold standard.
The article is by Charles Rist,
expert of the French delegation to
conference, and until recently, if
governor of the Bank of France.
No man in France speaks with
official position and his reputation
is less open to attack on the score of
on the international gold standard.
But the interesting thing about
Mr.. RiSt is that he recognizes, as
almost none of our sound money
advocates has recognized, that there
were reasons why the postwar gold
standard broke down and that these
reasons have to be taken into ac-
count in reestablishing it, and
startling though it may sound to
say it. Mr.. Rists analysis of what
went wrong is fundamentally the
same as that of Professor Warren
of Cornell.
What the Presidents adviser has
been teaching in kind of rustic
simplicity of speech, and with some
of the intellectual manners of the
solitary genius, the adviser to the
French government says with ele-
gance and sophistication.
The question which Mr.. Rist sets
himself to explain is why the price
level of 1925 collapsed. 1t then
stood about so per cent above pre-
war.
"a rise of so per cent" he says,
"such as took place between 1915
and 1925, could only be explained
by an enormous increase in gold
production the world over, whereas
actually production fell off during
the war and did not become normal
till 1922 and after" During the
war period the production of goods
fell off, the issues Of paper money
increased. There was, therefore, a
typical paper imitation.
But, says Mr.. Rist, the monetary
authorities of Britain and the
United States were misled by an
extraordinary coincidence. Up to
1925 the United States alone was
buying gold, and so the whole of
the worlds newly mined gold flowed
to the United States.
With this huge gold supply in the
United States the dollar was kept
convertible into gold, and because
we had a gold dollar the monetary
authorities made "the mistake Of
regarding the prices of 1925 as
true world prices in gold.
This Illusion" says Mr.. Rist,
was fatal to world monetary re-
construction"
TOR, as soon as the banks of
Il Europe after 1925 began to bid
for gold and world production re-
vived there was nothing in the
quantity of gold production" which
justified a price level Of so per cent.
above war, Gold prices had to fall
to something like their prewar level.
Now, this is precisely what Profess
sor Warren has been saying these
many years, and he has been a voice
crying in the wilderness. AS early
February, 1919, when prices we're
sky high, he estimated that they
would fall to the prewar level in
about twelve years. The estimate
was based on the civil war expert
ence. In January, 1924, basing his
calculations on the ratio of gold to
production, he predicted that "the
general tendency of prices for the
next ten to fifteen years will be
downward and that prices will close
ly approach or possibly go below
the prewar basis.
Mr. Rist points out next that the
monetary authorities of France and
Italy were forced to recognize that
some way had to be found
to effect artificially a result that
would have required twenty years of
intensified gold production to bring
about normally"
For "she idea of maintaining price
levels the world over on the war
time scale and Transforming them
into a gold price level, the while
maintaining old currency PARTIES,
looks today like a fantastic dream"
1t was the illusion that dollar
prices in 1925 were real gold prices
which miSled the British and our
selves. On this fallacy we built up
fixed charges in the form of debts
and wages and believed that we had
returned to normal. We had not.
The true gold price level was much
lower than the dollar and pound
price level, and so both countries
have had to choose between a deep
deflation of debts and wages on the
one hand and a revaluation of their
currencies on the other. Both have
now chosen to revalue.
MIR. RIST concludes by saying
1V1 that IF there still is hesitation
about frankly restoring gold to it's
former functions, it is because the
various governments would like to
be sure that the new sterilization
rates at which they would stop
would be the rates best adapted to
their circumstances.
This is a problem, which each
country has to solve for itself,
though its terms are virtually all
known already. In my opinion, the
sooner it is solved the better it will
be for world prosperity"
1t would be a great benefit to
this country if American monetary
experts and financial writer's would
study Mr.. RiSt's article with an
open mind, and come away from it,
having abandoned their present feel
ing that the monetary policy of the
United States is to preposterous to
be worth serious discussion.