Evening star., 1933-06-04

tive imitation. Having REDEEMED the
monetary unit, and having resumed gold
payments, it would require another re-
pudiation of promises, or a redeflnition
of the monetary unit to effect further
imitation With a managed currency,
all that would be required would be to
print new issue of notes. There would
be less resistance to this method Of in
flation than to the other.
The attitude of different minds toward
gold is very perplexing. There was once,
and there may be even now, certain
number Of people who blindly believed
that gold was the unchanging founda-
ton of all values.
Lately there has grown up an equally
blind antipathy to gold as very shift
ing and deceptive foundation. AS a mat
ter of fact, there is one sense in which
gold is the most stable of all commodi-
ties and there is another sense in which
it is one of the most, If not the most
unstable
In times Of panic gold tends to dis
appear. 1t combines large purchasing
power in small bulk, and Is very de-
sirable possession in times Of great un-
certainty and danger. That explains its
months or years, in spite Of the increase
in the worlds supply. With several of
the leading countries, notably England
and Germany, repudiating their prom
ises to redeem their notes in gold, there
was a valid, if selfish, reason for trying
to get hold of and keep store OF gold.
! That took gold off the market and de-
creased the effective supply. That
tendency was greatly increased when it
became apparent that there was coming
into power in this country a party with
a somewhat shady reputation on the
subject Of imitation. The situation was
not relieved when it was noticed that
the amiable and well meaning Presi-
dent-elect was surrounded by coterie
of advisers who we're artists in playing
up to the jazzy minds prepared for
them by an age of jazz. The scramble
for gold became almost panic, made
the available supply small, caused
fall in prices and made a moratorium
necessary.
Behaves as Commodity.
+ 1t is true that gold behaves in this
way, but so does any other commodity
under similar circumstances. Let 1t be
known, or believed, that any commod-
ity, say sugar, is going to be hard to
get, and people will begin to hoard 1t,
and make it still harder for other
people to get. Grab while the grabbing
is good is the only economic law which
applies to men in a panic. Gold is not
responsible for that.
In times when men behave with a
fair degree of nationality, gold is stable
in its purchasing power-over short Pc
RODS of time. Over long periods of
time, its purchasing power may change
considerably The reason for these two
facts is that the total gold production
of any year is only small fraction of
the total supply on the market. Gold,
being very durable. and, on the whole, |
pretty well taken care of, the produc-
ton of any one year is not speedily
used up, but remains in existence for a
very long time. The gold now in exist
ence is the accumulated product of
many years. Suppose that the world
gold production for 1888 should be twice
the average yearly product OF the last
10 years, it would make little difference
in the total supply on the market
In the case of such commodity as
wheat or cotton, most of one years pro-
duction is used up before another years
crop comes on the market. This years
crop is large fraction of the total sup
ply in existence. If, therefore, the crop
for 1888 should be twice the average
crop for the last 10 years, it would
glut the market and depress prices dis
aStrously. All commodities in this class
are subject to great changes in purchas-
ing power over short periods of time
Gold, for the reasons just given, is not
subject to such violent changes in short
periods, except in time of panic, The
supply of gold changes slowly. The
supply of these other commodities may
change rapidly.
Yet the very factors which make gold
a cB frIe
stable over long periods If there should
be continued increase in gold pro-
duction over a period of years, the
product accumulates, not being prompt
ly used up, and the supply may become
very great as compared with previous
decades.
Since gold is stable over short periods
OF time, it makes an admirable basis
for the currency from the standpoint of
the ordinary merchant, or manufac-
turer. Most of his transactions are
short-time transactions. 1t is much
more important that he should know
what dollar will be worth in 30, go
or 80 days than that he should know
what it will be worth in 10, 20 or 30
years.
Ihere are others, however, who are
interested in longtime stability. Pen
sionerS, bondholders, owners of insur-
ance policies, are more interested in
knowing what dollar will purchase in
~, 20 or 80 years than in knowing what
1t Will purchase in 80, 60 or 90 days
Gold is not, for them, a good standard
of value.
Cure Already on Way.
Ihe trouble with a managed currency
Is that. IN democracy such as ours,
no one can know what dollar will
be worth either over short or long periods.
A gold standard, with all its defects.
is distinctly to be preferred to that
sort OF currency. Debtors, as well as
producers will always want more inf1a-
tlon-debtors because it will reduce
their debts, producers because wages
and other costs always lag behind
prices. These classes will always be
| bringing pressure to bear in favor of
lnf1atlon, more and more imitation
Others will have to oppose them
II the devaluating of the dollar can
be postponed, nature will come to our
rescue as it did in 1896 From about
1888. the worlds gold production had
been rising rapidly. 1t took six years
OF increased production to bring
noticeable increase in the total supply.
Meanwhile the free-silver policy of in
/ f1ation was gaining ground. But by the
| Summer of 1896 gold was becoming
/ so abundant as to become noticeably
cheaper, or prices noticeably higher.
| That gave farmers and others what
they wanted, and they lost interest in
| free silver
The worlds gold production is now
increasing and has been increasing for
several years. This is certain to make
gold cheaper and prices higher. AS
soon as people regain confidence and
| release their hOardings this will give
farmers and other producers the higher
prices they Want-if we go back to
the gold standard And in that case
they will not need either managed
currency or a devalusted collar
/ II we Gavaluate the dollar and at