Evening star., 1933-06-10
BY ARTHUR CRAWFORD.

| Among ooiectiveS OF the World ECO
nomic Conference the establishment OF
stable monetary conditions is OF pri-
mary and fundamental importance.
This phase of the many-sided prob
lem involving financial and economic
relationships is of even greater moment
to the United States than it was few
months ago before this country aban-
doned the gold standard. Need OF
stability also is recognized more than
previously by nations which prof1ted by
reason of their deprecated currencies
while the United States remained on
gold.
There are reasons why it is not easy
for all nations to return to full gold
standard at once, but there is general
agreement that gold should be the
monetary unit supported perhaps to a
minor extent by silver. Stabili.ation OF
paper currencies is likely as the flrst
step in a gradual establishment OF an
international gold basis.
Gold has superior qualities for use
as an international monetary standard.
It is necessary to have some sort OF
link to connect national monetary Sys-
TENS so as to provide method by
which transactions may be carried out.
Gold has been found to be conven-
lent standard of this sort. 1t acts as a
; III
values of transactions between countries.
Conversion of Currency.
Thus in dealings between the United
States and France, while both coun-
tries were on the gold standard, 1t was
a simple matter to convert one cur
rency into the other. The amount OF
gold in an American dollar was approx
imately 25 times the amount OF gold
in a French franc. Therefore the dol
lar was worth approximately Is times
| a franc.
| If the exchange situation remains
| stable commerce flows freely among
| gold standard countries. Under con-
| ditions now existing with France, the
only major nation remaining on free
gold basis, exchange values fuctuate.
Most countries including even the
United States. have been forced to
place restrictions upon exchange trans
actions in order to protect their cur
rencies and facilitate payment OF their
external obligations.
In ordinary times countries main
tanning a gold standard accept gold
without limit at a fixed price Tor mint
ing into coin. There is a free circu-
| lation of gold coin as full legal tender
and redemption of paper currency in
gold, Reserves of from 80 to 40 per
cent or more in gold form the element
which inspires confidence in the sound
ness of the monetary system. No re-
strictions are placed upon imports and
exports of gold.
| There are no hard and fast rules as
! to all features of gold standard.
The system has varied in different
countries in the past and still more
variations are expected when there Is
| - tho r1rocpnt
experience with managed paper cur
| rencieS.
Three Kinds of Gold Basis
In the past there have been three
! chief kinds of a gold standard. There
was the specie standard, as in the
| United States, under which notes are
redeemable in coin. There was gold
| bullion standard under which notes
are redeemable in gold bars or bullion.
| There was also the gold exchange
standard under which notes are re-
| deemable at the option of the central
bank in either gold or in exchange
drawn upon other countries where it
is redeemable in specie or bullion. Most
! European countries in returning to a
/ gold basis after the war adopted either
| the gold bullion standard with rather
| high minimum redemption limit or the
gold exchange standard.
| Great Britain and France both
adopted the gold bullion standard, but
/ the former was unable to maintain 1t,
/ having made the mistake OF returning
| to the pre-war parity of the pound with
gold France, by stabihzing the franc
at only about one-fifth of its pre-war
value, wiped out large portion of its
/ internal debt and has become, next to
the United States, the largest gold hold
ing nation of the world.
/ In restoring an international gold
standard it will be necessary not only
/ to establish relationship between the
currencies of the different nations, but
also to adjust the gold parity of the
monetary unit of each to internal price
levels. When Great Britain in 1925 re-
stored the pound to the pre-war gold
par of S486 it meant that the burden
of debt was increased instead of being
| reduced. There was a decline in prices.
1t proved impossible to adjust the wage
level to the new relationship.
Not only is Great Britain determined
to fix much lower basis for the pound
when gold again becomes the standard,
but there is a possibility, despite Wig
orouS opposition, that the United States
under the authority vested in President
Roosevelt by the initiation provisions of
the farm act, may take similar action
with respect to the dollar Low prices
in the United States have caused a de-
mand for cheaper dollar so that more
dollars will be required to buy commodi-
ties, or, in other words, SO that prices
will be higher
1t has been suggested that the United
States may reduce the gold content of
the dollar by IS per cent and that
Great Britain may cut the former gold
content OF the pound by from 20 to 80
per cent. The pound had fallen about
81 per cent at the time the United
states placed restrictions on exports of
gold. Since then it has risen despite
the efforts of the British to hold it
ooWn. 1t would be to the advantage of
the United States if the pound should
be stabilized at about $3.50 which
would be 20 per cent below the former
par, rather than at S3.40 or 80 per cent
below, but the British would prefer the
lower figure
The trainers Of the imitation amend
ment TO the farm act had in mind the
possibility OF an international agree
ment. Under its terms the President
Is authorized by proclamation to fix
the weight Of the god dollar in grains
nlne-tenths fine and also to fix the
weight OF the silver dollar at definite
fixed ration to gold u is provided
that in case the Government of the
United States enters into an agreement
with any government or governments
under the terms of which the ratio be-
tween the value of gold and other cur
rency issued by the United States and
oy any such government or governments
is established, the President may fix
the weight of the gold dollar in &C
cordancc with the ratio SO agreed
upon" All forms of money issued by
the United States shall no maintained
at a parity with this standard The
present weigh of the gold dollar of 25.8
grains, nine-tenths fine, may not be
reduced by more than so per cent.
| In the debate in Congress on this
provision opponents, including Repub-
lican leaders. questioned its constitu-
tionality as delegation of power