Evening star. [volume] (Washington, D.C.) 1854-1972, 1933-04-20
MANAGED DOLLARS
TO REPLACE GOLD.
Currency DevaIuation Is Seen
. by Bankers as Result
of Action.
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By the Associated Press.

Nv the Associated Press
NEW YORK, April 20.-Uncle Sam
was launched upon a bold program
today to replenish his pocketbook with
managed dollars temporarily cut loose
from gold.
The fateful step Of going of the
eold standard" was frankly taken.
Before this announcement was made
BY Treasury Secretary Woodin, dollars
had declined in anticipation yesterday
some 10 per cent in terms OF principal
European gold currencies, and prices
of stocks and speculative commodities
had surged upward.
Not since redemption Of paper cur
rency in gold had been resumed IN
1879 had the United States officially
announced itself off the gold standard,
although an embargo on gold exports
had been in effect for time during the
World War.
While much confusion developed in
high financial quarters as to the import
of this momentous step. J. P. Morgan,
in one of his infrequent public state
ments. Endorsed the new imposition OF
q definite embargo on gold exports
saying: 1T seems to me clear That the
way out OF the depression is to COMBAT
and overcome the def1ationary forces.
Unprecedented Step.
The embarking upon managed
currency program by the United states
was an unprecedented step for major
country. Others, notably Great Britain,
have abandoned the gold standard
under pressure of heavy foreign with
drawaE. But the United States, with
its huge supply of gold now under
Government control. and its favorable
balance of trade, was in position,
according to financial authorities, 10
keep its currency close to It's golo
parity had it desired.
The suspension of the gold standard
was undertaken deliberately to decrease
the purchasing power Of the dollar. In
an effort to increase prices and to bring
the economic structure back into
working balance.
The gold standard, as commonly de-
fined, provides a measure OF value IN
terms of gold. through redemption OF
currency in fixed amounts OF gold upon
demand, in the case Of our currency,
In 1922 grains of fine gold to the
dollar.
Thus. the gold standard in this coun-
try had not been in full operation since
the banking holiday in March. when
redemption of paper money was halted.
but the Treasury had licensed few
gold exports for foreign exchange trans
actions, tending to support the dollar
close to gold parity. The definite en-
barge now placed on exports clarlnes
the situation.
Colds chief importance in the finan-
cial world has been in settling inter-
national balances, for it is the only
international measure of value. with
gold exports checked, the dollar must
find its own level in relation to otner
currencies, on demand and supply
basis. subject to the control OF deal
tngs By the New York Federal Reserve
Bank which has been In effect since
the banking holiday.
With the United States q creditor
Nation. and enjoying favorable bal
ance of trade foreign exchange experts
explain that under normal conditions
the dollar left to find its own level on
a demand and supply basis would nat
urallv be expected to advance rather
than to decline. The favorable balance
Of payments to this country have re-
suited in a huge increase in It's store
of gold in the past decade.
But the belief that the United States
might seek to extricate itself from It's
economic morass through reducing the
purchasing power of the dollar has been
sufficient to prompt selling OF dollars
by foreigners with balances in New
York. and the purchase of other cur
rencies as well as selling Of dollars
by foreign exchange spectators.
1t is this abnormal pressure against
the dollar, exchange experts explain,
which has decreased its level in rela-
ton to other currencies. How far such
pressure may reduce the level OF the
dollar Is regarded in Wall Street as
highly problematical, and dependent
largely upon inflationary steps taken in
Washington
Initiation has become such conten-
tious word that number OF financial
authorities have sought to substitute
other words for it. such as "anti-def1a-
ton Imitation is commonly defined
as an increase in the circulating me-
dunn, meaning either currency or bank
credit in the form of checks, or both.
with consequent rise IN prices.
Methods Of Initiation.
Initiation may be accomplished through
either credit or currency expansion. 1t
may be accomplished through heavy
expansion of bank credit, as in the re-
cent boom years, or through depreciation
of the currency through deliberate re-
duction in the gold content, an increase
in the volume of currency, with conse-
quent reduction og fold reserves, or
deliberate issue Of fiat money.
The form Of initiation most widely
feared is the issue of fat money, which
has frequently resulted from failure Of
governments to balance their budgets.
their eventual loss of credit and in
ability to borrow, finally leading to the
printing of unsecured paper money to
pay expenses. 1t was such course OF
events which led to the American issue
of "greenbacks" during the Civil War.
Successful steps taken by the Federal
Government to reduce its expenditures,
according to some leading banking
authorities, has offered assurance that
the United States is not on the road to
'greenback" imitation.
The setback in United States Govern
ment bonds in the New York Stock
Exchange, which was an early response
to the gold embargo. was explained as
due largely to a rush by investors to
convert their funds from hlghest-grade
fixed Understanding securities into
vantage Of the advancing prices. 1t was
not a question of the Governments
credit standing.
The chief difficulty experienced with
. managed currency, cut loose from
gold, has been in eeping it in stable
relationship to other world currencieS.
Gold has become the only generally &C
cepted and successful medium of inter-
national exchange: Since Great Britain
suspended gold payments In September,
1881, the pound sterling has fluctuated
widely in relation to gold currencies.
although the large sterling group Of
currencies. including those of the Brit
fish Dominions and the Scandinavian
countries, have held in fairly stable
ratio, permitting the transaction Of bust
ness within the group without serious
danger of loss from exchange fluctua-
tons.
Few Remain on Gold.
With the dollar cut loose from gold
the only important currencies still on
free international gold standard are
French and Swiss francs. Belgian belgas