Evening star., 1933-12-19
Dollar Devaluation Held Problematical
DR. Spague Sees Difficulties in Move for Trade Recovery and
Rise in Prices.
system which WIN give the country q

system which will give the country a
dollar of stable purchasing power
Whether this objective can be reached
through notifications of the gold
standard or by some other means has
not yet been determined, but clearly
devaluation must be deferred until some
definite decision has been reached and
the appropriate legislation placed upon
the statute book. For all these vari-
Gus reasons, 1t would seem that the
time has not yet come for definitive
revaluation of the dollar.
Prolonged uncertainty about the cur
rency doubtless has its disadvantages
but British experience clearly indicates
that fair measure Of confidence can
be established on the basis of Govern
ment policy that is directed toward
limiting exchange f1uctuation to the
greatest possible extent. The adoption
of similar policy by our own Govern
ment is not. one may hope, beyond the
bounds Of reasonable expectation. AL
ready there seems some indication that
the policy of further enforced deprecia-
ton may be abandoned.
In that event it is, of course, possible
that positive inf1ationary measures my
be adopted. This Is very great danger
unless 1t can be convincingly shown
that such measures promise nothing as
a means either of bringing about a
permanent rise in prices or a recovery
in trade.
No such inflationary measures have
hitherto been adopted by the admin
tration. Depreciation of the dollar
even by the method Of stepping up the
price Of gold, is not imitation. Initiation
is present when the volume of currency
and credit actively in use expands much
more rapidly than the volume of trade.
We may properly say that we have infla-
ton in times OF peace when currency
and credit are expanded with feverish
rapidity In the latter stages of a buSi-
ness boom, or when currency and credit
IN time OF war are expanded as a
result OF an intense Government de-
mand for goods and labor.
Different Case.
Initiation in a period Of depression,
when there is still an abundance of
credit available. presents a very dif-
ferent case. Moderate issues of cur
rency by the Government in such cir
cumstanceS would presumably have no
inflationary effect If it we're believed
that only moderate issues were to be
crease in the excess reserves of the
banks analogous to that which has re-
suited from open-market operations OF
the Federal Reserve banks in recent
months
Assuming. however. that it were
believed that the Government were to
determine to issue additional paper cur
rency until results were achieved in
prices and in trade, it is reasonable to
anticipate that distrust of the cur
rency would follow the mere announce
ment of the decision to adopt this
policy. even before the actual issue OF
additional currency, however moderate
that might be
Whether the result would be highly
explosive. who can say? We can say
however, with some confidence, that the
result would be far more manifest In
rise in the prices of existing tangible
properties and in equities than in an
increase in the demand fer labor and
capital for additional construction.
The attempt to initiate in a period of
depression is an uncharted sea. I con-
fess my inability to forecast the course
OF events in any detail, but can dis
cover no reasonable grounds for be-
lieving that inf1ationary measures af-
ford the slightest promise of the estab-
lishment of a higher price level that
will hold. much less that full employ
ment Of labor with rising standards OF
living which is our common objective.
Copyright 1888 bv the North American
NewSDaDPr Alliance