Evening star. [volume] (Washington, D.C.) 1854-1972, 1933-03-09

TED in this paper and also the locai news
specisl dispatches herein are also reserved
Expansion of the Currency.
The situation regarding currency ex-
pAnsion plans Is at the moment hedged
about by a number Of 'ifs" and butts
and It's Qualification depends altogether
upon the Presidents plans, which are
being outlined in part to Congress to-
DAY, and upon the ability Of Congress to
but those plans into effect.
Right now the issue, as proposed. OF
two or more billions Of Federal Reserve
bank notes, secured by Government
bonds, is referred to correctly a. ex-
psnsion of the currency, and IT IL be-
lieved that such expansion, authorized
BY laws already and about to be
placed on the statute books. Is far
preferable to the national issue OF scrip.
As at first discussed 1t viii remain ex-
pansion of the currency If certain other
things are done, but II certain other
things are not done, 1t can very easily
be considered imitation of the currency
It might be said, again, that as Ma
ton we are still on the gold standard
but 1t can be argued that we are OIL
the gold standard We are on the gold
standard If certain things are done. but
of the gold standard II certain things
ere not done.
There are, generally speaking, two
ways Of 'anchoring" the currency One
ID to base the issue Of currency on
precious metal. The other Is TO man
age" the currency by controlling its
issue In relation to the demand for
commodities. Both Of these have their
disadvantages, and the disadvantages
resulting from a sudden determine ton,
actuated by fear. OF most OF the people
to convert their bank credits into cur
rency, and q large part Of currency
into gold are exemplified in the present
situation. When currency is based on
sold It Is the right" Of every possessor
to turn 1t into gold. But the coun-
trys money consists Of some forty-six
billions of bank deposits, nearly six bill
lions Of currency and about four and
one half billions Of gold. 1t Ii obvious
" impossible to convert bank deposits
into currency and currency into gold
ct once, and when everybody tries 1t
at once the present condition results.
The disadvantages Of . managed"
currency are the human weaknessessin
The matter Of outstanding temptation.
II the Government, managing the issue
e currency, tries to meet It's obligations
By the simple expedient Of printing
paper money, imitation and all the
curses Of imitation immediately result.
What our Government seeks to do
now Is TO take effective measures to
restore confidence by bringing boarded
currency and boarded gold back into
the proper channels - basis for credit.
This will be done by embargoes and by
steps of various kinds to make hoard
ing of gold and currency difhcult and
embarrassing. At the same time, the
Inconvenience and stoppage Of business
brought about by locking up the gold
and currency is to be offset by making
Available . currency that may be used
for the transaction of business. This
new currency, backed by Government
bonds, is "as good as gold' Such
1,o he
gradually withdrawn as the need for
It diminished. 1t represents 4
managed" currency, and is safe 50
long IS the managing authority can
in reality manage it.
Imitation results when the managing
authority, the Government, continues
to spend more than it takes in and
closes the deficit by issuing more Gov
eminent obligations. When it becomes
apparent that these obligations are
lacking physical support they lose the
confidence Of the public and therefore
their value, and when they lose their
value and their purchasing power the
currency become unnanageable IN
relation to prices.
So. while expansion Of the currency
now is the correct and obvious method
OF meeting the situation brought about
by wholesale attempts to convert bank
deposits into currency and currency
into gold, and can be relied upon to
meet present difficulties, Its variability
rs an expedient really to bring order
out Of passing chaos Il dependent upon
the Governments ability and its courage
In making outgo in Government expen-
ditures meet income; in other words, it
IL dependent on the Federal Govern
ment's ability to balance Its budget.
Bank notes based on Government obi
cations are "as good as gold" as long
- Government obligations are "as good
a. gold" and these obligations are "as
good - gold' when it is demonstrated
that they are to be met
The budget cannot be balanced over
night. But the Governments determi-
nation to balance its budget can be
demonstrated in short order. This
special session of Congress, ana the new
President, acting with quick determine
ton to that end, no matter whom 1t
hurts, are in position to demonstrate
that the budget will be balanced.
In the present crisis large cities are
not as much interested in the. return of
beer as they are in provisions for free