Evening star., 1933-11-05
BY REXFORD GUY TUGWELL.

see to it that the dollar should have
substantially equal purchasing power
from one generation to another. HIS
recent action in preparing to buy and
sell gold was the first implementlng
step necessary to this intention.
To be on gold means having stand
ard of weight rather than of value;
the dollar has been defined as Ger
tain weight of that metal The diff
Guilty with this standard is that gold
is a commodity and that its value
fluctuates, and that rather rapidly
since there is so little Of it and since,
in troublous times. there is consider
able competition among countries and
among hoarders to get what little there
is >,
The real reason gold has been used
as a standard up to now Is not that IL
is a good medium Of exchange-the
worlds commerce outgrew gold long
apo-but rather that it furnishes what
economists call store OF value 1t
is a convenient retreat for the monied.
Their holdings can be converted into
gold and held. They are thus made
immune to social changes which might
otherwise affect them. Those who are
owed by others are always conserva-
tive on this question, but those who
owe-the debtors-as well as those VINO
desire a better medium OF exchange
and a more equitable store Of value
have long felt that a commodity so
secarce and so liable to fiuctuation
ought to give way to some other none
tary medium.
Commodity Dollar.
There have been many suggestions
for an alternative. Managed currency"
and commodity dollar" have become
the phrases most used by those who
wanted change. It Is not yet clear
whether the President will adopt other
commodities as a basis for the dollar,
but he has given notice that he intends
to manage the currency in the interest
of an overwhelming majority Of the
people
is still the orthodox international
medium and that managing the dollar
In relation to foreign currencies re-
quires that our gold supply shall be
under the control of our Government.
With this weapon at command our
dollar can be made to serve our own
domestic purposes and can be put be-
! yond the reach of foreign manipula-
ton.
Present policy requires that the COM
! modify price level shall be raised: this
! is equivalent to saying that there shall
| be q fall In the value OF the dollar
in relation to other commodities But
it W Is pars imeossIble foT fereieners to buy
the the Tai price s0in and With T it the value Of
dollars.
The bankers most Of them. the
creditors, the monied group in general.
will not like this policy and will resist
| it. 1t favors debtors, people OF low
| income. the farmers These last will
| favor and support it. And doubtless
they will want the President soon to
60 on to the next logical stepEthe
creation of a commodity dollar which
will separate the monetary medium
altogether from its present basis on a
certain weight of gold. They will not,
| for instance. favor devaluation. for
this would reinstate gold as medium
only reducing the amount Of it in the
dollar. They will want 1t recognized
| that gold is only another commodity
| like wheat, silver or iron. And they
will press for a dollar. based perhaps
| on an index number which expresses
the relationship of all commodities to
each other.
Stable Price Level
Such an index. 1t will be argued. IS
quite feasible with our present statls-
| tical resources. With Its use the dollar
| can be kept constant in general pur-
! chasing power because not gold alone
| is exchangeable for other goods. but
each commodity is exchangeable for
every other. This would furnish stable
price level and would also give us
/ dollar which would represent store
/ of value constant from generation to
generation" This point of view Will
| be vigorously opposed by those who are
roughly described as advocates OF
sound money"
Even a stable price level is not
! enough, of course, If we are looking Tor
/ an ideal instrument for exchange pur-
poses as we'll as something which Will
keep purchasing power constant. IN
/ fact, we had a stable price level, or
! one which was substantially so, from
/ 1923 to 1929 And at the end OF that
period we had debacle.
The difficulty there was-and 1t
might happen agair-that many savings
were made in costs of operation so that
| profits grew at the expense Of consum-
| ers' incomes. Purchasing power suffer-
ed a steady attrition throughout the
period SURPRISES went TO build new
! factories, TO make unrepayable foreign
| loans, to proliferate middle-men's serv-
| ices, to finance speculation. Workers
and farmers incomes should have been
! enlarged as efficiency and capacity grew.
! Only in this way could permanent
system Of exchange have been built up.
Two Ways Out.
To avoid a recurrence of this situation
recognition will have to be given, in
considering monetary policy, to the in
creasing efficiency of production. There
are two ways to do it. One would be by
progressive raising of farmers and
workers incomes. The other would be
by a progressive lowering of the price
/ level as efficiency increased.
Theoretically. a commodity dollar
could be used to accomplish this pur-
pose Practically there are great diff
culties, the most important of which is
that it would make always more difficult
the repayment of debts because they
would have to be discharged in dollars
which were more valuable-and thus
harder to get-than those which had
been borrowed. Still there may be ways
around this difficulty, such as the peri
odic scaling down of debts. And the
supreme importance Of constant pur-
chasing power to mass production
economic system Is more and mo-e
clearly recognized as time goes on:
eventually ways must be found-whether
or not they are monetary-to insure 1t.
At any rate the President has taken
another of those bold and courageous
steps which the people are learning to
expect from him. And. as always, the
direction he has taken Is toward favor
ing those who are suffering the worst
effects Of the present crisis.
Professors.
Traditionally the farmer has suspect
ed the professor and the distributor