The midland journal. (Rising Sun, Md.) 1885-1947, 1933-11-10

ton Finance corpor-
What Gold alton to purchase
! p,,.,: M.. newly mined gold.
with view to fore
ing higher commodity prices, has led to
more discussion and, / may add, con-
fusion, than anything he has done
since the banking holiday of last
March. He described the action as a
move toward development of IMAM
aged currency for the new deal. His
action was as swift as it was unex-
pected.
The fact that his announcement Gre
J ated SO much confusion and resulted
in so much discussion is attributable
largely, believe, to the lack of knowl-
edge generally among people concern
ing the part gold plays in the coun-
try's economic structure. In the alb
sence of that understanding, the nat
| ural question was: what's it all about2
| And to show how the program sue
ceeded in stirring things up, need add
| only that the discussion continues and
the confusion remains.
Mr.. Roosevelt sought, by having
federal agency buy the new gold at
prices above that which gold is val
ued at in world markets, to make the
dollar less valuable as it is measured
in world trade 1t was move, there
fore, supplemental to his action of last
f, March when he placed an embargo on
export of gold. That action resulted
| in more dollars being required to buy
an ounce of gold than when gold could
be bought and sold freely. In other
words, gold became more desirable to
have than did the currency of the Unit
ed States even when it was issued
against gold.
Thus, as a correlative fact, more dol
lars were required to buy bale of
cotton or a wagonload of corn or
wheat or a hog or share of stock in
a corporation than had been required
before the embargo on export was
laid. When the federal government,
for the Reconstruction Finance cOrpor
alton is an agency of the government,
began to buy the newly mined gold at
prices higher than If the gold were
being bought for minting into money,
the dollars became cheaper again.
The President hoped for an increase
in prices of farm commodities and all
other things entering into trade cor
responding with the reduction of value
in the dollar as measured in world
trade. (After all is said and done,
world trade governs the value of COM
modities because only in world trade
does the age-old law Of supply and de-
mand operate unhampered) For ex-
ample, the federal statute providing
for the value of the gold dollar made
the ounce of gold worth $20.67. The
first days purchase of the new gold
was made on a rate of $31.36 per
ounce of fine gold. 1t was Mr.. RoOse-
velt's hope, and the theory of the
economists who believe In the Roose-
welt program, that prices would ad-
vance so that commodities would be
worth roughly one-third more after the
purchase of the new gold than they
were worth in February before gold
was withdrawn from circulation. To
draw the comparison on basic dates
nearer to each other: the price at
which the initial purchases of new
gold were made should have increased
the price of commodities by percent
age as large as was the difference be-
tween the price paid by the govern
ment for the new gold and the price
at which that gold could have been
sold in the world market.
Whether the thing is capable of
working that way remains unanswered
as far as 1 am able
Call 1t an to see. Indeed, the
E~ce~;r,ers conviction held by
most monetary ex-
perts and students of finance in Wash
ington is that the program cannot be
regarded in any other light than as
an experiment. 1t must be considered
an experiment for the reason it never
has been tried before so that results
of a test are not available.
But Mr.. Roosevelt believed that the
argument advanced by some of his
"brain trust" advisers was worth an
experiment. ! am told on what I con-
slider to be good authority that prac-
teal monetary men in the administra-
ton had no part in formulating the
program. The theorists developed the
scheme and the President accepted it.
Use of the experiment had to be
adopted before any further moves
could be made toward managed
currency" The idea Of managed
currency" is that the value of the cur
rency shall be made to fluctuate, thus
maintaining a stable price for bushel
of wheat or a bale of cotton or prod
ucts made from them. In other words,
the theorists argue that the value of
the dollar can be controlled to such
an extent that the prices of all COM
modities, whatever they are, will range
within a very narrow limitation from
year to year.
The position these theorists take is