Evening star., 1934-01-17

These features include its theory that
the country's gold reserves should all
belong to the Government instead OF
! the Federal Reserve banks; its theory
Of the relationship of silver to stabiliza-
ton; the implied commodity dollar
feature OF the plan. and the very low
range of rates between which the ad-
miniStration proposes to stabilize. 1t Is
this last feature Of the plan, providing
for stabiliZation between so and go cents
gold, upon which public attention should
now be concentrated, and it Is to this
feature Of the plan that this article Is
devoted.
Permanent Injustice Seen.
In my judgment. the proposed range
OF possible stabilization rates is too low
and, II adopted, would cause great per-
manent injustice to the Nations present
creditor classes, who constitute many OF
the most worthy people and institutions
in our country. 1t would also impose
heavy temporary losses on practically all
classes of labor.
The gold standard in the United
| States was actually discontinued early
last March. although it was not legal
| ly given up until April. February.
1888. was accordingly the last month
during which we had a simon n-pure gold
standard in the United States. namely.
a standard under which all of our
different kinds of money were main
tanned equal in value, dollar for dollar,
with the value OF fixed quantity OF
gold in free gold market.
From February. 1888, to the present
time the value Of gold itself. as meas
ured by its purchasing power over
goods in gold-standard countries like
France, Holland. Belgium and Switzer-
land has remained practically un-
changed. Such changes as we have
had. therefore, since February in the
value Of our American paper dollar
are not due to changes in the value of
gold itself, but to changes in the value
Of our paper money.
Assuming for the moment. for the
sake Of the argument, that the present
high value of gold in the worlds mar
kets will be continued indefinitely
or, In other words. that the present low
commodity price level in gold standard
| countries has come to stay, except to
| the extent that there are debasements
of gold monetary unitS-a 60-cent
| American gold dollar should give lis
ultimately a general price level 662a
! per cent higher than that Of last Feb
ruary. and 50-cent gold dollar should
give us ultimately price level twice
as high as that of last February.
Expects Gold Value Drop.
Obviously, If we decide to call a So
cent piece a dollar, sooner or later
prices will be twice as high as they
would be II we were to call 100 cents
a dollar, provided there were no change
in the value OF the gold itself which
these so cents or these 100 cents repre-
sented.
On the basis Of q 80-cent gold dollar
the general price level would ultimately
be Sc per cent higher than it is now
and 81 per cent higher than it was
| Taking the lowest stabilization rate
suggested by the President, namely, a
5O-cent gold dollar, the general price level
would ultimately be about 86 per cent
higher than it is now and about As
, per cent higher than 1t was in 1926.
In arriving at these conclusions We
have assumed that the value Of gold
itself would continue at the very high
level now prevailing. This is very
improbable The present abnormally
high value Of gold is largely the re-
suit Of a world wide clamor for the
yellow metal for purposes that amount
to practical boarding throughout the
world in q time Of universal economic
depression. Gold was comparatively
stable In value during the eight and
half years ending with the crisis
Of 1929 and, except for the latter half
Of the year 1920 and the forepart OF
1921. the value Of gold throughout the
| world was depreciating most Of the
time from 1896 up to 1921.
The world Is producing more gold
now than ever before in its history,
tary gold has been increasing at much
more rapid rate. on the average, than
its production Of basic commodities 1t
has. moreover. in recent years been
realizing enormous economies in the
use Of monetary gold and is in position
now to use its monetary gold much
more efficiently than it ever did before.
Gold Supply Is Abundant.
There is no evidence of an enduring
scarcity Of gold, and, when we once
work our way out of the present de-
preston and begin TO use in normal
way the gold we actually have, instead
of boarding 1t, we will find that there
Is an abundant supply and that even
| without any devaluation Of gold none
| tary units at all the commodity price
level in gold standard countries would
have returned to what it was during the
eight and one-half years Of compare
tive stability ending with the crisis OF
1929.
A return Of gold to its 1925 purchas-
| ing power value would mean a decline
In the present value Of gold by about
| ~ per cent, or a further rise in our
| general price level Of about 20 per cent.
On this assumption. If we should adopt
q 60-cent gold dollar, the general price
level after the stabili2ation plan be.
came finally effective. and the world
finally worked its way out OF the de-
preston, would be approximately " per
cent higher than it is now and ~
per cent higher than 1t was IN 1925
On the same assumption, with 80,
cent rate of sterilization, the general
price level would be approximately III
Der cent higher than it is now and 5S
per cent higher than it was in 1926.
A price level twice as high as at pres
ent would mean q dollar only hall as
valuable as now, and a price level Ill
per cent higher than the present one
would mean q 47-cent dollar, as COM
pared with our present one, while q
price level So per cent higher than that