Evening star., 1934-08-13
SILVER PLAN SEEN
AS WORLD TONIC
Naturalization May Furnish
Leadership Toward Inter-
national Stability.
BY DAVID LAWRENCE.

BY DAVID LAWRENCE.
Monetary realism-the art of feel
ing your way to a standards not
new in world history. Hence, Presi-
dent Roosevelt's latest move to ma
tionalize silver and issue $80,0O0,O00
silver certificates should not be taken
as an alarming bent toward imitation.
1t really isn't. Currency backed by
metal is as old as finance itself.
Whether money shall be backed by
gold or by silver or by both is a mat
ter of national concern. But as
broad permanent policy it is usually
Influenced by international consider
ations.
There are no international stand
ards today The old gold standard
has gone by the boards. The world is
on a barter basis, with gold less and
less available as a medium for clear
ing trade balances between countries.
What happens for the time being
inside the United States as to me-
tallic reserves is a matter Of internal
policy, not international arrange
ment.
Availability Is Factor.
Let us assume that the issuance of
$50 100000 of certificates for silver
costing our Treasury originally about
SAC, 100000 means an expansion or
imitation" amounting to the differ
ence. namely S33, 100000. Are these
new silver certificates fiat" money to
the extent of $33,100,000? But the
Federal Treasury doesn't redeem any
currency in gold or silver bullion.
Hence. in certain sense, all money
is fiat money. Confidence depends,
among other things, on how much
metal there is really available to cover
the currency issued.
Using the legal reserve of 40 per
cent, there is ample gold in the
Treasury to issue many times $80.-
900 900 of currency, even if not
cent were backed by silver. We now
have $4,000, 100000 in gold bullion
and only $5,OOO,0O0,O0O in currency
outstanding.
Hence. it is hardly worth while
getting excited over the new issue OF
$50, ,OOO,OO0 of currency called silver
certificates" 1t all depends. in the
last analysis, on the strength of the
Treasury and on the amount OF
metallic reserve in all that is avail
able for redemption if redemption
policy ever becomes necessary.
Future Is Question.
The real question is: What does
the issuance of more currency mean
with reference to the future? There
has been no lack Of currency. The
banks are full of it. What, then, is
the meaning of the move?
One explanation is that the ad-
ministration wants to placate the
silver bloc. That may still be true
and yet not be the guiding reason
for naturalization of silver.
Another explanation is that prices
have been weakening, especially on
the security markets, and the admin
istration has not shown itself adverse
to moving the market up by a tonic
every now and then. But even this
is not a controlling reason. At best it
may have been an incidental influ-
ence.
The most plausible explanation is
that the President has about come to
the conclusion that a start must beT
made toward monetary stability in
the world and that leadership can
we'll be taken by the United States.
Redistribution of gold. so that each
nation may have a more equitable
share, has been advocated by econom-
lists who believe in the gold standard.
But our system of exchanging metal
for goods sold or when trade balances
are settled does not seem to bring
about redistribution of gold We ex-
port more than we import. Gold keeps
flowing to our shores. 1t is therefore
plainly desirable to sell gold itself.
Trade in Silver.
II the administration sold its gold
for European currencies, what would
it receive? Claim-checks and doubtful
ministries. This is, of course, unac-
ceptable. But since payment in gold
is impracticable, the payment by the
rest of the world in silver is the next
best thing. This makes silver more
valuable and increases purchasing
power Other countries have silver
and can get it more easily than they
can acquire gold. AS silver increases
in value elsewhere, the ability of other
nations to buy goods is enlarged some
what.
But where win this lead to? II the
price of silver Is enhanced and it be-
comes recognized again as a metal
for use as a coverage for currency,
then gold will not have as wide
utility as before. America could spend
a large part of her so-called gold
profit" in buying silver bullion and
yet not alter her attitude toward the
ultimate use of gold as we'll as silver.
But this is something that would be
accomplished over period of years.
Monetary StabiliZation Is a slow pro-
cess. anyway.
Now the rest of the world may not
agree with our ideas of using both
gold and silver. But an opportunity
for currency stabilization will come
when the present stalemate on world
to break the jam by introducing sill
yer as a means of substituting for
gold and as a means of eventually
keeping the price Of gold from rising
Today gold is at $35 an ounce and
there have been cries for an even
higher price.
Helps Stabilize Gold
The administration instead counters
with an increased use of silver, which
has the effect Of stabilizing the price
of gold Since the days of Alexander
Hamilton, silver has been used in re-
lationship to gold. America has had
her troubles as consequence of it,
but thus far there is no sentiment