The Indianapolis times. [volume] (Indianapolis [Ind.]) 1922-1965, 1934-01-03
THE GOLD PROGRAM

1T is well to remember that not all men in
Il fuential in the domain of conventional
finance believe that the heavens will fall if
we modify our policy with respect to gold. This
fact is emphasized clearly in a memorandum
on the stabilizati of the dollar recently set
forth by Frank A. Vanderlip, formerly presi-
dent of the National City bank.
Mr. Vanderlip can see no good in any re-
turn to the old system characterized by
"erratic and exaggerated fluctuations of the
price of gold measured in dollars. Nor can he
follow the opponents of unrestricted currency
inflation-largely imaginary figures, as a mat
ter of literal fact. Therefore he sets forth a
number of preliminary proposals designed to
help us along toward a sensible solution of the
monetary muddle.
Since gold coin no longer circulates freely
from hand to hand in any country and since
the coinage of gold encourages boarding, he
suggests the following measures:
Permanently cease the coinage of gold
Convert all existing gold coin into bullion.
"Confne the convertibility of the stabilized
dollar to exchangeabnity for gold bars only,
with minimum weight equal to approximate
ly $4,000 in the new currency"
An unsettling influence is exerted upon our
monetary system when foreign capital is sent
in large volume to the United States in order
to take advantage of higher interest rates in
the country. In 1899 no less than 81, 100000
600 of such deposit currency was created
in the United States as result of this desire to
exploit our high interest rates.
It gave us an exaggerated view of our gold
base when this deposit currency remained in
the country, thus creating unwarranted ex-
pansion and optimism. Then when these
funds later were withdrawn in rapid fashion,
the flight of gold tended to create an impress
sion of shortage and instability. To end this
in the future. Mr.. Vanderlip proposes that we
prohibit the Federal Reserve banks from re-
ceiving deposits from foreign central banks
and compel all member banks currently to in
form the Federal Reserve banks regarding the
total Of foreign controlled deposits in member
banks"
Other major abuses of the old monetary
and financial system gambling in foreign
exchange the flight of capital from this coun-
try and the reduction of our gold supply
in our domestic market.
To eliminate those evils Mr.. Vanderlip sug
gests that we retain the present government
control as meaning that gold only will be sup
piled freely for settling legitimate foreign trade
balances Shipments Of gold moved in re-
Spouse to international finance bills or the
purchase or sale of securities or merely by the
will Of frightened owners Of timd capital
should be controlled by government"
One of the main conventional objections to
any new monetary policy is the allegation that
It would impair the market value and sale of
government bonds. Mr.. Vanderlip proposes a
very ingenious and promising method, which
both would harmonic with the monetary
policy Of the administration and. at the same
time, increase the desirability Of government
bonds as an investment.
What Mr.. Vanderlip has IN mind is a bond
in which interest and principal would have a
fixed and uniform value at any time in terms
of purchasing power.
This would be determined by the use of
the Bureau of Labor price index based upon
the wholesale prices of 1876 commodities The
prices existing at the date of the bond issue
would be regarded as 100 In case the price