The Indianapolis times. [volume] (Indianapolis [Ind.]) 1922-1965, 1934-01-17

it can begin to build.
It should, however, be understood
that the American policy does not
mean anything resembling the auto
matte gold standard. 1t is doubtful
whether any such standard ever
existed in modern time, unless it
was in the disastrous period from
1925 to 1881.
The gold standard has to be man
aged with two objects in view: One
is to attain and maintain interna-
tional prices at which the primary
producers of the world can prosper;
the other is to keep national cur
rencies reasonably stable in pur-
chasing power within each country.
IN SO far as exchange rates have to
vary in order to permit internal
prices to be steady, the decision to
let them vary has been taken, if not
by all bankers and all experts, most
certainly by the democratic peoples.
The Presidents monetary policy eX-
presses this decision.
THE management of gold itself
l. ought theoretically to be inter
national. But it never has been,
and experience would seem to show
that the leadership in management
has to be taken by some strong
financial power. Until the war,
Britain had the leadership and did
the managing. Controlling about
three-quarters of the worlds gold
production, being the leading
creditor nation, possessing great
technical experience and actuated
by intelligent international pur-
poses, Great Britain managed the
gold standard. Since the war she
has not been able to manage it,
having lost her predominant
creditor position.
Gold, therefore, has been at the
mercy of spectators, of hoarders
public and private, and of ma
tionalistic politicians. If gold is to
be made Serviceable again and is
not to be an affection to mankind,
the strongest creditor power must
take it in hand and manage it.
The responsibility seems to be ours,
since we alone have the financial
power, though we may lack the
financial experience that is re-
quired.
With American resources Of credit
and with the American command
over the only precious metal which
is an equivalent for gold, namely,
silver, the necessary tools exist
with which to force down the value
of gold, international prices and
then keep them reasonably stable.
That this is the direction in
which we are moving seems clear,
and the world will do well to act
accordingly and not make the mis-
take of assuming that this adj
ministration has not the initiative
and the courage to work for the
detectives which it has announced.
The management of gold is some
thing for the future. 1t is prom
ised by implication, but 1t is not
yet put into effect. What is put
into effect is the management OF
the dollar for the purpose of rails
ing and then Stabilizing American
prices.
BY revaluing our own gold, the
President has made gold base for
credit-currency expansion that is
potentially enormous. Obviously
that expansion has, therefore, to be
firmly and carefully controlled.
That the administration is aware
of this problem is shown by Secre-
tary Mongenthau's announcement
that the gold profit" will be kept in
reserve and not spent.
This is very important decision
and a very wise one. For it means
that the imitation of credit which
will come from the financing of the
government deficit will be under
control. The bank reserves will eX-
pand no more than they are able to
contract. If this principle is adj
hered to, we should be able to have
all the internal imitation we need
without ever lacking the means to
stop it. The matter is technical
but of absolutely first Importance
if we are to avoid credit inf1a-
ton within the next few years as
great as or even worse than 1929.
y
TTAVING taken these decisive
II steps into a managed currency,
it is essential that we begin to think
about who is to be intrusted with
the actual business of managing. In
principle, of course, this enormous
power over the fortunes of the
whole nation must necessarily be
vested in the government.
But the real question is: Who is
to exercise the power Of the gov
ernment?" Clearly it is impossible
for congress to exercise it; were con-
gress to assume to decide what to
do about the dollar from month to