Evening star., 1934-07-15

Tor century of pubic 6eBFlCe ~ ~
lance on this money standard Vsrt-
able in some degree In value though
It be. a fixed standard Of money is
the one anchor Of the economic craft
To have this one standard at the
mercy Of temporary notions and un-
sound theories and political loErolling
Is the most extraordinary development
Of this weird era That 10000 900
holders Of life insurance policies, 90
coo 900 owners Of little savings ac-
counts and the many millions OF own
ers Of industrial and Government
bonds tolerate It Is testimony 10 the
monetary unsophisticatiOn Of the peO-
pie Of this country.
Where Is Commodity Dollar
What. for example, has become Of
that commodity dollar" that was. in
defiance Of all the principles Of
monetary science, going TO guarantee
the country a stable price level? This
was promised some time ago. Is 1t 10
be sprung on the country without
warning, or has the failure Of previ-
Gus experiments led 10 doubts as 10
this one? incidentally, II you are in
terested in knowing what the econo-
mists think about the commodity dol
lar there is available a small pamph
let written by the professor Of eco
nomics in the economics department
OF Cornell University.
The other serious issue is the uues-
ton of the future The failure Of de-
valuation TO dcvalue and of imitation
10 initiate have shown, as so many
critics have pointed out, that the the
ory OF devaluation as price raiser
is defective A change in the volume
of gold dollars at the base of the Ma
tons paper money and credit is not
directly and Immediately and neces-
sarily reflected in a changed price
level This was apparently known TO
everybody beforehand but the Senate
and the little group OF special experts
in the Treasury that did not quit
when the administration program be-
came clear.
But the eventual operation Of de-
valuation in the direction Of rapid
increase OF prices is highly probable
Prices depend generally on the re-
lation OF the volume of business to
the volume OF monetary instruments
used to effect that business, and the
volume of these money instruments
is a reflection Of the gold at the
base. If this gold base is increased
70 per cent by devaluation and the
volume Of paper money issued
against it is likewise increased and
these paper instruments are permit
ted to serve as legal foundation
for bank credit then the total avail
able credit is enormously increased.
Already the excess reserves" avail
able in our banking system are so
great that to quote the figures for
the possible expansion of business
credit would call for astronomical
calculations.
Recovery Is FOreseen.
Recovery is coming. When it is
firmly established and business has
revived, the demand for new capital
and the pressure for investment are
going to find these credit reserves
available. The result will be a fe-
verish rise of prices that will reduce
life insurance and savings. diminish
bond values and endowment funds
and injure the poor. the unorganized
workers, the white collar" working
classes and the non-speculating mid
die class
The hope that the huge increase in
gold dollars accruing from devalua-
ton, nearly $4,000, 900 900, will con-
tinue to be sterilized is vain. Already
all but S2,000.000. 900 has gone into
the general funds of the Govern
ment. OF the secret fund some has
already trickled out into the hands
of silver owners. Where the whole
sum will go no man knows.
There is one other way to prevent
eventual imitation That would be
by returning to a genuine gold stand
ard and removing all bars to the free
export of gold AS prices rise above
the normal post-depresSion level the
gold will flow out to the other coun-
tries and in so doing will benefit the
world.
The prospect for this is doubtful.
This country has embraced a con-
fused and befuddled nationalism,
and government that worries about
cheap lamp globes from Japan and
then deplores the fact that our ex-
ports exceeded our imports by S20,-
100000 is not likely to solve the
problem of international trade In
time to prevent imitation.
II would appear. therefore, that
the monetary program has failed to
raise prices materially in time of
depression. but has laid the founda-
ton for an initiation rise after normal
price levels have been restored by
natural recovery. In other words,
by doing the wrong thing at the
right time it will end up by doing
the right thing at the wrong time.
Truly, government of experiment
works in mysterious ways its wonders
to perform. Critics have been con-
demned for failure to present concrete
proposals. II a citizen sees an auto
mobilist about to drive over a cliff he
warns him to stop. only to receive a
demand that he show a better route,
the answer might we'll be that any
road is better than the road leading
over the precipice
Here Is proposal arising solely from
a desire to see recovery have a chance
in this country as in others, to see an
end to the privation of little children,
the heartache OF women and the Bit
terneSs of men in a stricken Nation.
Let the administration announce:
l. That there will be no more none
tary experiments.
2. That the new 59-cent dollar is
the permanent standard.
3. That at the earliest practicable
date all paper money in the country
will be freely redeemable in gold
bullion.
4. That at the earliest practicable
date all restrictions on the import and
export of gold will be removed.
). That the issue of silver certifi-
Gates will be confined to the numbers
necessary to the purchase of a limited
volume of bullion. without issues to
cover the "Seigniorage bullion"
6. That the repeal Of the imitation
act, the devalutaion act and the silver
act will be asked of the next session
of Congress.