The Indianapolis times. [volume] (Indianapolis [Ind.]) 1922-1965, 1934-02-03

will not be known until we know
what other countries do next. By
fixing the gold value of the dollar
definitely, though not finally or
eternally, we have in effect invited
them to fix the value of their
currencies. Presumably, if they
decide to devalue their currencies
as much but not much more than
we have done, we shall be content.
That would mean a British pound
worth $486 and French franc re-
duced from it's present value of 2-3
cents to not less than 4 cents.
If on the other hand, they sought
to go under the old parity Of ex-
change, presumably the American
sterilization fund would resist
them by buying their currencies and
converting into gold or silver.
Il
THEY are not likely to make a
L race in competitive deprecia-
ton. 1t is not to their interest to
do so, and by taking the leadership
III fixing our own currency in rela-
ton to gold, we have given the most
convincing evidence that could pos
Sibly be offered that SO far as the
international position of currencies
is concerned we desire stability and
not a currency war.
That being the case, it would
seem that externally the stabiliza-
ton fund is now likely to be used
simply to keep things in hand dur
ing the period of transition to a new
valuation of the European curren-
cies. What it may be desirable to
do with it in relation to the Far
Eastern exchanges, to Chinese silver
and the excessively deprecated
Japanese yen is another and much
more complicated story. What it
may be desirable to use it for in
ternaIIy is also another story,
Now it is clear that the dollar is
at the moment "undervalued. That
is to say, a dollar will buy more
goods in the United States than it
will buy in Europe. This condition
has to be corrected. 1t can be cor
which would make the dollar buy
less here, or by a fall in European
prices or by fall in European cur
rencieS, which would make the dol
lar buy more there. If we did moth
ing to raise prices here and Europe
did nothing to change the buying
power of the dollar over there, Eu-
rope would have to cut wages and
would probably be thrown into gen.
eral BANKRUPTCY.
But, of course, it is our purpose
to raise American prices somewhat,
buying power of the dollar over
there by revaluing European cur
rencies. The two operations to-
gether would, in the end, make the
purchasing power of the dollar ap-
proximately the same here and
abroad.
THE decision as to how much
Il European currencies are to be
revalued is for the European coun-
tries to make, and it is not for us
to interfere, provided they do not
depart substantially from the old
parity of exchange. 1t is hard to
see what better guess can be made
at the Anglo American parity than
the $4.96 which prevailed for a
century, and that is the only Euro
pean exchange rate which really
concerns us greatly.
AS for the French, the franc was
almost certainly undervalued in
1923, and while it is now overvalued.
there would not seem to be any
good reason why the French should
devalue as much as the British and
ourselves. But the decision is theirs
and not ours.
Our problem now is to expand
the American currency in order to
raise and sustain the American
price level. We have not yet had
that explanation. Though prices
have risen, the actual volume of
money, which means bank deposits
chiefly. is no greater than year
ago. This makes the rise of prices,
which we have had and are hav-
ing, somewhat precarious, gratifying
as it appears to he. For the rise
is not supported YET by an adequate
supply of purchasing power money. I
To create that supply is now the
chief task of the treasury and the
federal reserve system. The tools
and the resources to do it have been
Grated. There is gold in viz
tually unlimited amount. There
are central bank reserves in vir-il
tually unlimited amount. The prob
lem is to convert them rapidly, but
under strict control, into money
that buys goods and services.
THERE are two ways to do this.
i One is for the government to
borrow, not from investors, but from
the banks, and for it to spend what
it borrows. This is being done on a
big scale through the budget deficit.
The other way is for business men
to borrow from the banks and spend
in the form of capital investments
This is not yet being done.
But it has to be done. For the
government can not borrow enough
and spend enough, to create all the
new money needed to relate and
maintain them. The $4,000, 600, 900
deficit looks big on paper, but it
is not big compared with the money