Evening star., 1934-02-01
ROOSEVELT AVOIDS |
STERILIZATION NOW
Temporarily Switches Value
of Dollar Pending British
French Pact.
BY DAVID LAWRENCE.

Tentative or temporary deyaluation.
but not yet StabiliZation
That is what is embraced by the
Presidents proclamation, fixing the
value of the dollar at about SO cents.
compared to its former gold content.
Broadly speaking, it means Mr. Roose-
velt has set an upper limit of 60 cents
indeed. Congress did that for him
and he has now fixed lower limit of
59.O6, to be exact, SO foreign govern
merts may know there is less than
per cent Of variation upward that Mr.
Roosevelt can make and there is slight
ly over per cent that he can go
downward.
The British and French would pre-
fer the United States to cause its dol
lar to go up, rather than down. for
that would mean the pound and franc
would buy less American goods.
On the other hand, British and
French goods would be getting higher
prices whenever the dollar rose and
was converted into more pounds or
francs.
Has $4,000, ,0O0, 900 Club.
Mr. Roosevelt has no intention of
VARYING the gold content. unless con-
ditions require it. He has a So .0OO,-
100000 stabilization or equalization
fund ready TO sell dollars. If necessary,
in foreign exchange. SO as to keep the
dollar lowering around the 59-cent
level. Sometimes, however an internal
political situation, such as the fall OF
ministry, may send the currency unit
OF foreign country down. which is
the same thing as forcing the dollar
up. 1t is to offset these emergencies
that the big equalization fund is to be
employed
So far as domestic prices are con-
cerned. Mr.. Roosevelt would not like to
send the dollar up in gold content. for
that is the same thing as bringing down
the price level-at least it might have
that immediate effect 50 the President
virtually has been prevented from any
def1ationary move
The big question is whether Mr.
Roosevelt will some day wish to use
the other nine points of his margin and
depreciate the dollar TO so cents. He
might wish to do this if he felt the
price leve. was not rising fast enough.
The chances are he will not bring the
dollar down any further than SO cents
because prices are rising now and there
is every indication that there will be
for year or SO anyway. an increased
demand for goods, certainly as long as
public funds last and public projects
are spending at the present rate or the
accelerated rate that will come when
the program is in full swing.
True Limits Set Up.
If the price level is in a healthy
position and there is. therefore no need
to depreciate the dollar to aid prices
inside the United States. the whole
problem Of stabiliZation or future re-
valuation thus will be narrowed to the
difference between SO 06 and 60 cents
These may become the true upper and
lower limits, and finally fairly stable
position somewhere between these two
points may be attained
The procedure is not orthodox-that
is it never has been done quiet the
same way before-but that does not
mean it is not sound. AS matter of
fact, the Presidents method OF tenn
porary devaluation puts long term in
yeStorS on their guard and keeps the
money situation on short-term basis
until everybody can see a little more
clearly what's ahead.
Mr.. Roosevelt doesn't know what
steps foreign governments may take TO
depreciate their own currencies. The
President has two weapons of self
defense. he can buy their currencieS. |
selling dollars. and thus hold exchange
at a fixed point: or he can vary the |
gold content again and depreciate the |
American dollar down to so cents as |
measure OF protection in currency |
war.
Wants an Understanding.
What the President really wants is |
an understanding with Great Britain
and France. Consultations will begin |
at once. 1t may be that Britain and |
France will see the wisdom of coming
to an agreement at once in the interest |
IF a revived world commerce. For no
matter what are the temporary advan-
ages. an uncertain monetary situation
ultimately works to the detriment of
business in all countries.
The Presidents latest proclamation
therefore, may be hailed as a constluc-
i've step forward-a movement in the
direction of real Stabilizaton. though it
nay take several months vet to find
1ut whether Congress was right in set
ting the upper limit at 60 cents or
whether the dollar really is worth more
han is claimed for it here.
In any event, the presence of Amer
can dollars abroad in large quantity
and the fact America still is exporting
more goods than it is importing, makes
t difficult to determine an accurate
'aluation at this time But even if it
axes a year or SO. the chances are