Evening star., 1934-06-24

situation created by the gold
IL bill and the silver bill enacted
by the recent Congress. doubt
II anybody will ever in fact under
stand it any too well, but he doubtless,
as good citizen, ought to try.
The first marvel in the matter is
that We are now the only country in
the world with less money in circula-
ton than we have monetary gold
stock. Our gold stock, in our govern
mental vaults, is $1,000, 900 900. Our
money in circulation is only $5,300,-
10000. We could redeem in gold
every dollar out in paper or in silver
and still have S2,500, 10000 of gold
left over in the possession Of our Gov
ernment. No such situation exists in
any other country.
The closest approach to it is France.
The French monetary gold stock is
rs, 5,000, ,000,00 francs. French money
in notes in circulation is 81 ,000, ,000, 900
francs. 1t will be noticed thus that
even France, with its wealth of gold,
has more money in circulation than it
has gold. We alone have more gold
and much more.
But OF Gold Standard.
Yet we are off the domestic gold
standard and cannot redeem any
paper dollar for gold-or even for a
gold certificate. The reason for this
must lie deeper than any mere jour-
nalist can ever probe. In fact, it lies
deeper than most economists are able
to probe. Throughout history it has
been held that a given stock of gold
can support the circulation of a very
much larger stock of current money.
Now We observe among US a given
stock of gold supporting a stock of
money much smaller than itself
Hence torrents Of tears by congress
Sional 'infiationists" who have been
tinkering energetically with our none
tary system ever since March 4, 1888.
for the express purpose of putting
more money into the hands Of the
people"
Their sadness is deepened by their
recollection of the fact that in March
of last year the stock of money in
80 SSa4oeAOAA Wdo SttOOO.OOOsOOO. OlI4CC
then the stock Of gold has been
sharply marked up, but the stock of
money in circulation has fallen by
more than $4,000, 100000. The people
themselves took that $4,000, 900 900
back to the banks and left it there
after the conclusion of the bank holi-
day-and allowed it to pass out of
circulation from hand to hand. How
can statesmen ever put more money
into the hands of the people" if the
people are forever retiring it from
their hands into banks?
And will the new silver bill really
do any attual good on this point i?
Under that bill the President is di-
rected to buy a great deal of silver
and TO issue silver certificates-silver
paper money-againSt it. An incl
dental but stupendous marvel there
upon emerges. You cannot exchange
any sort of paper money for gold in
the domestic monetary market, but
you will be able to exchange a certain
sort OF paper money-namely, silver
certifcates-for silver.
It would seem, then. in a way, that
in the domestic monetary market we
shall be partly on silver and not at
all on gold. In the international
monetary market, however, we are
on gold whenever our Secretary of
Treasury decides that he is willing
to allow gold to be exported. Inter-
nationally We are on the Henry
Morgenthau discretionary gold ex-
change standard. DomesticaIly we
shall be on what might be called the
irredeemable gold paper and redeem
able silver paper money standard. It
consoles some people to be able to
redeem at least some of their money
in some metal.
But will the total amount of money
in circulation be increased? Let us
suppose that the President ultimately
buys $500, 100000 worth of silver.
Federal Reserve circles calculate that
he will have TO buy about that amount
of silver in order to meet the REQUIRE
ments of the new silver bill-if he
decides to meet them. He cannot buy
more than a small proportion of that
amount in the United States. He
will have to buy almost all of 1t
abroad
Probably Pay in Gold.
He probably then will have to pay
for it in gold. This would be a mag
nificent blessing to many European
countries which are in great need of
gold. There is Germany, for instance
The gold reserve of Germany is now
so small that DR.. Hjalmar Schacht,
governor Of the German Central Bank,
is jocularly charged with being able
to carry it about in a satchel. feel
quite sure that DR.. Schacht would
gather up all the old silver spoons in
Germany-and all other available
German silver objects-and sell them
with joy to Mr.. Roosevelt for gold.
At any rate Mr.. Roosevelt now has
it in his power to restore about ST.
500 900, 900 of gold to Europe, provided
that the Europeans will rapidly ac-
quire silver from the Orient and COM
petently resell it to us. Our none
tary gold stock in the United States,
if and when this process got COM
pleted, might be reduced accordingly
from $1,000 ,000, 900 to $1,000, 900 ,000
This handsome gesture Of ours to
European countries which do not feel
strong enough to pay us the debts
they owe us would be signal illustra-
ton Of our occasional passion for in
ternational helpfulness and would per-
haps be a sort of balance to the un-
kind cut which our new silver pur-
chase policy will draw across the in
dustrial throat of China.
will Raise Price of Silver.
The effect of our new proposed
silver purchases is intended to be the
raising of the price of silver through
out the world, including China. Now
it has been the low price of silver
that has induced Westerners and
Japanese to invest in China and to
start manufacturing there. The re-
cent movement toward industrializa-
tion in China was directly caused by
the decline in the gold value of Chi
nese silver currency.
Therefore a new rise now in the
gold price of silver will give that new
Chinese industrialization nasty
knock. This has been vigorously pro-
claimed by the chairman of the Bank
of China, Mr.. Ii Ming; by the cele-