Evening star., 1934-01-15
RETALIATION AIMS
AT PRICES Of 1926
LARGE Middle Class May Feel
Pinch as Cost of liv-
ing Climbs.
BY DAVID LAWRENCE.

BY DAVID LAWRENCE.
The man in the street may we'll Won
der what "stabilization" or 'devalua-
ton" really means to him in the actual
everyday transactions Of an average
home, Many letters come from all
parts of the country asking about the
effect of the monetary policies being
considered by the Federal Government
The answer depends on whether tfle
INQUIRER is thinking about the imme-
diate future or is taking long-ranee
view
Because, first of all, there will not be
sny perceptible change in the life OF
the individual. no matter whether the
gold content is cut 40 or so per cent
that is. no immediate change. The sun
will rise and set just the same ana
prices will not vary at once
But-and here's the difficulty-the
Governments pronouncement OF none
tary policy in a definite form Will al
feet every man, woman and chlio. some
of them will be lucky and Will come OUT
of it better than others; some Will pe
unfortunate and will encounter genuine
hardship.
How 1t Works.
Here is how it works.
Sllppose the Federal Government an
nounces that hereafter SO per cent OF
the amount of gold that used to be con,
tanned in dollar must be CONSIDERED
a dollar. This would be revaluation OF
the dollar at so cents and would in
sense be called stabilization. Actually
there is no sign that Prof. Warren. who
does the monetary thinking for the
President. really intends any such thing,
for he has a plan to keep the gold con-
tent constantly varying; but. anyhow,
let us assume that the revaluat1on VII!
be for a while at least on the basis Of
so cents.
dollar for a bushel of wheat, the for
eigner could give us a gold dollar OF
only so cents. He could buy two
bushels of wheat for the amount OF
gold that was in our old gold dollar:
So whatever gold Europe has now Will
buy twice as much as before. This Will
be an advantage to American exports,
but only a Temporary one.
So far as American purchases from
Europe and the rest of the world are
concerned, our power to buy from otner
countries would be cut in hal1. Inls
in turn would affect the buying power
of other peoples, but the export and
import trade adjustments are not SO
important IN themselves as what they
do to American prices
Affects Living Costs.
Thus the world prices on wheat and
cotton and copper and coffee are apt
to become the American prices. II
wheat goes up in export prlce-that is,
if the price doubles-it will be fine Tor
the farmer just as long as the rest OF
the American people can stand the IN
creased cost. This leads either to
diminished consumption and an effort
to use substitutes or to pressure 10
raise wages Manufacturers find them
selves confronted with demands from
labor so that wage earners can meet the
increased costs Of living.
If everybody raises wages and costs
in exactly the same ratio as everybody
else. the net result is that we are all
where we were before. The real pur-
pose of revaluation is to cut down DEBT
and enable the Government to get
more money to carry on public works
and other relief projects. But the
effect, on the other hand. is to force
the price level up gradually on the
articles one needs to buy when, as a
matter of fact, wages and salaries DO
not go UP proportionately. The only
way UIle QIOuuCSIO vi SAo
can sell at the new prices and make
profit is to hold their costs down. Labor
and the middle class thus are compelled
10 make the sacrifice.
The administration is not in favor
of fixed weight of gold in the new
dollar because it recognizes these dan
u-ss1sww1t~nsists that the gold content
~sfail be varied: that is. fixed amount
may be proclaimed every three months
goes up or fails to respond to the
stimulus given.
Dollar Worth sI.45.
Prof. Warren argues that we never
should have constant amount OF gold
in our dollar, but it should be changed
whenever an average or index OF prices
indicates that the gold price and the
price of commodities is out of line. He
insists that this is form of stability
and that the old gold dollar was in
need of correction ever since 1926. when
it was really worth 100 cents. In pur-
chasing power today it is worth about
Sl.45. The purpose now is to bring
that figure down SO that dollar will
purchase only 100 cents worth of goods,
figured in 1926 prices.
If the Government succeeds in
making the dollar buy less, then prices
VI dI tlCltS VI JlUuStllOlu use UluSI ~
up. If we paid rs cents dozen for
eggs in 1926 and could buy two dozen
for S1.50 in those days. while today
we can buy three dozen eggs for that
S1.50, the theory is that very soon we
shall be able to buy only two dozen
eggs for our Sl50. This is called re-
ducing the purchasing power of our
dollar and bringing it in line with
1926 prices.
Nobody would object to paying rs
cents a dozen for eggs increases on
other household necessities if his own
wages or salary went up by one-half, as
is the case in the illustration of Is
cent increase in a 50-cent price for a
dozen eggs. But will wages and salaries
60 up that rapidly? Probably not.
Form of Imitation.
There must be hardship in the mean
time on the large middle class of the
United States-al persons whose wages
or incomes are relatively fixed. But the
administration hopes to soften the pain
By varying the gold content of the dol
lar and trying to control prices on the
way up as we'll as wages. This is big
Job. 1t requires Government control of
nearly every factor in business and
labor.
Copyright. 1934)