The Washington times., 1935-01-26
was that the Gov

from 1872
grains of pure gold to 1871 grains.
This, in turn, would seem equiva-
lent to raising the price of gold,
because it made it possible to
turn an ounce of gold into more
I(Smaller) dollars.
In fact, the Treasury by de-
Rrees did raise it's price" of gold
from $2O.67 an ounce to $35 an
ounce. or exactly the same per-
centage that it reduced the size
of the gold dollar. The price"
it paid, however, was in paper
dollars. 1t takes in gold, but
does not give it out.
But something went wrong.
The country did not follow the
Treasury, and the market value
of paper dollars did not de-
cline according to the reduced
size of gold dollars and the in
creased amount of paper dol
lars given for gold. This is
seen in the fact that the aver
age price of commodities rose
only about 20 per cent, which
is far less than the mark-up
in the "price" of gold or the
devaluatiOn of the gold dollar.
In short, the Government
failed dOubly. (1) 1t failed to
fix the real price of gold.
~ 1t failed to control COM
modify prices by fixing" the
price of gold in paper dollars.
The reason is simple. BY keep
1ng us off the gold standard, and
not allowing us to get gold for
our paper money, the Govern
ment completely stultified its
gold manipulations. Paper dol
lars are all we have, and they
are not convertible into gold.
The Government gives paper for
gold, but it won't give gold for
paper. Gold is not allowed to
circulate, so what is done to the
theoretical gold dollar has no
result except vaguely to disturb
our confidence in money.
=. OF course, this brain trust"
theory was adopted for the purpose
OF Tightening the burden of debt. {"
It IS supposed that by cheapening
the dollar, debtors will be helped,
in that the dollars they pay to
creditors will not be worth as much
as formerly.
This assumption is not as simple
as it seems, for it may be just as
hard for the debtor to get posses
sion Of cheap dollars as it was to
get the more valuable dollars. In
fact, to the extent that business
uncertainty and unemployment
are maintained, the debtor is not
helped. His expenses and living
costs may rise as fast as his in.
come.
(2.) 'Why maintain the price
Of gold 20 per cent above the
old price,"
No one knows which, but 1t must
be for one of two possible reasons:
Either the idea is to return to the
gold standard on the new basis,
and actually pay out gold in "59.
cent dollars" cat $35 per ounce
of go16.
Or the notion of further expert
ments in trying to control prices
by tinkering with the size of the
gold dollar still is held.
A third point is that by main.
tanning the SS5 price per ounce,
the government affects the ex.
change rate for dollars against
= foreign currencies. You see, the
New Dealers allow gold to go to
foreigners, so their funny gold
price does affect foreign ex.
change. Thus the dollar buys
more at home than abroad,
which amounts to cutting our
prices to foreign buyers.
(3) Didn't the drought prove
that the price level can't be
controlled by changing the gold
dollar?"
Well, it at least gives strong evil
dence that commodity price aver
ages are affected by other factors
than changes in gold dollars. Evt.
IDENTIFY scarcity of grain, etc.,
caused price averages to rise; and
such changes cannot be controlled
by mere money tinkering.