Evening star., 1935-02-24
Courts Gold Criticism Held
Empty Victory for Bondholders
Decision Tells Government 1t Has Been
Naughty, But Cannot Be Punished,
Yale Professor Declares.

obstruct and upset the new monetary
policy of Congress, the gold clauses
must fall. In short, the Constitution,
instead of prohibiting actually au-
thorizes Congress to rule out the gold
clauses, because private contract
rights" cannot be allowed to block
full and effective control of the ma
tional currency.
The Contract Duty Of the Government.
With the Governments own prom
ises to pay In gold, embodied in the
Federal bonds and gold certificates.
the court had greater dificulty. The
second of the gold decisions appears
on the surface to be self elf-contradictory
and certainly its implications are far
from clear. The court first refuses
to stretch Congress control CT the
currency to permit reputation Of con-
tracts made by the Government itself.
The Government. says the court. may
not on any pretext WEIGH on its own
promises. Any attempt to do so, as
by refusing to honor a promise to pay
in gold, Is clearly unconstitutional.
One Of the distinguishing character
istics OF sovereign is the power to
incur obligations which necessarily
involves a duty to fulfill such OBJ
legations.
However, another attribute of SOW
ereignty is immunity from legal suit.
The Government cannot be sued with
out its own consent. 1t Is true that
the United States has set up q Court
Of Claims in which suits may be
brought against the Government, and
the cases involving the Federal gold
clauses were. in fact, instituted in the
Court Of Claims. But payment of
judgments secured in the Court of
Claims can only be made with money
appropriated by Congress to pay
those judgments.
No Payment in Gold.
Now. asks the Supreme Court, can
Congress, having withdrawn gold from
circulation. be forced to pay out gold
to satisfy Court Of Claims judgments?
And the court answers that it can
not. For Congress, after granting
the privilege OF suit against the United
States. can limit that privilege as it
pleases. Moreover, Congress, in ex-
ercising its control over the currency
can, and has withdrawn gold coin
from circulation. And Congress, by
taking gold out Of circulation, has
clearly denied plaintiffs in the Court
Of Claims the right to be paid in gold.
Thus the Court of Claims, although
its technical jurisdiction extends to
this type Of case, has not the power
to order the gold payments which
would amount to specific performance
Of the Governments promises.
A Right Without q Remedy.
Can, then, these holders of gold
bonds and certificates recover. in the
Court of Claims. money damages for
the Governments failure to live up
TO its promises to pay in gold? Can
they get the extra So cents on every
dollar which the gold promised them
would be worth today? And again
the answer is no; because. says the
court. they have in reality suffered
no damages. The dollar which the
Government is willing to pay them is
worth as much to them today as the
promised gold dollar would have been
worth to them before the dollar was
revalued. Since they have in fact
sustained no loss. to pay them the
extra 60 cents would amount to an
unjust enrichment" such as the
Court Of Claims is not empowered
to grant. And it is this equitable
defense to the suits, interposed by the
Supreme Court in behalf Of the Gov
ernment. which estops the claimants
from realizing the present money
value of their gold promises.
Thus the court, while saying that
the Governments refusal to fulfill its
gold promises is illegal, actually holds
that the beneflciaries of those prom
ises can get neither their gold nor
its present value in money. They
have won moral victory in estab-
fishing their right" but the right
has no remedy. The court in effect
tells the Government that it has been
naughty. but that 1t can not be
punished.
A Few Unanswered Questions.
It is clear then that the gold
clsuses are worthless to holders of
private bonds and that, so long as gold
is restricted from circulation, holders
of Government securities can not and
will not be paid in gold. But the basis
on which these latter holders are re-
fused their equivalent In present cur
rency raises several questions. For
that basis Is the failure of the claim
ants to establish q real loss In pur-
chasing power. Could. then, o foreign
holder of Federal bonds, who had
suffered by the revaluation process a
genuine decrease in purchasing power,
recover In damages? Such recovery
could scarcely be called an unjust
enrichment" Can a domestic holder
get an extra S or 10 cents instead Of
SO cents on every dollar, If he proves
with price indices that the present
dollar will buy that much less than
the old dollar? Could he get his full
50 cents In the event Of real inf1a-
ton in the future?
Determination of such points as
these may well require further eluci-
dation of the instant decision. Ger
tainly 1t is likely that such arguments,
no matter how tenuous some Of them
may be, will be made the bases Of
further protests. Meanwhile, the
holders of the Governments valid
but unenforceable promises may take
such satisfaction as they can out of
the fact that the Supreme Court has
spanked the administration with one
hand, while directing 1t with the
other to go right ahead with It's gold
policy, and damn the torpedoes.