Evening star., 1935-05-19

elgn investments OF any S0rC, europe
will have a large amount Of our Sc
curities and we shall have most of the
worlds supply Of gold.
But what can we do with that gold?
We do not need it to buy foreign
goods and raw materials because we
cannot take all of these our exports
could pay for as it is. We shall have
the gold in the Treasury vaults, but
all other countries will have demone-
tized because they have parted with
all or most Of their supplies to us.
Then that gold will be Just like the
war debts-without any practical
value. Then at last we shall have to
face the practical problem Of foreign
trade and investments.
We lodged the issue the first time
when we undertook to collect foreign
debts and maintain an export surplus
by lending to the world the difference
between what it paid us in goods and
what we should have had to take to
balance our debt collections and ex-
port surplus. We are dodging it again
now by taking gold payments. But
in the end the war debts were re-
pudiated and the gold will be de-
monetized. Then we shall be able to
sell abroad to value equal to what
We buy of foreign goods and what we
then owe foreign investors.
Where Peek Is Right.
Now Mr.. Peek is right about one
detail-our war debtors could pay us
in gold up to the amount which they
hold, If they chose. But once they
did that they would have to renounce
the gold standard permanently be-
cause they could not get the gold
back, and to undertake such process
would be to do something which, If
not dishonest, would hardly be
straightforward. Permitting their ma
tlonalS to liquidate American holdings
IN their securities comes to the same
thing, but 1t is less direct and obvious.
The trouble with Mr. Peek's thesis
Is that none Of the debtor countries
mas enough gold to discharge its debt
10 US, save the French, and once il
mad been used for that purpose I'D to
the limit of possibility, there would be
no means Of continuing to take more
of our stuff than We do of theirs. So
whether we take the worlds gold for
war debts, private investments or ex-
port surpluses, when we have taken
it the result is the same
To sell more than we buy abroad
we must, in the long run, sacrifice all
of our war debts and foreign invest
ments generally and permit foreigners
to build up a holding of American Sc
curities. We tried to lend them enough
to keep our war debts, our foreign in
and our trade surplus going,
but that broke down. We are trying
to keep the thing going by taking their
gold, but the supply Of gold is limited
and when we get it all it becomes one
more commodity that we can dispose
Of only for the goods of other coun-
tries.
Wallace Has Different View.
Secretary Wallace sees the situation
a little differently. He recognizes that
unless the United States buys more
foreign goods it cannot sell enough of
its agricultural products to keep any
thing like the present acreage at work.
In his words America must choose"
but in point of fact it has chosen
buy more goods. Secretary Hull from
his angle sees war as probable con-
sequence of economic nationalism
everywhere. Fundamentally his theory
is as sound as Wallace's, but his pro-
tests are equally futile. Neither to
save the farmer at home nor to pre-
vent the next war in Europe Is Con-
gress going to reduce the tariff; in
stead, under pressure from all direc-
tons, it is likely to stop up the holes.
What it comes down to, then, is
that the United States is going to sac
rifice some $4,000, 100000 or 20,000,-
600 900 in foreign holdings, war debts
included, in an effort to perpetuate
its pre-war economic position. In all
probability it is also going to part
with some $1o,00O,000, 900 of its do
mestic securities to the same end
Eventually it will have to show for
this operation something like $15,000,-
GC0, 900 in gold, which will be without
current value because no one will be
able to offer for it anything that the
SAAtC0 0bduCo WAL Wdl4I. 1A41u OllC
Treasury win be unable to lend it be-
cause of the johnson law
What not few of the better in
formed observers in Washington fear
is that as we pile up a larger and
larger share of the gold of the world
we shall presently be swept away in
another credit imitation with conse-
Guences impossible to forecast. How
ever, that is beside the fact of Mr..
Peek and his discovery that we are
trading in our creditor nation posi-
ton for a mess of pottage, otherwise
the worlds gold supply. But Secre-
tary Wallace should be reassured, be-
cause, as MIR. Peek says, the process
will make us a debtor nation and then
the Western farmers will recover their
foreign market. For Secretary Hull,
however, Mr.. Peek's has no comfort,
because countries like Germany, which
have neither gold nor raw materials,
are not likely to take ruin lying down.
Copyright. 1881