The Washington times., 1935-01-14

up DeSdn OH
December %.
It does not seem likely that the
decline will go a great deal
further.
The decision in the gold case
will not be made for something
like a month. Meanwhile, more
or less uncertainty about it may
prevail, and uncertainty does not
produce wide moves.
Insofar as the gold clauses are
concerned, a position in the mar
ket involves two bets: Cd A bet
on what the decision will be, and
CD A bet on what the result of
q decision against the New Deal
erS W, Id be.
AS to what the decision will be,
no one can know. My "bet" is
that the court will uphold the
sarcsity of contracts, and scold
the Administration, but will say
that the thing has been done and
cannot now be undone. They will
say that the sovereign" has
made mistakes, but that it is too
late to correct them by a general
right-about-face.
But that is a mere guess.
AS to what the result of a de-
cision adverse to the New Dealers
would be, however, think We can
do more than guess. think that
it would tend to precipitate cur
rency initiation, and that this
tendency would soon become ef-
fective, unless collapse in busi-
ness were to force deflation-
which does not seem likely.
In the first place, conditions
are not like those in the '70s and
ZOOS. Nor is it at all likely that an
adverse decision would restore the
dollar to the old level. Debts have
not been iquidated, and as long
as this is true there can be no
sterilization.
In the second place, a decision
upholding the gold clauses would
not necessarily touch the aban-
donment of the gold standard or
the devaluation of the gold dollar.
1t would not necessarily have any
tendency to prevent the issuance
of greenbackS.
Even if the Government and
some corporations were forced to
pay some debts according to the
old gold standard, others might
either adopt a devalued gold dol
lar, or no standard at all-Which
means greenbackS.
In fact, my opinion is that an
adverse decision would hasten in
flation. It would make the "bur-
den of debt" seem heavier, and
the urge to Tighten the burden OF
debt" would be strengthened.
1t would become the means of
actually forcing into circulation
the inflated currency of which we
now have such an enormous eX-
cess. Our currency (bank depositS)
is tremendously inflated now. All
the inflationists have to do is to
make it circulate"
But if the Government and
corporations were forced to pay
a large amount of debt in gold at
1922 grains to the dollar, fear
would arise that they could not
do it, and a run" might enSue.
The Government could pay out
gold. and then take it back. at the
same time writing up some more
"profits" on the reseizure just
as it has done on the original
seizure. Or it could pay out it's
notes in any amount considered
the equivalent of gold, thus max
ing currency initiation effective at
last!
AS to corporations, the Govern
ment could lend them gold at
$2067 an ounce, and then take it
back at $35 an ounce; or it could
just start the printing presses, and
give them currency sufficient to be
"equivalent."
I don't think this country is
ready to face deflation voluntarily.
And there are plenty of ways to
beat any decision on the gold
clauses.
So stick to your sound hedges
against initiation.
It should now be apparent. how
ever, why I have consistently ad-
vised only stocks which are not
overvalued on the basis of earn
tngs. Real value is the only sound
basis. The only menace to value
ton. The only menace to value
based on earnings is socialism.
New York Central