Evening star. [volume] (Washington, D.C.) 1854-1972, 1935-04-19
BULL|0NSTANDARD|
PREVAILS IN j. 5.
Gold Shifts Permitted to
Keep All Money on Equal
"a Buying Basis.
BY DAVID LAWRENCE.

demption of currency in gold bullion
and under what conditions? Is the
Government maintaining all curren-
cies at the same purchasing power?
These questions are answered by
the Treasury Department nowadays
in this manner:
First, America is on the gold bull
lion standard. which means the gold
standard as Europe has always known
It, Gold cannot be coined, but bull
lion can be used to redeem under GER
tain conditions.
Second, the conditions under which
the. Treasury will allow the Federal
Reserve banks-which are, in turn,
owned by the private banks of the
country-to acquire gold are covered
in regulations that permit such acqui-
sition whenever it becomes necessary
to- maintain the equal purchasing
power of every kind Of currency in the
United States"
Third, the Treasury will use its gold
at any time to maintain the equal
purchasing power of all currency,
whether issued by the Government or
by the Federal Reserve banks.
Lack of Suit Ban Cited.
The views of the Treasury become
particularly interesting in connection
with the apparent Discrimination, for
the present at least, to ask for any
legislation Withdrawing by statute the
right of the citizen to sue in the Court
Of Claims If he feels his dollar of to-
day is not bringing him uniform pur-
chasing power, as compared with that
which existed just before the gold re-
serve act of January 80, 1894, was
passed.
The Treasury takes the position
that it is fulfilling its obligations and
that, in the legal sense, it has not re-
pudiated. Thus, when the Supreme
Court of the United States said that
Congress went beyond its power in
abrogating the gold clause in Liberty
bond contracts, the Treasury, Of course,
became obligated to see to it that no
damage is suffered by any citizen
This is now accomplished by the fol-
lowing regulation:
The Federal Reserve Banks may
from time to time acquire from the
United States by redemption of gold
certificates. In accordance with Sec
ton 6 of this act, such amounts of
gold bullion as. in the Judgment of the
Secretary of the Treasury. are neces-
sary to settle international balances
or, to maintain the equal purchasing
power of every kind Of currency of
the United States. Such banks may
acquire gold abroad or may acquire
gold in the United States, ETC."
Constitutes Answer to Court.
The operation of the foregoing ex-
cerpt is little understood, but 1t con-
sttutes the Treasury's answer to the
gold clause decision of the Supreme
Court as 1t affects Liberty bonds, and
ID also in the Governments reply to
those who argue that America today
has an irredeemable currency, or fiat
money or fiat bonds.
First of all. the Federal Reserve
banks have today about IS 500, 900 900
in gold certificates This is to say
that the Treasury is holding $780,
900, 900 in gold bullion as security for
the gold certificates. Actually, the
Federal Reserve banks have in circu-
1ation only about $500, 100000 in
Federal Reserve currency, so that the
amount of gold certificates more than
covers the amount Of currency.
Surprising. however. the price of
gold goes beyond $35 an ounce in
London or Paris, SO that it is $36.
The Federal reserve banks would
find that their notes or currency
did not have the guaranteed pur-
chasing power which was possible
before. namely when gold was SELL
ing at $35 an ounce. In other words,
their purchasing power would have
declined by one-thirty- fifth. Under
these circumstances, the Treasury
would promptly be willing to release
enough gold for shipment, so that
the Federal reserve banks could OBJ.
tain gold in London at the higher
price.
the selling operations of the Treas
ury's own sterilization fund, would
be ito bring the price of gold back
to $35 an ounce. The amount of gold
actually used by the Federal reserve
hanks-that is, the amount of gold
certificates permitted by the Treasury
to be redeemed in gold bullion-would
be very small.
: Like Settlement Operations.
The operation is very much like the
gold settlement fund, which has been
maintained to clear balances as be-
tween different regions of the United
States, or very much as the Bank
for International Settlements has
functioned in transferring gold bal
ances and credits.
The Treasury makes the point
that, while this is not redemption
IN gold coin in the popular sense.
there is no need for gold coin and
that transactions in gold bullion are
all that Is necessary nowadays.
There is nothing, moreover, to pre-
vent the Treasury from issuing gold
coins in quarter size, for instance,
af any time, just as Premier Flandin
did recently when he wished to en-
phasize the readiness of the French
government to redeem in gold.
TT Is further explained that the
Treasury Is willing to release and sell
gold bullion anywhere in the world
fQr any purpose except boarding.
Hence the recent sales of gold to CEN
ttal banks in Mexico and other coun-
tries. It is believed that, some day.
It popular psychology requires it, re-
demption of $1,000 bullion bars, SINH
lSr to that which England and France
nave used in their gold standard, may
be in effect in this country. For the
pfesent this is not deemed necessary
because the Federal Reserve banks,
acting for the depositors of American
banks. can obtain gold whenever nee
eSsary to maintain the gold price
purchasing power Of the dollar, so
that all currencies, whether silver Ger
tificates, or Federal Reserve notes. or
United States notes or the Liberty
bonds with the old gold clause, when
presented for payment, will buy the
same amount Of commodities or goods.
AL of which Is only another way Of
Saying that none Of these Treasury
obligations will be permitted to sell |
at q discount in terms OF the world |
price Of gold. This may be taken as