Evening star., 1936-01-01
RETURN TO GOLD
BASIS IS DELAYED
World Conditions to Prevent
Currency Sterilization in
Near Future.
BY NJ. B. STONEHILL.
cambridge Associates Writer.


the past year. Sporadically, there are
demands for immediate Stabillzatlon
of the dollar, sometimes on the old
basis, more often according to the old
method, but at the present gold value.
But while France and the other gold
bloc countries are struggling with the
problems entailed by premature re-
turn to the gold, it is difficult TO
understand why there should develop
general insistence for stabilization of
the dollar until international monetary
stabilization becomes possible. Nor, in
spite Of the opinion Of large group
of business men and bankers that a
return to gold would be completely
desirable. is it probable that the United
States will act alone.
1t is both surprising and not sur
prising that conservative opinion in
England and the United States should
be so at variance on the currency sub
ject. London traditionally the worlds
money center. is naturally far more
conscious of the stresses and strains
of international finance than is the
United States. To us, the export trade
Is only a small If highly important
percentage of our total business vol
ume. Foreign trade forms the core of
England's existence. Sometimes We
like to consider frequently unWisely.
that the United States is large enough
and self-suf6cient enough to go its own
way without regard to the foreign con-
sequences Of our acts. There is. how
ever some growing doubt about the
complete wisdom of this position and
1t seems probable that this doubt will
be manifested to an extent that will
preclude serious consideration of dol
lsr stabilization apart from inter-
national stabilization.
Awaiting Voice of Events"
The real question. then, is when will
international stabilization be feasible
and. if any one has an answer to
exactly when that will be, he has not
come forward with it. Most author
tiles agree that it is the voice of events
| rather than the sudden determination
Of statesmen that will bring about
world stabiliZation One of these
events would be devaluation of the
present gold bloc countries. Another
and more remote, unfortunately. prel-
ude to stabilization is the pacifica-
ton of Europe, for there are few polit-
1cal and financial leaders who would
attempt to secure for their nations
the responsibilities of Stabilization
until there is a better outlook for
peace than now exists, for, it is obvious.
an outbreak of hostilities in any part
of Europe would render such an
achievement futile and possibly lead
to even greater disaster
Neither devaluation nor more
peaceful outlook, however, would pre-
sent complete answer. England is
by no means sure that a proper ratio
between the dollar and the pound has
yet been determined and, of course a
just ratio between sterling and the
gold bloc currencies In the mean
time, England is fairly well satisfied
with the workings of her managed
currency. Even, as before stated. con-
sentative opinion is inclined to look
with some favor on the maintenance
of the present system for the time
being. Among the influences which
tend to convince them of its current
advantages is the contrast in the effect
upon domestic trade of the pre-war
Bslkin trouble and that of last Falls
tension in Europe.
A Lesson From Contrasts.
When the Balkan trouble broke out
there was some fear that Britain
might become embroiled. In conse-
quence, England. then, of course. on
the gold standard, began to lose gold
at rather an alarming rate. The Bank
cf England was forced to raise its dis
count rate to check the flow of gold
and domestic business men were pc
nallzed to the extent that they had
TO pay more for credit notwithstanding
the fact that no serious outbreak ma
terlallzed from the Balkin incident.
During last Autumn's crisis on the
other hand. even though the British
Meet was ominously massed in the
Mediterranean. English business men
suffered no damage, no extraordinary
amount of gold was lost. the pound re-
manned steady in international ex-
change, and the Bank of England's
discount rate remained unchanged.
That is part of the case for managed
currency. On the other side of the
picture, however, it is possible to see
that few English leaders are actually
comfortable about being "off gold" in
spite OF It's present advantages. Ulti-
mately, the belief of the English ma
Jority is that England will be back on
the gold standard. But not vet. nor
probably even though other factors
are favorable, until England has
reached the point where the adyan-
teges of Steadier prices and an un-
shackled foreign trade outweigh the
present benefits to be gained through
managed currency under present un-
certain conditions.
The United States, it is safe to say.
has much to gain and little to lose by
agreeing to stabilization on any rea-
sonable basis. 1t would be folly to
insist that we take the initiative to
stempt sterilization of the dollar on
permanent basis without waiting for
international agreement.
1t cannot be said that stabilization
Is dead issue. It must of necessity
remain in the middle ground of mems
minds until some of the present per-
.plexities are cleared away and the
world economic situation has i'm
proved sufficiently SO that there will
be less fear of competitor nations and
more general desire for facilitating the
exchange of goods between countries.
Staolhzation as referred to here
means Stabilization in the old sense
or with only slight variation. A de
1acto stabilization has been main
tanned. of course. since the dollar was
feyalued at 59.06 per cent of its old
value, During the past year the dollar
has remained strong and a fairly
steady working parity with the pound
and the franc has been maintained
The silver program while unsettling
to other countries has only been
mildly inf1ationary so far as we are