Evening star., 1936-07-26
Continued From First Page

serious repercussions in the United
States and elsewhere" he said.
Early in 1888 gold redemption was
suspended here and the gold standard
was abandoned for period of several
months. The following year the gold
standard was restored in greatly mod
ified form. The gold dollar was re-
valued by the establishment Of new
mint price of $35 per fine ounce for
gold, as compared with the former
price of $2067. A little later a policy
Of extensive silver purchases was
adopted"
The genera! effect of this monetary
legislation, Miller said, Wss further to
complicate an already confused none
tary situation in the world at large.
1T had particularly diSorganizlng
effects upon the distribution Of the
worlds gold and silver supplies" he
continued. "A movement of gold to
the United States of spectacular di-
mensions and ominous portent began
early in 1894 and has continued with
out noteworthy interruption ever
since, affected in its rate of intensity
first by one factor, then by another.
The United States has during this
period added to its gold monetary
stock the entire output of the entire
mines of the world and, In addition,
some considerable amounts Of gold
previously held in private boards or
by central banks.
The huge accessions to our gold
supply which have occurred in the
past two and half years as result
of the revaluation of gold have car
ried the surplus reserves of the banks
of the country to a height of s3,000,-
100000, a level never hitherto even
remotely approached or contemplated,
and one which called for degree Of
management far beyond the powers
of the Federal Reserve System to deal
with before the recent banking legis-
lation''
Shipments of S445, 100000.
The Federal Reserve Bulletin for
July, published July 18, reported
that total shipments of gold to this
country had amounted to s445 600, 900
from the middle Of April to the third
week in June.
The United States has more gold
set aside against its domestic Iabli-
ties than the total stock of any other
country" said the Bulletin. I'm addi-
ton it has gold available for inter-
national use to an amount more than
three times as great as the maximum
gold drain during the depression. The
inflow of this gold has been the prin-
cipal factor in the unprecedented in
crease of excess member bank re-
serves"
The Bulletin said that Treasury
fiscal operations had cut the excess
reserves to $4,000. 100000 in the
third week of June, the smallest
amount in more than year. But
by the end of the month they had
risen to S2,70o000 as the Treasury
paid bonus checks from accumulated
balances.
The board of governors under the
1885 law, Miller pointed out in his
recent address, has exclusive power
to change reserve requirements sof
member banks-a new and powerful
expedient of both banking and credit
control"
He added that the board now has
ultimate responsibility in the deter
mination of discount rates, and
through its majority membership on
the Federal Open Market Committee
it has potentially at least controlling
position on the committee.
Formerly Were Optional.
Before 1885 adoption of policies
recommended by this Open Market
Committee was optional with each OF
the 12 regional banks. Now the de-
cision of the board Of governors,
which replaced the old Reserve Board
in the 1885 reorganization, is manda-
tory. The Reserve banks have minor
ity representation on the committee,
however, their five representatives
being chosen by the Reserve banks
organized into the regional groups
for this purpose.
The principle of open market op-
erations was recently explained by
M. S. Szymczak, another member of
the board of governors. Open mar
ket operations are now considered
the most important for the control
of bank deposits and reserves, he
said.
This means control over the volume
of money or means of payment, re-
quired by people in their economic
life" he said
Sale by Reserve bank of a million
dollars worth of securities means ap-
proximately million dollars worth
of available bank credits will be ex-
tinguished, lending power will be cur
tailed, and the money market
tightened. If securities are pur-
chased, lending power is increased and
the money market eased. The effect
is the same as that obtained by al
tering reserve requirements.
The effectiveness of the discount
rate as a means of control is, by
itself, rather limited, SZymczak be-
lieves
When the Federal reserve act was
adopted, the prevailing idea probably