Evening star., 1936-02-10
Currency Expansion Opposed
On Basis of NelC Cold Standard
'EPrinting" Derice Runs Headlong Into
Confidence Problem, Observer Says,
DepIOring BIOw to Great Masses.
BY DAVID LAWRENCE.

Public interest in the exact status
of the gold bullion held by the Treas
ury-some 10 billions of it-has been
quickened by the proposals Of a Sen
ate Committee that additional cur
rency be issued against the gold.
Last week this correspondent point
ed out that the gold bullion was
pledged as collateral and that it would
be tantamount to a violation of the
contract between the Federal Reserve
banks and the Treasury to issue
greenback currency against the gold
held there in trust. Now, many letters
are coming in from different parts of
the country asking how it happened
that the gold surrendered by the
American people in 1888 has gotten
into the ownership" of the banks.
This seems to indicate a widespread
unfamiliarity with the kind of gold
standard under which America is
operating today. Indeed, it is vital for
the citizen to know that entirely
apart from the controversy over
whether it was moral or Immoral to
oCNdAdC bAAC 6Ol0 SOhGGl1t Va t1lC AOl-
lar, the arrangement now set up Dy
act of Congress does embrace what
might be truly called sound none
tary method. While it does not yet go
as far as is desirable toward the estab-
ishment Of complete confidence, the
fact remains that America in her
monetary practice has moved in con-
formity with advanced monetary SCI
ence in the world. and particularly in
accord with recommendations made
by the foremost experts comprising the
League of Nations Gold Committees
of 1881 and 1882.
How Gold Is Pledged.
But first of all for those who wish
to know how the gold now in the
Treasury Is pledged, it is necessary to
read the text of an all-important and
very carefully worded paragraph in
the gold reserve act passed by Con-
gress and then approved by President
Roosevelt on April 80, 1884. 1t is as
follows:
"Sec. 6. Except to the extent per-
mitted in regulations which may be
issued hereunder by the Secretary of
the Treasury. with the approval of
the President, no currency of the
United States shall be redeemed in
gold: provided, however, that gold
certificates owned by the Federal Re-
serve banks shall be redeemed at such
times and in such amounts as in the
judgment of the Secretary of the
Treasury are necessary to maintain
the equal purchasing power of every
kind Of currency of the United States.
"And provided further, that the re-
serve for United States notes and for
Treasury notes of 1890. and the secur-
ity for gold certificates dncluding the
gold certificates held In the Treasury
for credits payable therein) shall be
maintained in gold bullion equal to
the dollar amounts required by law,
and the reserve for Federal Reserve
notes shall be maintained in gold Ger
tificates, or in credits payable In gold
certificates maintained with the Treas
urer Of the United States under sec
ton 16 of the Federal Reserve act as
heretofore and by this act amended"
1t is significant to observe the use
Of the words security for gold cer-
tif1cates" which must be maintained
in gold bullion equal to the dollar
amounts required by law" and IDOL
lar" Is defined by the same law to be
one containing the present gold con-
tent.
Profit Goes to Treasury.
The same law provides that If the
weight Of the gold dollar should at
any time be further reduced the ere
sulting increase in value Of the gold
held by the United States" shall be
covered into the Treasury "as q mis-
cellaneous receipt"
Thus it would be within the power
of Congress to devalue the dollar still
further and 1t may well be argued
that no currency is sound which is
faced with such uncertainties or which
has been wrongly devalued already.
Nevertheless, the point cannot be re-
futed that the gold reserve act of 1894
does provide for the use of the gold
bullion as collateral for gold certifi-
Gates when once the gold content Of
the dollar Is fixed or stabilized.
Now actually the title to the gold
bullion itself remains in the Treas
ury, but the gold certificates were in
the nature of payment made for the
gold seized in 1888 and turned over
by depositors through the member
banks of the Federal Reserve system
and through that instrumentality to
the Treasury itself. The Federal Re-
serve banks hold the nrx certificates
in trust for all the people who have
currency in their pockets or in bank
accounts.
Only the so-called gold profit"
amounting to about $2,250, ,000, 900
came into the Treasury free and clear
Of obligation to serve as collateral. The
$1,000. .ooo. 900 Of gold bullion now In