Evening star., 1936-02-20
DOLLAR STABILITY
IS SEEN ASSURED
International Situation Is
Held Sole Possibility of
Money Change.
RY DAVID LAWRENCE.

BY DAVID LAWRENCE.
The American dollar has reached
point of stability where the public may
feel assured against any further change
In the gold content.
No formal or official statement to
this effect can be made because there
are elements related to the interna-
tional situation which might make 1t
necessary for the United States some
day to take protective measures against
unforeseen changes in monetary units
abroad. But for all practical purposes,
so far as domestic United States is
concerned, the dollar has been stabil-
lied. Nothing except foreign contin-
gencies will ever alter the policy that
has been determined upon by the
Roosevelt administration.
The importance of this decision can
not be overestimated. It means that
iong-term financing can be made with
the full realization that the dollar will
remain constant. The small area in
which the law permits variability IN the
gold content is looked upon by Gov
ernment officials as primarily pro-
lection against foreign developments
and not as a weapon for further de-
valuation or artificial stimulus to in
ternal prices.
Flexibility Defensive Device.
1t would. indeed, not be surprising
If the Federal executive were to retain
Indefinitely the power to change the
gold content between 59.06 and SO cents
SO as to give America hexibility against
currency depreciation abroad, but the
probabilities are that the power will
never be exercised. The flexibiiity is
really regarded as a defensive device
for future currency wars.
The stability Of the American dol
lar is important to the continuance
Of low interest rates and the steady
ing of the whole system of Govern
ment borrowing. But it is even more
important as an indication to the rest
of the world that the United States
stands ready to discuss stabilization OF
currencies on an international basis
at any time that France and Britain
are ready.
If international stabilization does
finally become matter of consulta-
tons and an agreement is reached
there is always the possibility that g
slight change one way or the other ir
the gold content would be part Of
the international understanding, ir
which case such changes as would be
made in gold content would be sc
slight as to be unbalanced by the
greater degree of confidence ane
steadiness which would result from
the return to an international gole
standard Of practical effectiveness ir
world trade. This is not expected fol
another couple of years.
Will Maintain Present Content.
The vital fact for the moment Ii
that the administration means tt
maintain the dollar at its present
gold content and it is prepared to dt
fend the thesis that once the 1884
devaluation occurred, there has beer
no further tinkering or changing o.
the level then fixed.
This may acquire considerable
political Importance in the next si'
months because the administration
feels rather keedy the criticism thai
1t has not carried out the Democratic
platform about maintaining "a SOUND
currency at all hazards So far as
present gold content is concerned and
so far as the stabilization fund has
been used, it has been in the direc-
ton of stable dollar.
Now everybody realizes that the
stability of the dollar does not de-
pend alone on a fixed gold content,
but on the ability of the Treasury to
meet its obligations and to borrow
money at low interest rates. Once
the expenditures get out of hand and
the public makes up its mind that
there isn't going to be any balanced
budget, no amount of assurance as
to the maintenance of the present
gold content will do any good.
Deficits Destabilize Currency.
So, assuming that the public &C
eepts for the moment the informal
assurances that the gold content OF
the dollar is not going to be changed
and that monetary tinkering for pur-
poses of raising domestic price level
has been abandoned, the fact remains
that no currency is stable and no
monetary unit can be regarded in
definitely as safe if Treasury deficits
pile up year after year.
What, therefore, can be done to
give assurance with reference to
budget balancing? Clearly, the ad-
ministration is in tight spot on its
budget, yet there are indications of
desire to cut some of the spending
agencies down. Rigid economy will
be compelled with even greater real
ism after the elections, no matter
which party is victorious.
The business and financial world
IN the meantime can take it as a posi-
tive fact that rumors of further de-
valuation or currency manipulation
not only are unfounded, but that there
exists a definite and deep-seated
policy in the administration OF main
tanning the present gold content so
that the whole structure of interest
rates over span Of years may become