The Washington times. [volume] (Washington [D.C.]) 1902-1939, 1937-06-19
The Human
Side of the
News
By EDWIN c. HILL


the ground in Kentucky. Again
why? The more gold there il
coming out of the ground, the
more they have to sink back in
Economists call that "sterilizing'
gold. If they just let the gold
loose, it would cause initiation, and
another crash. If we went back
to the gold standard at lower
price, that would be initiation, and
we would just ooze back into the
depression.
Yeah? Yes, indeed! Just give
me little time out to go through
the Wharton School of Economics,
with a postgraduate course in the
Bank of England, and I'll tell you
all about it. But not so you can
understand it-nothing like that.
Men who have done all this, and
more, make it just as clear as mud
when they tell you about gold.
Their embarrassment is like that
of the august citizen whose little
boy asked him why an iron boat
didn't sink.
We have bought and sunk into
the deep concrete cellars in Ken
lucky and other storage vaults
about twelve billion dollars worth
of gold, and all signs are that
we will have to keep on buying
and burying at a heightened
rate. We pay interest on the
money we borrow to buy this gold,
and that means that Uncle Sam,
fixing a gold price which Stimu-
lates overproduction, has to hire
the surplus to stay on the side
lines.
Can 1t Go On?
How long can this go on? To-
day. on all the great bourses and
in all the great capitals of the
world, gold is a nightmare. The
London market is jittery, and Sir
John Simon, new chancellor of
the exchequer, is kept busy reas-
surfing spectators, insisting there
is. no intention Of returning to the
gold standard. All the great ex-
change centers, from Shanghai to
Singapore, are buzzing with ru-
mors. Chancelleries are calm,
but vague and never enlightening.
1 find this same unrest and mis-
giving in our own financial circles.
It seems to boil down to this:
If we don't sterilize gold, the credit
base will be dangerously widened,
prices will shoot Skyward, and
there will be another big smash.
If we cut the price, commodity
prices will drop, and we sink into
another depression. If we just go
on buying and sterilizing, we go
bankrupt.
This chapter seems to have
started with the depression.
Everybody was scared. The one
safe, tangible evidence Of value
was gold. All over the world,
safety-first-minded citizens bought
gold. Literally and truly, the vast
gold hordes sprung the founda-
tons of the great bank vaults of
London. This gold was worth
$20.67 an ounce. When we de.
valued the dollar, we made it
worth $35 an ounce.
The British price, which had
been fixed at IS shillings, was
upped to what anybody would pay.
Our high price started gold tide
back home-not only repatriated
gold, but new gold from all over
the world.
Higher world prices also stimu-
lated gold production everywhere,
in the United States, Russia, South
Africa and Canada. Russia leaped
from fourth to second place in
gold output. Our Treasury would
accept an ounce Of gold and give
in return $35 in gold certificates.
Last December. Treasury officials
become alarmed. They saw that
such a widened credit base might
wreck the national price structure
and bring about uncontrolled in.
flation.
It was then that they begun
their sterilizing process, borrowing
the money to pay for the gold and
then Immediately Sluicing the
bullion out Of the monetary blood
stream by planting it in that
armored vault in Kentucky. AS
I get it, there is here a grand snarl
of classical economics and the
economics of the modern managed
economy. Any deep insider in this
business will tell you that gold
figures in the commodity equa
ton, but, being the yardstick and
measure of all commodities, its
artificial price distortion wrenches
all commodity prices out of plumb
OTHER FACTORS
There were at hand innumerable
precedents in which valorizatior
schemes had caused ruinous over
production: vide, the Canadian
. wheat pools and the Brazil coffee
price-rigging, both disastrous, like
all the others. In short, Mill and
Bentham are still on the job, and
; a fiat economy has produced an
! overproduction of gold, which is
the ultimate and basic befuddle
ment of economy under natura,
law. But there are other factors
] derivatives perhaps.
All over the world, prices have
been wrenched loose from a metal
lie base. This is a factor Of total
ltarian and authoritarian govern