Evening star., 1937-07-18
COLD-FOR.SILVER POLICY
IMPOSES INVISIBLE TAX
Purchase of China's White Metal Stirs
New Warning for U. S. to
swatch Out"

CuldtlOn. IL SOUNDS very mlCn lKe
Alice in Wonderland. yet it is a fact
And We are doing this every day Of
the year. as We buy silver.
The exchange Of American gold for
Chinese silver. in this instance, is the
exchange Of a salabe metal for one
which is unstable, excepting at
great loss. If this gold-Silver swap
were the best solution" for our gold
problem. il would be far better for US
10 do nothing about the sterile" gold
We don't need any more silver. 1t
would be difficult indeed to conceive
of any foreign commodity We might
purchase with our gold which would
have less utility than silver. Why de-
monetlze Chinese silver? Why not
pre-War paper rubles?
The Treasury, as distinct from the
people, does theoretically gam an ad-
vantage in exchanging some Of It's
sterillzed gold hoard for more Chinese
silver. With the new silver certificates
which it will issue against the metal
just bought of China, it can IN turn
buy back some Of its own outstanding
obligations thereby making the public
debt slightly smaller than it would
otherwise be. ANY importation of sill
yer tends to lessen the inflow of gold.
and 10 tighten the interest cost Of
sterllIHng the excess gold.
InhatiOnary Tendency.
Unlike gold, however. imported silver
is not being sterllized Instead its
purchase results in a prompt increase
in outstanding silver certificates. the
issuance Of which IN turn tends to
increase the excess reserves of the
banking system In other words. the
purchase Of foreign silver by Washing
ton tends to be lnflationary, and ac-
cordmgly Is in direct conflict with the
purpose of the policy of sterllzlng
gold. In other words, the sale of gold
to China Is not defatlonarv. but the
purchase Of silver from that country IS
lnf1atlonary.
If We wish TO assist China by placing
dollar exchange to its credit, We might
do so in the form Of loans, instead of
ti44ONHtL lil' piI hast vi SllNtI. llt
difficulty. Of course, would be to Justify
such loans in the face of Chinas rec
ord Of defaulted debts. American
creditors Of years past are still await
ing settlement of outstanding claims
against various Chinese governmental
units.
That the Treasury undertook to give
up gold for silver is attributable to the
aWkWardness of the gold steriliza ton
policy and the mandatory nature Of
the Silver Purchase act, which permits
the Treasury to buy silver as freely as
it wishes. Only regular Treasury pur-
chases every week make it possible for
the world price to stay at As cents.
One can readily imagine what would
| happen TO that price were this country
to discontinue purchasing newly
mined offerings and cause producers
to turn to the open market for other
customers.
Past Billion Mark.
Under the present silver policy,
s838,0000o of silver certificates have
been issued, 100000 standard silver
dollars have been needlesslv coined.
and in addition. s375.O00, 900 (cost
ralue) of additional unused silver
bullion has been piled up in the
Treasury and Is still available for
issuance. The only conceivable pur-
pose in coming new standard" dollars
when the vaults already held about
hundreds of millions of them, must
have been the desire to use the COINS
as form of advertising for silver.
According to the terms of the Silver
Purchase act Of 1884, our present gold
, stock would require total silver stock
, of 25300,000 monetary value AS
| compared with this figure We held,
last January 81 a total of s2.422 ,OOO.-
| 600 Of silver money. Unless the public
wakes up, silver Will be streaming into
that West Point vault and initiating
orr cIIrrerry for lopc time