Evening star., 1937-03-20

1Stration every
ody, including
the President himself stated that the
purpose of devaluation of the dollar
was to send prices up to somewhere
around the 1925 level
For weeks and weeks in 1888 and
1884, the big goal was the 1926 level.
1t was assumed that 1926 prices repre-
sented normal and that gold devalua-
ton would force prices to that point
once more.
But what has happened? This very
week the index maintained by the
Federal Government covering an aver
age of 700 commodities shows that
We have reached only 81 per cent of
the 1926 level. In the same week
comes statement from the governor
OF the Federal Reserve Board that
prices are running away and that
monetary devices cannot help keep
them down.
From some points of view this might
mean that the New Deal is getting
ready to answer those critics who will
say that If the devaluation of the dol
lar sends the price level up too high,
then by the same process of reason
ing revaluation of the dollar the
other way will hold the price level
down.
Fears to Change Arise.
But it Is apparent that the New
Deal now is diScarding the very the
ory of monetary manipulation which
was the cardinal point of its 1888 and
1884 policy. Today the dollar is
plainly undervalued in terms of gold
throughout the world and many Of
flcialS here recognize it. But they are
afraid to advocate tinkering with the
dollar any more. They believe such
policy would mean instability.
1t is insisted also that the pound
and the dollar are now in very good
ratio, something. however that some
British experts dispute, for they are
credited with saying that the pound
ought to go lower in terms of the
dollar.
In any event. the selection of s35
an ounce for the price of gold was
an arbitrary guess upon the part of
our monetary authorities. A fixed
price for gold in a world as unsettled
as that which faces us on every side
today is difficult thing to defend
except on Psychological grounds. But
with all the world selling gold to
America at $35 an ounce and with
world production of gold rapidly in
creaSing, it is no wonder that the
Treasury is talking about hot money"
from abroad The foreigners are
sending gold into the United States
as fast as they can mine it, and they
are getting 35 American dollars in
exchange, and they promptly proceed
to buy equities in American companies
and keep the claim checks for the
future.
Retaliation Means Profit.
II gold is revalued downward of
course, many of these foreigners will
have a handsome profit. But the
fact remains that the profits to these
foreign buyers are relatively small.
compared to the damage that may
be done by the continued willingness
of the United States to buy at S35 an
ounce all the gold that can be fur
niShed, The Treasury was in some
what the same position with respect
to silver, and now many millions of
ounces Of silver have been dumped
in America which cannot possibly
have use in our monetary system
commensurate with the quantity be-
Ing stored up. The one offsetting ad-
vantage, however. where silver is con-
cerned, is that the United States does
not have to buy all the silver the
world produces, but only a certain
quantity and only over a long period
Of time. Today as gold is offered, how
ever, the United States Government
is committed to buy from all corners
at S3S an ounce, no matter if the |
world supply has increased to the point |
where applying the law of supply and |
demand the price of gold should logi- |
cally go down.
Reversal Since 1888.
All sorts Of suggestions are being |
made as TO restricting the purchase |
of gold at $35 only to metal mined |
within the United States and letting
the price outside the United States
find its natural level Gov. Eccles'
statement this week would seem to
indicate that these devices have been |
for the moment at least pushed aside |
The Federal Reserve Board spokesman |
would rather instead see price control |
achieved through other legislative |
methods. But the fact remains that |
while in 1888 devaluation of the gold |
content of the American dollar was
held forth as a great panacea and as |
means of bringing back 1926 prices, to-
day danger signals are hoisted on the |
theory that in effect 1926 price
level would be menacing to the cost |
of living and the whole economic |
structure.
(Copyright 1872