Evening star., 1938-02-15


are tumbItno. Treasury officials
feel need for the step has passed.
3, the Associated Press
Partial abandonment Of the Treas
ury's gold sterilization program. on
cials said today. in effect will increase
total bank deposits and thus increase
the mount Of money which banks can
lend to business men and others.
Whether this helps business will de-
pend on whether the money is lent,
which is a private affair. The lend
able excess reserves Of the Nations
banks are now sl,40O 100000. COM
pared with the s5OO.000 600 which the
Federal Reserve Board believed year
ago was ample for business needs.
or more direct concern to the
Treasury. officials explained. the new
policy will check the growth of the
Federal debt-now at the unpre-
cedented total of $37, ,576 900 ,OOO-and
reduce the Governments interest costs.
Borrowed to Buy Gold.
Under the sterilization policy in
augurated December "a 1896, the
Treasury borrowed money to buy gold
This was designed to keep the credit
supply stable.
Secretary Morgenthau announced
late yesterday that hereafter the first
s100, 900, 900 of gold which the Treasury
acquires each three months will not
be Sterllized. Instead. the metal will
ho need hac
currency which the Treasury will
spend through the Federal Reserve
System
Officials linked the new policy di-
rectly to the business recession. but
for differing reasons Some indicated
a desire to put mild inf1ationary prop
under falling commodity prices, which
some economists believe must be
steadied before business men will start
buying normal quantities of goods.
Original Purpose Gone.
Others said only that the original
purpose of the sterilization program
was gone. At the time it was started,
prices were rising-too rapidly, the ad-
ministration believed. and hence it
acted to neutralize the inflationary
effect OF gold imports. Now that the
country is in recession. that action
no longer is necessary.
y. M. w. Sprague, Harvard profess
sor and former Treasury aide, said
the new policy was perfectly harm
less move, and will make very little
difference in business activity or in
prices"
Lionel D. Edie, New York economist,
called it "a step in the right direction.
1T should tend to give little more
stimulus to the imitation psychology
but the tangible results of this step
oy itself will not be of great i'm
portance"
A total Of $500 ,OC0,0 900 of foreign
gold has come into this country since
President Roosevelt devalued the dol
lar early in 1884. He fixed a price of
$S5 an ounce for gold, which has been
the highest offered anywhere in the
world.
Some foreigners sent gold here to
get the benefit of the price; others to
safeguard fortunes menaced hy in
ternal crises in their own countries.
How much potential credit expan-
sion the new policy will make possible
is not known, because the inflow of
foreign gold has varied as much as
from $121 100000 in January, 1887,
down to $7,l82,s60 last month.
Domestic gold production, which also
is affected. amounts to about SIS 5,O0O,-
600 month.
The first injection of new gold into
the credit base will be $4,000 .000-
the amount of foreign gold bought by
the Treasury since January l.
Meanwhile, the Treasury's inactive
gold fund, in which sterilized gold
formerly was placed. will remain at
its present level of 1929 ,00o, 900 un-
less the quota is exceeded or unless
some foreign government wants to buy