Evening star., 1938-06-17


without founda-
tion, of course, ex- Jaw" A~"fen'e'
cept in the minds of clever SPECTATORS
who. sitting far away from the possible
clutches of the Securities and Exchange
Commission. reap their profits among
the gullible in foreign exchanges,
especially at Paris and London
Gambling Money Lost.
It would be strange thing, indeed,
If the SPECTATORS in England and
France or even in far off Shanghai
where they frequently operate we're
to know more about the intentions of
the President of the United States and
the Secretary of the Treasury than
do the people in America. Again and
again come the official denials here,
but the gambling money is won or lost
between the time the rumors are spread
and the time the victims of the rumors
find out through some official pro-
nouncement that devaluation isn't
intended.
Perhaps 1t is the big money made
by the spectators in 1888 when they
actually sensed the probable action of
the President long before the American
people did and possibly it is the state
Of Americas fiscal situation today
which prompts shrewd observers to
think that devaluation of the dollar
Is inevitable For there can be no
doubt that if gold is going to bring a
higher price than $35 an ounce, any
body who can buy the metal abroad
and hold 1t there for the ultimate
price to be paid by the American Gov
ernment would, indeed, make q profit.
The real trouble, of course, is that
everybody knows the Treasury pays
g. fixed price for gold and there is no
demand to govern the true price Of
the precious metal. As long as it
seems probable, therefore. that the
United States will pay $35 an ounce
or agree to buy later at an even higher
price, the whole gold market of the
world will continue to be more or less
affected by the action of the Govern
meuC OF CQe OQlCeQ states.
Can Trade by Gable.
Devaluation rumors do not originate
in America largely because American
citizens cannot buy or sell gold inside
this country. They can cable or radio
their money to London and buy gold
for safekeeping in Britain and they
can carry on somewhat similar trans
actions through Canadian stock ex-
changes. but the real speculators are
In foreign countries where the metal
is traded in very much the same as
wheat or corn or other commodities.
Strictly speaking, with world pro-
duction Of gold constantly increasing,
the price of gold should in due time
60 down below $35 an ounce. But,
with the increasing debt of the United
States and the new lending spending
program, foreign observers think the
existing gold stock buried in Kentucky
may have to be revalued so that it can
yield more dollars than under the
present law.
A nation which keeps an unbalanced
budget and goes deeper and deeper
into the red, especially as tax receipts
continue to decline, must some Gay
ind way to repudiate debt. This Is
not done, as so many people think, by
refusing to redeem existing Govern
mert bonds at par. Nor is there rea-
son to expect any drop in the market
price Of bonds below par because the
Government itself bought its own
bonds to keep the price up.
Mark-up Of Gold.
What could conceivably happen Is
that when the public debt becomes
unmanageable, the Treasury might be
called upon to devalue the dollar
This means mark-up of the Amer
ican gold supply and a corresponding
increase in bookkeeping dollars so as
to create new offsets for the debt o1
the Federal Government.
But even such moves are not imme-
diate. It may take at least two OF
three years for the full meaning OF
the present pump -priming program tc
be understood by the American people
It Is significant that the outside world
already is apprehensive The devalu.
alton rumorS are coming from persons
who still think that two and two make
four and that the American Govern.
ment cannot ultimately escape the
laws Of arithmetic.
Truly the public debt is rising rap.
idly. The administration here endeav.
ors to answer criticism by arguing that
America can stand a so or 60 billior
dollar Federal debt. Which might bt
true, because wealthy country car
stand an increasing debt. The expert.
ence OF the world, however, has showr
that 1t Is not the size of the debt bu
the rate at which it is piled up ane
the length of the period within which
the precipitate rise is brought abou
which ultimately breaks confidence IL
the monetary unit whatever its value
The dollar can never be safe from
devaluation as long as the head Of tn,
Government of the United States i
totally Indifferent to whether tn,
budget ever is balanced. And by in
difference is meant not mere disdail
for book balance, but scorn for thos
sound policies of tested economic
from which economic recovery flow
and tax receipts sufficient to meet ex
penses can really be collected.
tCopyright. 1888, by the North America,
Newspaper Alliance, Inc)
Suif fnr nivnrca E1Iad