Evening star., 1939-11-14


Before 1884. the United States
Government was willing to pay only
S20.67 for every ounce of newly
mined gold, but ever since that date
bonus of about SIS an ounce has
been paid by the Treasury here for
all gold mined anywhere in the
world.
Calculating this bonus or subsidy,
which, unlike a loan. does not have
to be paid back, the total amount of
the gift to the rest of the world is
approximately $6000,0O0 1000.
This means that foreign countries
have exchanged their gold ounces
for American dollars. buying securi-
ties in American companies and
building up their balances in Amer
lean banks. 1t is true the Treasury
earned big bonus or profit on gold
already accumulated by the United
States before 1884, but the largest
accumulations that have come in
from foreign countries since then
have been those of newly mined gold
or old metal exported to America in
the natural course of trade
Primarily for Trade.
The original purpose of the bonus
was not, of course, to enable Europe
to finance a war but merely to MAIN
tain American trade and particu-
larly to assist American farm prod
ucts. Farm prices in 1888 were down,
and the devaluation of the gold
dollar was intended to make them
rise. Although farm prices did rise
for a while, other factors entered
into the situation, and until the
present war boom started the agri-
cultural price scale was about as
Tar down as at the time when the
devaluation of the dollar began, thus
nullifying almost entirely the gain
derived from the devaluation STEP
AS for the other prices of COM
modities not measured in interna-
tlonal terms or in gold, there has
been relatively little change That
is Why devaluatio' of the gold con-
tent of the dollar has been virtually
meaningless in domestic sense.
The purchasing power of the dol
lar, considering the year 1926 to be
on the basis of 100, has been some
where between 125 and 116 during
the last few years. reaching the
latter point only when the price
rise started recently due to war con-
ditions abroad. In other words, the
dollar buys S1.16 worth of goods
today as compared with 1926, and
hence devaluation of the dollar has
been an academic matter thus far.
Russia and Germany Benefit.
AS for foreign countries, however,
they have benefited by the fact that
America was willing to trade $35
for an ounce Of gold instead of
$20.67 and this enrichment came
five years ago as Europe began pre-
pairing for another war. Even Rus
sia and Germany have benefited
indirectly by the bonus on gold, be-
cause all exchange prices for gold
have been influenced by the pur-
chases engaged in by America. In
effect the United States Govern
ment as the biggest buyer of gold
has been chief instrumentality for
holding the price of gold at S35 an
ounce. All nations naturally like
to get more American dollars or
English pounds for their gold than
they used to get.
incidentally, the above figures do
not take into account the silver
bonus given by the American Gov
ernment to the rest of the world.
Silver has been bought at a price
two or three times the market price
prevailing prior to the Treasury's
adventures in the realm of silver
price fixing. Here, too, what the
United States Government pays for
silver makes the world price. Other
silver mining countries have bene-
fitted by the bonus, and while it is
by no means as large as the gold
bonus, it is substantial in amount
and has helped the British and
French build up their dollar bal
ances in America.
The last thing, of course, that the
administration intended was to use
its monetary bonuses and subsidies
to finance war, but it is an ironical
fact that if it had not been for
Americas revaluation of the gold
and silver dollars. respectively.
there might not tadav he war