Evening star., 1939-02-28
Sterilization
(Continued From First Page.)

flights of capital from one country
to another.
Such, for example, was the sit
uation created in the fall of last year
when as a consequence of the
Czecho-Slovakian crisis a large VOL
ume Of funds sought to leave Eu-
rope for the United States.
THE outflow of funds was so
large that the amount of gold Zap
proximately $1,000 OOO,OOO) which it
was necessary to ship from Europe
to provide dollar balances was far
greater than could be taken care
of through normal commercial
channels.
If there had been no stabiliza-
ton fund to cooperate with the
other funds (of other countries), the
dollar exchange would have fuc-
tuated so violently as to disrupt our
trade. International monetary chaos
might have ensued."
The Secretary explained that
American businessmen, doing busi-
ness in other countries. needed as
surances of fairly stable exchange
rates between the dollar and foreign
currencies in order to plan their
business transactions.
Part Of Fund Is Intact.
Mr.. Morgenthau asserted that
81 800 100000 Of the funds gold
never has been used and is intact.
He added that 100000 900 OF the
funds original gold has been used
as revolving fund for to-day
transactions and that he did not
want to divulge the gold holdings of
the revolving fund for fear of aiding
currency spectators. Previously,
however, Secretary Morgenthau had
said the fund had made a Sl2 2,G00,-
900 profit since 1884
The Secretary told the commit
tee the fund took special measures
against losing money on temporary
purchases Of foreign currencies by
making arrangements with some
countries, particularly China and
Mexico, by which those countries
would pay cost price for any of their
currencieS acquired by the fund. An
other important function Of the
fund, the cabinet member said, was
to protect the credit structure of
the United States from the della
tionary effect of foreign withdrawal
of funds on deposit in this country.
Protection OF business, however,
was the primary purpose of the
fund, he said.
THE stabilization fund is, under
present conditions, potent instru-
ment for the protection of our stake
in world trade and of every Ameri-
can producer who completes in the
American market with foreign pro-
ducers," Mr.. Morgenthau asserted.
THE only persons in the United
States who can possibly be injured
by the operations of the stabiliza-
ton fund are speculators in foreign
exchange.
Whereas the businessman needs
stability in exchange. the speculator
thrives on exchange fluctuations.
Any business man who has had to
deal in foreign currency knows that
the dollar is the most stable and
the soundest currency in the world
today.
The $2,ooo,ooo,ooo stabinzation
fund has been an important and,
believe, essential instrument in
maintaining that stability"
Secretary Morgenthau's balance
sheet on the fund showed that on
June 30, 1898, it had s2,05s, ,716,045
assets, including $1,946, 1872 .534 gold
and dollars, $100,332 of English
pounds and French francs, SIS, ,107,-
637 United States bonds and $48,-
838,340 Of Chinese gold.
The Chinese gold, however, was
held by the fund as security for
$48, ,487 $50 owed the fund by the
Central Bank Of China.
The statement showed earnings
Of the fund from January 81, 1884,
to June 30, 1888, of $10,545 1888. Re-
Gently the Secretary said profits on
the fund had been about $4,000, ,0OO
Apparently, therefore, the fund has
earned about s1,500,000 since last
June 80.
The statement also showed that
from January 81, 1884, to Decem-
ber 30, 1888, the fund spent $784,-
653 for administrative expenses, in
cluding $457 ,561 for salaries.
Representative Luce, Republican.
Of Massachusetts, said it had been
contended that uncertainty Of what
might be done about dollar devalua-
ton was lone Of the chief reasons
for a delay in the revival of busi-
ness" and asked the Secretary
whether he agreed.
Il do not agree" Mr.. Morgenthau
said II think 1t depends on those
with whom you talked. The people
with whom I've talked, in a non-
political atmosphere, think these
powers have been a distinctly sta
bilizing influence"
Representative White, Democrat,
of Idaho asked Secretary Morgen-
thau whether he did not think the
stabilization funds Of the United
States. Great Britain and France
were 'disturbing influence"
''No: I don't" was the answer I'm
fact, think they have had just the
opposite effect. If we didn't have
these funds, I believe we would have
had complete economic chaos"