Evening star. [volume] (Washington, D.C.) 1854-1972, 1939-07-02
Effects Of Monetary
Change 10 Depend
On Events Abroad
Trode Dangers Debated,
Fixed Rotio Called
Aid to Confidence
Nv CLAUDE A. jaeger,

Associated Press General Financial Editor
NEW YORK, July, 1.-The effects
of expiration of President Roose-
velt's powers to regulate the value
Of the dollar, 50 far as American
business is concerned, will depend
largely upon what happens abroad.
Wall Street money experts said
today.
When Congress failed to renew the
Presidents power to change the
theoretical gold content Of the dollar
and to operate the $4,000, 0O0, 900 fund
to regulate the value of the dollar
In terms of foreign currencies, 1t
did something seemingly rather re-
mote from the paper money and
small change with which Mr.. Con-
sumner buys his groceries.
But the possible effects, money
men explained, must be gagged In
terms of two factors:
/. The faith which monied men
have in the future value Of their
dollars and.
2. What happens to the value OF
other important currencies In the
world, in relation to the dollar.
Want Fixed Standard.
As for No. l, conservative financial
leaders have long argued for re-
turn to fixed sgold dollar"
dollar which will be exchangeable
into a fixed number of grains of
gold at any time, as the American
dollar had been for a number of
years up to 1888.
They argued that this was neces-
sary to give investors enough faith
in the continuing value of money
to induce them to make free use
of 1t in normal financing.
What happened with expiration of
the Presidents power to change
the amount of gold behind a dollar
last night does not mean that you
can change dollar at the bank,
or the United States Treasury, into
a fixed amount of gold. Since 1888
when the Treasury took over all
monetary gold in this country, gold
has not circulated as money, and 1t
still does not.
But the expiration of the Presi-
dents power does leave the dollar
at officially LBS of an ounce of
gold, and gold is the medium by
which balances between countries
are settled. Insofar as the world
price level in terms of gold is con-
cerned, so far as transfer of money
between this country and others
goes, the dollar is now pretty def
nitely 1-35 part Of an ounce of the
yellow metal, which is the tradi-
tional measure of wealth.
A good many bankers argue that
this is helpful in letting moneyed
men know where they stand, and
should encourage them to put their
funds to use. A number of Wall
Streeters argue that a further de-
sirable step would be to return gold
to circulation, to permit a holder of
paper money to go to the bank and
get an ounce of the metal for $35,
If he wants it.
Fear Metal Base.
But administration leaders and
some economists point out that the
important consideration for the man
who holds dollars is not how much
gold will it buy-they say you can't
eat gold and couldn't afford to
make a house out of it-but how
much of the normal consumable
things of life will 1t buy
In other words, they insist that
it is important the dollar be so
managed" that it will have as
nearly stable purchasing power as
can be achieved. They say the sup
ply and demand for gold, particu-
larly in these troubled times in the
world, are too uncertain, that the
metal is not now suitable as fixed
permanent basis of measure for the
currency we use in exchange for
the necessities of life.
And now to consider No. 2-What
happens to other currencies in re-
lation to the dollar-some of Wall
Streets outstanding money experts
say the success of leaving the dol
lar at 1-35 of an ounce of gold, as
confidence restorative. may be
largely dependent upon how Europe
comes through the economic stresses
of rearmament and the threat of
war.
These stresses may conceivably,
they point out, cause sharp de-
cline in the British pound sterling
and other foreign currencies. This
would tend to reduce the price of
goods of other countries in world
trade, in relation to prices Of Amer
lean goods. While the percentage
Of total American business carried
on with foreign countries is rela-
lively small, they hold it is enough
to have a serious effect upon sensi-
tive price levels here.
Regarded rs Club.
The Gold Exchange Act of 1884
placed the dollar at approximately
SO per cent OF its gold equivalent
prior to 1888, which made the price
of gold just $35 an ounce, and per-
mitted the President to alter the
dollar between go and so per cent
Of its old gold value. That meant
1t could not be increased much, but
1t could be cut more than Is per
cent from its present level, a sub
stantial further depreciation.
The power to alter the dollar be-
tween the so and so per cent limits
expired last night. While it had
not been used, some Wall Street
money experts considered it an i'm
portant club which this country
could hold over the world exchange
markets, to discourage other coun-
tries from deliberate depreciation
to gain advantages in world trade.
just where the new situation
leaves things is a matter of argyll
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