Evening star., 1940-02-18
Gifts May Provide Safe Outlet
For Dangerous Gold Reserves
Berle's Fantastic Suggestion Given Weight as
United States Struggles With Problem
of Mounting Supplies
By Raymond p. Brandt.

at $S5 an ounce may have been q mis-.
take. but they assert that it would be
catastrophe to our domestic economy II
the policy we're now changed.
The latest ofacial word on the sub
ject is the reply in October of secre-
tary Of the Treasury Morgenthau to
questions by Senator Vandenberg Re-
publican, Of Michigan. Answering the
blunt question: why doesn't the Treas
ury stop buying gold?" Mr.. Morgenthau
said:
Such a step, taken unilaterally. would
have disastrous effects on our economy.
1t would disrupt the foreign exchanges
and gold bullion markets and would
very soon cause such drastic disturb
ances in international trade, and even
in the domestic sphere, as seriously to
impede the recovery Of business.
Present relationships among the
various leading currencies would be up
set. The dollar probably would appre-
ciate Immediately in terms of other lead
ing currencies. At present, when the
demand for dollar exchanges increases,
foreigners need only to obtain gold
(either at home or on the London mar.
keD, ship 1t here and obtain dollars
in exchange. If, however, this means
Of obtaining dollar exchange were re-
moved, dollars would rise in value in
definitely in terms of other currencies.
While it is impossible to know in ad-
vance what rates of exchange would
finally emerge, we can be certain Of at
least one thing-that no country would
benefit from the ensuing international
monetary disruption"
Paper Profits . Factor.
Mr.. Morgenthau did not include in his
letter another potent reason why the
New Deal is against a decrease to $25
an ounce. When the dollar was devalued
the Treasury took a paper profit" of
$4,000 100000 on its then gold reserve.
Since then the reserve has been In.
creased to $17,644.000 900, which If re-
valued at SIS an ounce would create q
paper "loss" of more than S. 900, 900 900.
This would more than wipe out the so.
called profit"
In his reply to Senator vandenberg,
Mr.. Morgenthau admitted that his only
solution for the increasing gold hoard
is full business recovery in the United
States.
We are confronted with the fact" hs
said, that though we should like to zee
less gold and even to get rid Of SUBJ
stantial amounts we already have, there
Is, under existing circumstances, no ac-
ceptable alternative to the policy We
have been pursuing. In the case Of all
the proposals we have examined, the
remedy has always been worse than the
disease. The best way to reduce our
gold inflow on commodity and service
account is for us to have full business
recovery so that our imports will rise
more rapidly than our exports"
Gold Imports Drop.
When Secretary Morgenthau wrote to
Senator Vandenberg, gold imports had
temporarily dropped from 1896 900 900 in
September and $3.50 900 900 in August to
$50, 100000 in October. Since then they
have increased, with the Federal Re-
serve Bulletin reporting that during the
first "a days of January they had al
ready reached $180,SOO,000.
There is every indication that Great
Britain and France are at present con-
serving their gold boards and meeting
their payments for American goods by
the sale of their American securities.
But as the war continues they will be
under constant pressure to sell their
gold. According to Treasury Depart.
ment figures, England has more than
$4,000, 900 900 in gold and France almost
as much, while Holland. Switzerland and
Belgium, which are virtually on war
expenditure basis, have relatively large
holdings. .-.....
In addition to these accumulated re-
serves, the current world production,
outside of Soviet Russia, was valued in
1899 at $1,11s, s,4s0000. The Federal Re-
serve Board notes that while official
figures are not available for the q. s.
s. R., the estimate for 1898 was 1884,
100000. There is no reason to believe
that it was less last year. ....
Thus with the present volume of now
(see GOLD RESERVES, Page C-3o