Evening star., 1941-06-22
War Causes Changed Outlook
On New Deals Money Policies
Uncertainties Bolster Administration Reluctance
to Relinquish Its Power Further to
Cut Value of Dollar
By Arthur Whibbie Crayf0rd.

was unnecessary, that the existence OF
the Presidents power for a further de-
valuation failed to restrain other nations
from a competitive depreciation of cur
rencies after 1884. that rumors of pos
sible changes in the value of the dollar
caused abnormal flows of gold and capt.
tai into and out of the country in 1887,
and that a fixed statutory gold content
of the dollar will provide the needed
element OF certainty in business trans
actions. This group takes issue with the
contention of the administration that
the depreciation of the dollar in 1888
and 1884 stimulated business recovery
by reversing a disastrous downward
course Of prices, that it was responsible
for substantial elimination of the in
justice between debtors and creditors
due to sharply falling prices, and that
it helped exporters to regain their COM
petitive position in world markets.
Those who believe devaluation was
unnecessary hold that statistical evil
dences are lacking as to any substantial
generalization of the dollar in terms OF
the pound and other monetary units fol-
lowing abandonment of the gold stand
ard by Great Britain in September,
1881. Abandonment of gold by the
United States in the spring of 1888, the
subsequent policy of deliberate deprecia-
ton of the dollar and the final, formal
devaluation in January, 1884, at ap-
proXimately the level attained by
gradual steps, were predicated on the as
sumption that the pressure of depreci-
ated currencies of Great Britain and
other nations upon the price level in
the United States was a major cause
of the continued advance of deflation
in this country.
Warren Theory Not Borne Out.
Failure of commodity prices to advance
proportionately to the increase in the
price of gold. as implied in the Warren
theory, which was the basis of the ad-
ministration's gold-purchase scheme il
the fall of 1888, gives substantial support
to the position of critics of devaluation
The price of gold was increased by 60
per cent between April 1888. and jan
uary, 1884, the period of deliberatc
depreciation of the dollar. The whole
sale commodity price level increased onl.
25 per cent during the same period.
In defense of administration policies
it has been asserted in the present de-
bates that devaluation helped to stabilize
prices at a higher level and that no
responsible official expected that the
gold action would restore that of 1926.
If the depreciation of the dollar &C
tually helped to relieve pressure Of other
currencies upon the domestic price level
in the United States, the effect was only
temporary, the critics assert, inasmuch
as relationships among currencies
changed greatly in subsequent years.
In scarcely any important instance,
either recently under war conditions or
earlier. have relationships been even
close to that existing following devalua-
ton in 1884
Devaluation is held to have contributed
to the problem of surplus gold through
an incentive to increased production by
reason of the higher market price. Most
authorities agree with the Treasury that
the tremendous movement of capital to
the United States and a large excess
of merchandise exports over imports were
chiefly responsible for the huge inflow
of gold in recent years, but they hold
the $35 price contributing factor to
the extent that new gold has been pro-
duced and brought out of boarding in
excess of normal amounts of earlier
periods.
Defense Cost Increase Feared.
Opponents of an extension of the
Presidents authority over the dollar
stress the inf1ationary possibilities which
in recent months have been aggravated
by upward price tendencies under the
defense program. 1t is asserted that a
further devaluation, with an accompany
ing gold profit of several billions and
its use in an enormous expansion of
credit and currency, would lead under
war conditions to an inf1ationary price
rise which would greatly increase the
cost of defense and cause distress among
the consuming population generally. 1t
was because of the billions Of existing
(See MONEY, Page C-3)