Evening star., 1941-06-22

Uncertainties growing out of the pres
ent war have introduced new angles In
the perennial controversy over monetary
policies. again in the forefront of discus
sion in Congress by reason of the expira-
ton of powers of the President on
June 30.
Possible dangers in any weakening of
the authority of the administration in
the existing emergency have tended to
facilitate favorable action on legislation
to extend the power to devalue the
dollar and to ma1tain an exchange
stabilization fund for the additional
years to June 80, 1943. Nevertheless, the
issues are sufficiently acute to provoke
sharp debate. The pending adninistra-
ton bill was passed by the House on May
27 by a vote of 226 to 1873 after two days
of consideration. Divided opinions were
in evidence in hearings in recent days
before the Senate Committee on Banking
and Currency. The expected approval
in the Senate will be accompanied by a
renewal of the arguments for and against
monetary policies pursued since the
advent of the New Deal eight years ago.
An Economic Weapon.
On behalf of the administration it is
contended that continuance of emer-
gency monetary powers is imperative in
the light of the most serious disruption
of the international exchange markets
of the past 20 years and prospects of an
even more critical period ahead. These
powers, it is asserted, already have been
helpful to the interests of the United
States and allied countries and will re-
main powerful weapons for use in eco
nomic warfare after the cessation of
military hostilities. Inf1ationary posi-
bilities from a further devaluation of the
dollar are held to be of no consequence
in view of the unlikelihood of any actual
exercise of the power.
Those opposed to any continuance of
the Presidents power to devalue the
dollar contend that past results do not
show beneficial effects and that its
existence constitutes an inflationary
threat which may jeopardize the defense
program The granting of broad power
to the Executive without immediate
likelihood of its use is held to be con-
trary to the principles of American con-
stitutional government. The continu-
ance of the exchange stabilization fund
has evoked virtually no opposition al
though criticism has been offered as to
actual and possible uses of the fund.
The division of opinion is not entirely
on partisan lines. The position of the
opponents of continuance of the dollar
devaluation power is fortified by rec
concentrations of the Federal Reserve
authorities, who have shown greater con-
Germ over inf1ationary possibilities than
the Treasury the principal sponsor OF
the pending legislation and the agency
which benefits most from factors tend
ing to create low interest rates. The
Federal Reserve authorities, however,
are primarily interested in proposals for
greater control of banking reserves and
have not sought to inject themselves into
the matter now pending.
Initiation Chances Not Denied.
AS examples of useful operations of
the stabilization fund Mr.. Morgenthau
cites the purchase of large amounts of
gold for the Treasury, cooperation with
European countries under the tripartite
accord, which has been inactive since
the start of the present war, and loans
to support the currencies of China, Ar
gentina and Brazil. The stabiliZation
arrangements with China were declared
to have been of great aid to that coun-
try in its monetary problems, while
those with Latin American countries
were regarded as important contribu-
tions TO American good neighbor policy.
Administration spokesmen do not deny
the inf1ationary possibilities inherent in
any devaluation of the dollar. They
maintain, rather. that in view of the
failure of injurious imitation to develop
from emergency powers. held by the
President in recent years, there is no
reason to suppose that he will sanction
anything of the sort hereafter.
Opponents of the continuance of the
Presidents power to devalue the dollar
hold that depreciation of currencies al
ways has been injurious throughout the
history of the world, that such action
by the United States in 1888 and 1884