The Daily Alaska empire., 1945-03-30

deposits to 25 cent it has been suggested that the price of gold be raised from S35 to S56 an ounce The resultant SO per cent upward valuation of gold reserves would permit of further tremendous ex- pansion of Federal Reserve obligations the basis of present required minimum of 40 per cent against Federal Reserve notes and 35 per cent aganst deposits If the sponsors of this proposal to raise the price gold had deliberately tried to aggravate infla- tionary tendencies at home and to destroy the con- fidence of foreigners in the stability of the dollar, they could not have upon better to attain their ends.
 The cfevauation of the dollar and the accom- panyng rise in the price of gold from S2O67 to S35 per ounce in 1884 a grave mistake, as subsequent events have proved It was a highly unstabilizing influence throughout the period preceding the out break of war felt both within the country and abroad
 To repeat that il-advised experiment in these critical days would be an unpardonably irresponsible act, needlessly alarming to the public that might precpi tate a flight from the dollar into goods and real propertyan inflationary manifestation that the Gov ernment has been trying hard to prevent. further lowering of the value of the dollar in terms of gold would also create unease among Government bond holders and make it increasingly difficult for the Treasury to place security issues with nonbank investors Last but by no means least, an arbltrary change in the gold value of the dollar at this time would be equivalent to sabotaging the Breton woods monetary agreements For those agreements are based on the assumption that the dollar will remain stable in terms of gold As Dr. Randolph Burgess, President of the American Bankers Association, says our gold nrice is the peg on which monetary stability through out the world has hung" And it's continued stability is essential to any effective program TOT postwar stabilization of world currences.
 Another consequence of donar devaluation that has received relatively little attention is the resultant besowal of tremendous wndfalls foreign holders of gold and dollar balances and the putting of an excessive premium foreign gold production at the expense of the American people In the 30s, Tor example the raising of gold to S35 per ounce brought about an immediate increase of 59 billion dollars III the purchasing power of foreign gold reserves Since then world gold stocks have grown rapidly owing in large part to the stimulus to gold mining resulting from the higher dollar prices obtainable TOT goo' During the war years foreign gold holdings have been expanding rapidly because pay cash for imports and let most of huge volume of exports go out under lend lease arrangements The net result has been huge accumulation of forelgn-oWned gold ana dollar balances estimated at IT billion dollars tor 20 billion dollars if foreign owned private banking funds are incuded Mere talk of dollar devaluaton is likely to precipitate rush convert foreign owned dollar balances into gold In any case, the IA billion dollars of gold already in possession of foreigners would pro duce tidy increment of more than eight billion dollars while additions foreign gold holdings caused bv the stepped-up sbsdization of gold mining would follow
 With swollen dollar resources, some forlegn groups would be in position to buy so much in our markets after the war that it might be necessary to restrict exports to prevent them from cleaning us out of scarce goods Moreover, by taking gold valued at an ar- btrary high figure of $56 in exchange for our goods we should be driving wretchedy poor bargain rom our own viewpoint In addition, should be bestow-
 ing benefits most erraticaly on countries that might he able to finance purchases abroad without our aid Fortunately there is support in responsible
 administration circles for this untmey proposal to repeat the mistakes of the past.