VITAL ISSUE.

Auckland Star, Volume LXVI, Issue 29, 4 February 1935, Page 7

VITAL ISSUE.

U.S. GOLD CLAUSE.

Inflation Policy Challenged

At Law.

SUPREME COURT TO DECIDE. (United P.A.—Electric Telegraph-Copyright) WASHINGTON , , February 3. After the markets had closed on Saturday the Chief Justice, Mr. Charles E. Hughes, announced that the Supreme Court would not issue its judgment on the gold clause case on Monday as liad been expected. The Chief Justice explained that the matter was under consideration, but the nine judges were not yet ready to give an opinion. During the past fortnight market movements have been largely influenced by speculation as to what the decision of the Court might be. The chance that the judgment might be adverse, that is that the Government's inflationary gold policy is illegal, caused much oppreliension and Inertia ruled on the securities exchange, whereas the continued industrial improvements would have normally sent prices sharply forward. The commodity markets in general have been similarly affected. It is understood that the Government is confident of a favourable judgment, but it is prepared for an adverse one. It is reported to have measures drafted which would be rushed through Congress to counteract the immediate deflation the effect of such a decision by the Court would have. The nature of these bills is not known. It is further reported that in the event of an adverse ruling the Government is prepared to close the security exchanges to prevent an immediate violent fluctuation of prices. The postponement of the decision is viewed as rather alarming in some Government quarters, as it seems to indicate that the Court Is finding difficulty in weighing the legality issues involved against the Government's contention that its action was imperative for the national welfare.

The action was brought as a test case by the holder of a single bond in the Baltimore-Ohio Railway Company, who contends that he should have had an interest payment of ten dollars more (about 40 per cent), basing payment on the old gold values, and that he has in effect been deprived of property without due process of law. It is estimated that 100,000,000 dollars' worth of securities is involved, as well as President Roosevelt's entire monetary policy. For that reason the Attorney-General, Mr. H. S. Cummings, took the almost unprecedented action of personally defending the suit. He argued that the crisis of 1933 was so serious that summary action was necessary to keep people from slipping to a lower level of civilisation. The seeming dubiousness with *-hich the Supreme Court heard the Government's arguments caused a major dollar panic in the middle of January.