GOLDEN PROMISES

Evening Post, Volume CXVII, Issue 52, 2 March 1934, Page 6

GOLDEN PROMISES

3IAECH-MAY EEVOLUTIOX

U.S. CERTIFICATES AND BONDS

(By F.V.E.)

An American contemporary reviews some recent American history, covering the fam<w;s March (when President Roosevelt and the wholesale closing of all banks arrived together), and the following montha.. " • The March decree against hoarding declared it unlawful for 'American citizens to keep gold coin. The decree also declared it unlawful forthe-m-.to keep gold certificates. ■■-. ;' '..--.■ ■■ : . Up till then, the gold certificate had occupied a.peculiar' place in the United States currency. It was a .receipt for gold, not merely, a paper hoto issued against such security as a gold reservej Government bonds, and: good, commercial debt. .To show that it was 'a receipt for gold,' the'gold cei-tificate said:' ".This certifies .that "there have been deposited, in the ; Treasury '-- of • .'the United States of ' America'-10 (or. it might be 100 or; IOOOy dollars in gQldcom .payable...to. the b.ea'rer 'on demand. " This receipt for actual gold dollars gave : absolute title toithc;.specific amount of gold in, the V.ff. Treasury. It was deemed the finest paper money in the' world. Anywhere- in tho world it was accepted as actual gold. No one could imagine a time When the United States Treasury would refuse to honour-its,own receipt for "actual gold entrusted to its keeping.,'. ' The other United States paper money,called by .the Americans. greeai paper money, was exchangeable ..with, gold certificates, dollar for ; dollar,.-Itwas thus,always possible,for^the American citizen .'to exchange > his! gold certifi.cates for green paper.;, But the March decree compelled him. to do Jso-r-eom-pelled him to go to the bank, :surr"ender his gold and gold certificates) ]and receive green paper money-equivalent "in face value. The result ;';is-'<thafr;;Since Marcli 6 it has been• unlawful-f or>an American citizen- to - have• a gold'certificate in his possession.-The lUnited States Treasury did not, from- March 6, refuse to gold-cash its. gold certificates because.- it Tyas 'short of -gold. .It has the "gold. Yet it. decided to compel the surrender of .gold certificates- for their equivalent in' : green paper; and for a citizen to return a ' gold certificate above 100 dollars ineang -liability to fine.and imprisonment.-;' ;;;. .•',-. Why,' therijr haying- gold,- ,did --the' United States ;'Government call- in-the gold certificates'?. 'It galled-them in because it .had decided'that it would,-if it; thought fit, halve 'the;vgold -in- 'the dollar. Since this devaluation, of'-the dollar beiJame : effective, a /gold certificate, if convertible at all, : is convertible', only into a dollar-witH the reduced gold backing. Thus a i 10-dollar gold' certificate, if presented now, would no longer buy what it.pledges to buy—lo dollars in. gold coin. No wonder "that the Government' in March tried to get these gold certificates out of tho way. But the. cancelling of an old promise to pay is not as remarkable, as the repudiation of a new promise to pay. The March decree, making illegal the possession of gold and gold certificates, was history by April, ,and in April the United States Government " issued 500,000,000 dollar?' worth of bonds. In those bonds it was stipulated that the interest and principal should be paid in gold. A month later Congress enacted that the . Government might pay. the. interest, and. principal pf these bonds,; and other bonds, in paper. ' Needless to. add, the gold value created by reducing the gold in1 the dollar goes' to the Government.