MONETARY MUDDLE

Otago Daily Times, Issue 22067, 25 September 1933, Page 9

MONETARY MUDDLE

TOE POSITION IN AMERICA DEMAND FOR INFLATION (United Press Association.) (By Electric Telegraph—Copyright.) WASHINGTON, September 23. (Received Sept. 24, at 10 p.m.) It is felt in informed Washington circles that the monetary muddle in which the Administration finds itself is rapidly reaching a crisis, with a positive declaration of principle possible following a conference called by President Roosevelt at White House to-morrow night to discuss the situation with leading financial advisers, including the Budget director. It is no secret that the powerful Wall street financial community, as well as the President's more conservative advisers, are urging a positive position on the currency inflation proposals be enunciated immediately. They hold that uncertainty over money mattew is retarding long-term investments, which, if it continues, is calculated to retard, if not defeat, the National Recovery Act programme. While the Administration's recent credit extension schemes for commodity purchases and loan proposals are held to be desirable to meet the immediate emergency, they are not considered strong enough medicine to instil confidence in the capital investing class on the one hand, or silence the inflation agitators on the other. The majority of those called to the conference, it is believed, prefer no inflation at all. However, if some degree of. inflation is considered necessary by the President they have a definite plan for immediate limited action, while another, it is understood, has been considered and may be submitted later. The first proposal, which is ready for discussing to-morrow night, provides for the immediate issuance of about 1,000,000 dollars fiat money with the definite proviso that no other inflation will be undertaken. It is even suggested that the President should renounce the extraordinary inflation powers Congress granted him in the Thomas Amendment. The second proposal, which has not yet been formulated in a definite plan but which is said to have strong Wall street support, would immediately stabilise the pound and dollar through co-operation between London and Washington. It also envisages revaluing the gold content of the dollar at the present depreciated levels, which are about 35 per cent, off par. It is pointed out that the gold which the Federal Reserve holds, while worth 3,591,000,000 dollars at the old legal standard, has now appreciated to about 5,525,000,000 in relation toxoid standard exchanges. It is believed "that with this amount of gold as a basis sufficient currency with reasonable gold coverage could be placed in circulation without restoring fiat money or arbitrarily halving the dollar's gold content Although it is realised that such action might have an immediate deflation effect many leading financiers believe it is superior to the President's policy heretofore, in which they see manifold dangers, not the least of which is the continued if not increased flight - of capital to foreign countries, due to the nervousness of American investors. It is admitted that neither plan recognises the power of the Congress to force a broad scale of inflation over the President's head, but it is believed that President Roosevelt's prestige, and as a final resort his veto powers, are sufficient to keep him in control of the situation. A declaration that inflation was indispensible to the success of the National Recovery Act was made on Friday by Senator Borah. DOLLAR FLUCTUATIONS. WASHINGTON, September 22. It is reported that the economic advisers of the Government are giving close study to methods of controlling dollar fluctuations to the end that "constant purchasing power" and stabilised price levels may be achieved. The, subject has been under consideration for weeks, with Sweden's managed currency system as a practical guide, but how President Roosevelt feels towards such an experiment has not yet been disclosed.