OFF GOLD

Southland Times, Issue 21997, 22 April 1933, Page 5

OFF GOLD

UNITED STATES CONTROLLED INFLATION POWERS FOR PRESIDENT A MONETARY DICTATOR (United Press Assn.—Telegraph Copyright.) (Rec. 5.5 p.m.) New York, April 20. A drastic Bill to grant Mr Roosevelt authority to expand both currency and credit and decrease the gold value of the dollar was put before the Senate late to-day on behalf of the Administration and action upon it to-morrow is virtually assured. The inflation amendment to the Farm Bill, as completed by the Democratic leaders, would authorize the Treasury to enter into an agreement with the Federal Reserve system for the purchase of three billion dollars in Government obligations in addition to those already held. The bonds would be held in the reserve system’s portfolios for agreed periods of time. It is no secret that despite the general good nature and willingness to follow the leader with which American people accepted Mr Roosevelt’s programme during the past six weeks, all that vast tier on tier of legislation has resolved into America trying to lift itself by the bootstraps. It has all been largely schematic and not without grandeur, but exasperatingly slow as concerns results. The people’s impatience, sharpened by years culminating in suffering, began to voice itself in Congress by well-known and well-calculated demands for a radical inflation of the currency or a radical change of the monetary system. Should Congress have been allowed to have its own way there is no saying what unorthodoxies as concerns money it would not have forced through during the next few weeks, aside from otherwise disrupting the President’s legislative programme. The best opinion is that Mr Roosevelt, by putting himself at the head of the movement, has cleverly stopped it. “90 Per Cent. Psychology.” There is no gainsaying the fact that the Black Bill, which to-morrow will probably be passed, gives the President power to do many extraordinary things, but does not make it mandatory. From Washington comes word to-night: It is 90 per cent, psychology and only 10 per cent, dynamite.” The Black Bill represents a compound of many ideas, and contains the germs of many schemes that have been advanced in and out of Congress, and by its composite nature not only represents all views, but bespeaks the support of all factions with the possible exception of a small minority. Its major import and its sufficient safety valve are the fact that Mr Roosevelt is made monetary dictator with discretion not only to do such exceptional things, for instance, as to bolster Federal stocks by open market operations, but also to negotiate a wide range of treaties of a political and economic nature with foreign Governments. To-day the United States is off the gold standard, but to-morrow the President has power to resume it. Mr Roosevelt, as is known, is a “sound currency” advocate, and is said to be basically opposed to “tinkering” with the currency. He does not want monetary inflation, he wishes credit inflation, so that the wheels of industry and production will start moving on a large scale with attendant benefits. It is felt that if he finds that experiments which the Black Bill allows him are not producing the desired credit expansion, and at that without injurious effects on the monetary system, he will quickly abandon them. Plans Upset. On the eve of Mr Ramsay MacDonald’s arrival the question may frankly be asked to what extent the stage was set for him and for M. Herriot, since the official abandonment of the gold standard and the intended adoption of controlled inflation have obviously upset their plans and loosed forces domestically of possibly incalculable strength and in a not wholly predictable direction. Such a stage setting might prove too much for the drama itself, namely, the adjustment of international economic affairs via the World Conference. Frantic shore-to-ship telephone calls from the Press Association to-day elicited the following statement from Mr MacDonald: “It is easy to realize that the events of the past two days have materially altered the situation since we left London and provided new elements for consideration. Quite naturally the abandonment of the gold standard by the United States will have a decided bearing on the coming discussions.” M. Herriot, in a statement aboard the He de France, said: “My mission, is a new one. We supposed the President would await an exchange of views with Mr MacDonald and myself before taking a decision, as the invitation was inspired by a desire to consult us about the international aspect of this decision. Now that circumstances and arguments, certainly powerful, have hurried his steps, our future conversations will have a new significance. 1 refuse, even by conjecture, to presume his intentions.” Leaden Wall Street has changed mightily in “rocketing” the stock market with certain important issues such as United States Steel, which gained 50 per cent, in price. While bonds even United States Government, are depressed, commodities have made exceptional gains. Cost of Living. It is stated that as going off the gold standard did not seriously raise the cost of living in Britain, similarly the American “man in the street will not be affected in any way”; but it seems impossible that the basic staffs of life and living can continue to have any more such hectic markets as those of the past few days without the cost of living rising quickly and perceptibly That this, if not accompanied by an automatic adjustment upward of present deflated wages, might seriously discommode a great element of the population, namely, the labouring class, seems inescapable, and the labouring class can at the present time ill-afford to adjust itself to any further dislocations.

To revert to the question of the stage setting, it seems to indicate that if any such intention existed it lodged chiefly in the breast of Congress. Mr Rainey’s statement to-day and specific provision in the Bill that the President, whenever he finds upon investigati.on that the commerce of the United States is being adversely affected by depreciat-

ed currencies of the other countries or wishes to secure international agreements for the stabilization of currencies, can take appropiiate steps seem to indicate this. It is indicated, too, that Mr Roosevelt personally is not adverse to utilizing the situation for the purpose of “bargaining” at the impending Washington Conference, but the circumstances, and not the intent, seem to have been the principal impetus of various steps and measures of the past few days and the days to come both as concerns Congress and the President, embarrassing though the situation may prove to visiting statesmen, Benefits Rather Than Evils. Despite the nationalistic tendencies of the situation, there is a strong conviction that the extreme position which the United States has apparently assumed on the eve of international conferences may produce benefits rather than evils. It is pointed out that America perhaps is now realizing better than ever before that isolationism is impossible and that the monetary systems of the chief nations of the world are not only in fact interdependent. but provision must be made for their smooth interdependent functioning. . . There is growing appreciation of the fact that Britain will probably make a lump sum debt offering dictated by essential national and international economic considerations, and that if the United States Government does not see its way clear to accept it, the onus of consequent dislocations will rest upon the United States rather than upon the debtor. Finally, there will be a readiness on the part of America to offer greater receptivity to foreign goods. America, by encouraging a buying movement of foreign goods, will accelerate a much desired buying movement domestically. Circles close to the Administration feel that the stage setting should not prove altogether inimical to the world drama. SWIFT ACTION PROVISIONS OF NEW BILL. PRESIDENT’S WIDE POWERS. (United Press Assn.—Telegraph Copyright.) Washington, April 20. Intent upon getting quick authority to direct controlled inflation, Mr Roosevelt and his economic counsellors today collaborated with the Congressional advocates of currency inflation in drafting legislation upon which it is proposed to act without delay. The Congressional leaders were consulted in a struggle to overcome constitutional obstacles to the proposed legislation. It is anticipated that the measure will be ready for introduction late to-day as an amendment to the Farm Bill in the Senate. The Bill would give Mr Roosevelt authority to issue unlimited new currency as legal tender under the old greenback law, and also enable the President to reduce the gold content of the dollar by international agreement or otherwise. To overcome constitutional objections to the latter proposal it was tentatively agreed to limit this authority to a reduction of the gold content of the dollar by 50 per cent. The Congressional leaders appear to be standing behind _ Mr. Roosevelts campaign. Quick action is desired to get the situation fully in hand as soon as possible. The Speaker, Mr Rainey, told newspapermen to-day that Mr Roosevelts monetary moves were designed to meet “the concerted and planned campaign by foreign nations to beat down the United States commercially. Mr Rainey said the President’s move was toward bimetallism and would place the executive in a position to meet the nations that depended upon the pound sterling on their own ground. Unless those nations come with us to some international stabilization of money they are lost,” he said. “There has been a concerted drive by the European nations against the American dollar. They have been attempting to take all our gold from us, leave us stranded and reduce us to a fourth or fifth-class Power. The President’s action is the most statesmanlike move taken by any chief executive in my memory.” A later report states that the draft of the proposed controlled inflation amendment to the Farm Bill was completed by the Democratic leaders late to-day with a provision for authorizing new currency up to 3,000,000,000 dollars. The President would have power to direct the issue of the supplementary currency. Other details of the proposal are withheld pending the introduction of the measure in the Senate, but it was also understood to authorize the President to accept up to 100,000,000 dollars in silver as part payment of war debts and reduce the gold content of the dollar. The leaders said it would not be pressed to a vote to-day, but would lie on the table for action to-morrow. Senator McAdoo (Democrat, California), a former Secretary of the Treasury, to-day introduced a Bill to authorize an issue, up to eight billion dollars, in United States notes to refund the Government’s short-term debts maturing within the next five years. SHARE PRICES HIGHER NEV r YORK STOCK EXCHANGE. BRITISH CURRENCIES GAIN. (United Press Assn.—Telegraph Copyright.) New York, April 20. Heavy buying poured into the Stock Exchange at the opening, pushing prices of numerous shares from one to two dollars higher. Silver soared from two to three cents an ounce. Profit-taking in the late trading reduced the gains by about half after an avalanche of early buying had sent prices up one to nine points. Billions were added to the quoted values of stocks and staples. British currencies continued to skyrocket, the nominal opening quotation for the pound being 3.89 dollars in United States funds and the Canadian dollar 891 cents. French francs rose approximately one-fifth of a cent, to 4.44 cents. Other currencies also rose. By noon British currencies had receded slightly, the pound being quoted at 3.86, four cents under the day’s high level. HEAVY WHEAT SALES PRICES SOAR AT WINNIPEG. (United Press Assn.—Telegraph Copyright.) Winnipeg, April 20. Wheat futures scored smashing gains of two and a-half cents in a wild opening. Backed by phenomenal sales of Canadian wheat for export, totalling 4,000,000 bushels in the last two days, futures withstood profit-taking throughout an active session, closing 1| to 1J cents higher, to bring the total gains in the last two sessions to 2| cents. The volume of transactions was enormous. EFFECT IN CANADA WIDE GAINS IN STOCKS. AN OPTIMISTIC OUTLOOK. (United Press Assn.—Telegraph Copyright.) Toronto, April 20. The close of the Canadian markets to-day brought an optimistic picture with rises right down the line and nothing to discredit the general opinion in financial and industrial circles that Canada will be the gainer by the United States gold action. It is reported that wide gains were made in stocks, though the close was below the day’s tops. In Toronto the general list closed near the day’s tops

after the most exciting day in four years. The pound pursued its upward course all day, closing at 4.39 J dollars on Wednesday and opening at 4.41 i on Thursday. It climbed gradually to 4.45. With the exchange stumbling block largely removed, the Primp Minister, Mr R. B. Bennett, reported the drafting of definite reciprocity proposals to be made to the United States at the Washington Conference. GERMAN OPINION TEMPORARY DEPRECIATION. (United Press Assn.— Telegraph Copyright.) Berlin, April 20. Financiers associated with the Reichsbank consider fluctuations in the dollar cannot touch the dollar exchange in the long run. America is the worlds greatest creditor and therefore a continuous demand for dollars will maintain the dollar quotation near parity. America’s action is necessary to prevent irregular withdrawals of gold. It is unlikely to affect German currency which stocks of foreign currency adequately protect, but the lasting depreciation of the dollar would decrease German exports and possibly necessiiate a moratorium. FRENCH ANXIETY ANGLO-AMERICAN MONEY WAR. (United Press Assn.—Telegraph Copyright.) Paris, April 20. Apprehension prevails in financial circles regarding the Anglo-American money war in which it is felt both are using weapons of currency inflation, leaving France at the mercy of a depreciated dollar and sterling. It is considered that Mr Roosevelts decision will make the international confusion worse. RETAINING GOLD HOLLAND’S INTENTION. The Hague, April 20. Holland is unlikely to abandon the gold standard.