BANKS: Hold The Line

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Depression's Depth, The combined effect of all these endeavors by the Government gave some conception of the depth and magnitude of the Depression. More than 8,000,000 persons were estimated as unemployed. Local charity was running out in community after community. Wheat was selling at 56¢ per bu. where last year it sold at 86¢. Cotton was down to 5¾ per Ib. compared with 9¢ last year. According to the Labor Department's estimates all commodity prices had dropped 31.1% since 1929. During the same period stock values declined 80%. For the first quarter of 1932 exports ($460,000,000) and imports ($398,000,000) were at the lowest level in 20 years. Farm prices, according to the Department of Agriculture, looked more like those of 1832 than 1932.

Gold, Chief economic result of the price decline has been a marked rise in the value of the gold dollar. Louder & louder has grown the political demand that the dollar be cut loose from gold and allowed to find its equilibrium at a lower level. Theoretically as the dollar went down, prices would rise—a boon to all debtors. Senator Borah summed up this popular sentiment last fortnight when he called the present dollar a "dishonest dollar" and pleaded for a "stabilized currency."

The gold stock of the U. S. Treasury is about $4,250,000,000, 33% of the world supply. On demand it pays out gold for paper currency. When it sees it can no longer pay, the U. S. goes off the gold standard. For weeks past the U. S. has been steadily losing gold to Europe as foreign banks, distrustful of U. S. conditions, called their credits home. Last week gold exports were $60,394,000, the week before $41,000,000. In the last three weeks the Federal Reserve has lost almost $100,000,000 of its gold reserve. These facts made the country wonder last week if the U. S., sooner or later, would have to go off the gold standard.*

Governor Meyer as head of the Federal Reserve is committed to the proposition that the U. S. should stick to gold. Last month he told a House committee: "We all know the evils of the gold standard but we do not know the evils of another system."

Last week before a Senate Committee he was asked: "How are we going to stay on the gold standard?"

Sharply he replied: "You might as well ask a man how he is going to play a piece on the piano. There is not the slightest doubt in the minds of any responsible official of the ability or intent of the United States to stay on the gold standard. No nation has gone off except through necessity. There are none that do not want to return to a metallic basis."

Last week's betting in Washington was 4-to-1 the country would stay on the gold standard. Three factors explained the odds: 1) Foreign investments in the U. S. do not exceed two billions and therefore their complete liquidation for withdrawal would not, of itself, drain the Treasury's gold reserve; 2) the Treasury would meet a gold run by paying & paying, thus dispelling public fear; 3) "free gold" above and beyond all legal reserves for currency totals $1,200,000,000.

Silver. Almost as politically important as gold is silver. The Treasury gets its silver for coinage not from open market purchases but by recovery from gold bullion. Last year it thus acquired 2,193,313 fine ounces.