OCR Text |
Show THE GOLD SITUATION. A bulletin, issued by the Guarantee Trust company of New York, says the trade export excess of tho United States for 1919 was four billion dollars dol-lars but that in spite of this great amount of goods sold to other countries coun-tries the gold and silver of the United States is flowing in a steady stream out of the country. Other countries are.. buying our goods but they are not 'sending us gold or silver in payment. I In the first six weeks of the present pres-ent year, the bulletin says, more gold 'has left the United States, gojng chiefly to South America and the Orient. The domestic credit stringency stringen-cy has been reflected in declining reserve re-serve ratios at the Federal Reserve banks and has been in pan caused by absolute losses of gold Six these reserves re-serves As a consequence credit liquidation liq-uidation has occurred at the expense of both foreigjjrnd domestic credits. The bulletin goes on to say that j "There are those who, in the light of these conditions, view with certain J ,alarm the continued export of gold. They feel that, while deflation is undoubtedly un-doubtedly necessary, it should take' jplace gradually and not be unduly forced and accelerated by large losses of gold, the foundation of our monetary mone-tary and credit structure. A gold dol-'lar dol-'lar In the vaults of a Federal Reserve jbank serves, or may serve, as the basis ,of 'deposit liabilities of ?2.50, and these deposits, to the credit of a member bank, may in -turn serve to enable j credit extension by that bank anywhere any-where from seven and a half to four-leen four-leen times that amount, or say $19 to j$35. With reserves close to the legal minimum, therefore, every million dollars dol-lars of gold lost practically means forced credit contraction of perhaps twenty millions, unless contraction comos about by normal industrial liquidation. liq-uidation. "Meanwhile, it is further pointedi out that gold production In this country, coun-try, now at its lowest figure since 1896 or 1897 between 55 and GO million mil-lion dollars in 1919 as against 105 millions mil-lions in 1915 Is not adding to our stock available for banking reserve, Isinco industrial (Consumption of the Jyellow metal is at a greater rate than new production. This, of course, is j due in good part to the "cheapness" j of gold relative to other commodities jin Oils era of high prices; in other words, to the fact Chat, a dollar alwaya representing or being identical with 123.22 grains of gold, it follows that the value of gold, in terms of other commodities,, com-modities,, declines in exactly inverse (ratio to the rise in the general level of prices, expressed in terms of gold, or dollars." |