Mr. Jones's Dollar

Into the anteroom of Undersecretary Dean Achesonon the second floor of the Treasury Building in Washington, big-framed Jesse Holman Jones and Henry Morgenthau Jr. strode at 9:30 one morning last week.

"How about gold?'' demanded a dozen newshawks who were waiting for them.

Smiling, Jesse Jones grabbed Mr. Acheson's secretary, pointed to her teeth and wisecracked, "There's some gold for you."

After he and Mr. Morgenthau went in to Mr. Acheson, bored newshawks waited for 20 minutes. At last the door opened, the Jones head appeared, the Jones finger beckoned. In filed the newshawks. Reading from scrawled notes, Mr. Jones apprised the U. S. that beginning that day R. F. C. would pay U. S. gold miners $31.36 an ounce for their output. Mr. Acheson and Mr. Morgenthau listened in silent approval. The newshawks dashed for telephones.

R. F. C.'s gold price was theoretically good until canceled, but next morning Messrs. Jones & Morgenthau again appeared. A new price, $31.54, was announced. On succeeding days it was the same (except that Mr. Morgenthau gave up his personal visits, began to send a substitute)--and the price was pushed up to $31.76, to $31.82. Thus was inaugurated Franklin Roosevelt's new policy (TIME, Oct. 30) of having the U. S. set its own price on gold--and dollars.

How Mr. Jones & friends fixed the price, only they and God knew. Mr. Acheson had cable reports every morning telling the latest news of foreign exchange markets. Presumably they telephoned the President at the White House to get approval of their price-fixings, but on what principle they fixed their premium above the world price remained a deep secret.

What Price Dollars? Until last March there were by law 25.8 grains of gold 9 10 fine in a dollar. On that basis an ounce of gold made $20.67 dollars and $20.67 was therefore the price that the Government always paid for an ounce of gold. Since then the way of figuring the gold value of a dollar has been to take the exchange value of the dollar in relation to francs or some other gold currency and figure what percentage the dollar has depreciated. Thus the gold value of the dollar fell steadily all summer until it reached 64% (or 64-c-). Fortnight ago it bounced back to 72-c- and then after the announcement of the President's new policy began to fall. The day before Messrs. Jones, Morgenthau and Acheson set R. F. C.'s price on gold, the dollar slipped to 66.88-c-.

But the first R. F. C. price on gold was $31.36 an ounce. On that basis the value of the dollar in gold (calculated by dividing the par price, $20.67; by the actual price, $31.36) was 65. 91-c- -- or 1.12-c- less than the exchange price. On successive days as the R. F. C. boosted its price for gold its valuation of the dollar fell to 65.54-c- to 65. 08-c- to 64.96-c-.

The exchange value of the dollar did not follow the R. F. C. value down. It wandered around at levels of from 66.25-c- to 67.78-c---about 2-c- higher than the R. F. C. Thus two gold values for the dollar existed side by side, one fixed by the open market, the other by Mr. Jones & colleagues. That was disconcerting.

But neither of these values of the dollar worried Mr. Roosevelt so much as still a third value--the value of the dollar not in gold but in purchasing power. The latest figures of the Department of Labor's wholesale commodity price index showed that the purchasing power of the dollar (as compared to 1926) was $1.42, up 1 1/2-c- from the week before. This was the figure that Mr. Roosevelt really wanted to bring down. All his tinkering with the gold value of the dollar was merely in hope of bringing down its value in commodities--in other words to send com modity prices up just as the R. F. C. undertook last week to send gold prices up.

Results. As a price-boosting measure the R. F. C.'s new gold prices had little immediate effect on the stockmarket. Stocks, after their first bounce, remained firm, gained little. Grain prices moved upward but apparently more because the Government was threatening to buy more grain and to peg prices by lending farmers 50-c- a bushel on corn (see p. 17).

One big result, however, was another boom in the gold mining business. In Denver the U. S. Mint received $416,000 in gold in two days; in San Francisco the mint received $2,225,000, much of it from Manila. These receipts are largely the result of increased operations since Sep tember when the Mints boosted their price from $20.67 to the world price, around $30. That sent miners scurrying into the hills all over the West, brought back life to old mining towns that had been nearly dead for years. In Alaska the president of the Alaska College and School of Mines reported a rush of prospectors to take short winter courses in mining in anticipation of a boom in the Klondike when the weather moderates next spring.

Individual miners who go out with pans into stream beds did not seem likely to make big profits for they seldom mine more than $3 worth of gold a day. What is more, every time they take a batch of gold dust to the Mint they have to pay 50-c- to make an affidavit that they really dug the gold in such&such places. In practice many individual miners sell gold to storekeepers and other accommodating middlemen. Since middlemen have the cost and trouble of filling out affidavits of ori gin, they often as not give miners more than $16 to $18 an ounce, even recently when the Mint price was around $30. Big profits therefore are mostly reserved for big producers. Yet many big producers are taking the opportunity of working their poorer ores (which cannot be profit ably worked in ordinary times), thereby increasing their costs and cutting their possible margin of profit.

Second Stroke. Disappointed that price fixing of domestic gold had no apparent result even on the foreign exchange value of the dollar, the President summoned Governor Black of the Federal Reserve Board, Governor Harrison of the New York Reserve Bank, Fred I. Kent, foreign exchange expert, Professor James Harvey Rogers of Yale, and Professor George F. ("Rubber Dollar") Warren of Cornell along with Mr. Jones and colleagues and other economic advisers to a Sunday afternoon conference at the White House. From it issued announcement, foreshadowed fortnight ago in the President's radio speech, that the R. F. C. would begin buying gold abroad. To buy gold it would have to sell dollars, thereby tending to force exchange value of the dollar down toward the level of the R. F. C. dollar. Unable to down the dollar on its home grounds, Mr. Jones and friends were going to wrestle it in the world arena.

Next morning Europe was agog. Since if one currency goes down in foreign exchange, all others go up relatively, the President's announcement carried an implied threat of a currency war--with the R. F. C. fighting Britain's equalization fund, and France perhaps leaving the gold standard in order to compete. Washington hinted, however, that the Administration in its gold purchases intended to play ball with the Bank of England, would not tinker so much with dollar exchange as to upset England's plans for sterling exchange. In a twitter the financial world waited as it had done a week before to learn the important point: how and how far the Administration intended to execute its new policy.

Immediate result of the announcement was that the exchange value of the dollar slumped to 65.44-c- which compared with the R. F. C.'s value of 64.67-c- (resulting from a fourth successive increase in the price of gold). Stocks and grains, however, failed to rally, actually slumped after the new announcement. The R. F. C.'s new policy gave President Roosevelt potential control over the foreign exchange value of the dollar, but many an economist wondered whether it would give him any direct help in lowering the more important commodity value of the dollar in the near future.

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