Dollar Squeezing

Fortnight ago R. F. C. Chairman Jesse Jones boosted the price paid U. S. miners for gold, thereby squeezed the gold value of the dollar from 66.88-c- to 64.96-c-. But the foreign exchange value of the dollar remained over 66-c-. Last week, using the shiny new squeezer given him by President Roosevelt, authority to buy gold in the world market (TIME, Nov. 6), Mr. Jones using both hands not only squeezed the domestic gold value of the dollar to 62.94-c- but got the exchange value down to 64.81-c-. How much gold Mr. Jones had to buy in London and Paris to achieve this result was kept a dark secret.* He said the amount was substantial. On the mere threat of U. S. buying, the exchange value of the dollar had begun to shrink and the guess of most foreign observers was that not much had been bought or would be bought if the Bank of England and Bank of France were not to be angered. Results-- All this squeezing of the gold value of the dollar did not have any noticeable effect in reducing the more important domestic purchasing power of the dollar. Last week dollars did not buy quite so much in stocks or grains, for prices of both rose moderately, but the commodity value of the dollar, although it dropped i(f still stood at $1.41 by the Department of Labor's index--77-c- above the gold value. More immediate result of putting the Jones squeezers on the gold dollar was to cause the breakdown of Anglo-U. S. debt negotiations (see p. 9). It likewise aroused a wave of protest from sound money men. Long have they grumbled but until last week few of them have cared to put their names to protests against the Administration's policies.

American Legion, Said Edward Arthur Hayes, National Commander, to a rally of American Legionaries in Manhattan: "We want to know that the fellows who were maimed in the War and from whom a great deal has been taken in the way of benefits will be receiving a dollar that is worth a dollar and not 30 or 50-c- for that dollar."

New England Council. Its president, Henry D. Sharpe, wrote to Franklin Roosevelt concerning a questionnaire sent out on inflation: "Never in the history of this Council have we received so prompt or so unanimous an expression of opinion. . . ." Of 210 replies, 209 were against Inflation. Economists. Twelve professors of finance in Northwestern University, University of Chicago, University of Wisconsin, University of Michigan, Ohio State University and University of Illinois is sued a manifesto: "It is now assumed in Washington that the price of gold and the prices of other commodities move automatically in the same direction. . . . It is a sobering thought that the 1926 price level was based on a gold dollar of the old weight. . . . There is no point in insisting on a return to the old gold parity, but a scheme to depreciate the dollar to uncertain limits . . . does not inspire confidence. The peril of sheer greenbackism is real and not imaginary." Chamber of Commerce. At a special meeting dominated by chop-whiskered old Leonor Fresnel Loree, the New York State Chamber of Commerce solemnly resolved that "measures should be taken with the utmost promptness looking toward the restoration of a permanent gold standard in the U. S. . . . It is of the greatest im portance to business recovery that the Administration clearly and unequivocally announce that it will not adopt an automatic commodity dollar or a managed commodity dollar or similar currency experi- ments. . . ."* An amendment to substitute an endorsement of the President's policy was voted down with a roar of Nays. When Earl Harding, representing the inflationist Committee for the Nation, asserted that the resolution would antagonize "perhaps 75% of the population of the nation" the chambermen laughed. Mr. Loree, president of Delaware & Hudson R. R., old wise man of the sea of practical economics, took a $100 bill out of his pocket and held it up: "It says on the face of it that it is redeemable in gold on demand at the United States Treasury. Now it is a mere scrap of paper. We have violated that obligation just as flagrantly as Germany violated its treaty with Belgium." James Brown, president of the Chamber and partner of Manhattan's Brown Brothers, Harriman & Co., read a telegram from Professor Edwin Walter Kemmerer of Princeton, famed financial adviser to many nations: "I hope the Chamber of Commerce will recommend an early return to the gold standard, and an immediate commitment by the Government to do so. Our gold supply and credit situation are such as to render a prompt return to the gold standard entirely feasible. The danger of an uncontrolled inflation, which is already serious, increases with every day of governmental delay in announcing a definite stabilization plan." Gold Demand. In Washington, Halsey K. Davis filed a mandamus action in the District of Columbia Supreme Court alleging that on Oct. 25 he had demanded at the Treasury gold coin in payment for a $20 gold certificate and had been refused. He demanded that Secretary Woodin be ordered to pay him $20 in gold--of the old value--on the grounds that the first three sections of the banking act passed last March, and the executive orders issued under it, were in defiance of Article V (on Amendments) of the Constitution, were an improper delegation of the powers of Congress and deprived him of his property without due process of law. While these attacks by word and law were made last week on the President's monetary policy, he had comfort and support from other sources.

P: The Supreme Court of the District of Columbia decided that one of his emergency acts--declaration of the banking holiday last March--was legal and binding.

P: In an article published in the maga- zine of the Columbia School of Journalism Professor Edwin Robert Anderson Seligman of Columbia made the following points: ''That the depression is ending; "That, for the first time in history, recovery from the bottom of an industrial cycle is being speeded consciously and effectively; "That fear of uncontrolled inflation has little basis in fact; "That we are not on the way to Bolshevism, Fascism or any other form of autocracy, but; "That we are in the midst of a social revolution, within the framework of capitalism, which promises lasting benefits."

*Last week R. F. C. announced it had bought 66,000 oz. of gold from U. S. mines. The first $2,128,000 of R. F. C. debentures issued to pay for this gold were sold in the market at a discount amounting to an interest rate of .375% (compared to .22% on Treasury bills). *The Chamber also issued a pamphlet quoting without comment from two of Grover Cleveland's messages to Congress: "At times like the present, when the evils of unsound finance threaten us, the speculator may anticipate a harvest gathered from the misfortunes of others, the capitalist may protect himself by hoarding or may even find profit in the fluctuations of values; but the wage-earner--the first to be injured by a depreciated currency and the last to receive the benefit of its correction--is practically defenseless. He relies for work upon the ventures of confident and contented capital. ... He can neither prey on the misfortunes of others nor hoard his labor. . . . All history warns us against rash experiments which threaten violent changes in our monetary standard and the degradation of our currency. . . . Every unstable and fluctuating dollar fails as a basis of credit, and in its use begets gambling, speculation and undermines the foundations of honest enterprise."

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