People's Pilot, Volume 3, Number 45, Rensselaer, Jasper County, 27 April 1894 — A FINANCIAL PROBLEM. [ARTICLE]

A FINANCIAL PROBLEM.

Can the United States or Any Other Debtor Nation Maintain the Single Gold Standard? In order to maintain the single gold standard in any country there must be kept constantly on hand gold in some proportion to the currency to be redeemed. Assuming that the amount now in this country is sufficient to secure at all times prompt redemption in gold of all other forms of money, then, under these conditions, if the United States, or the people of the United States, owed nothing to other countries and other countries owed the United States nothing, it would only be necessary for us to sell commodities enough to pay for what we buy elsewhere to keep even with other countries. To be able to do this, however, prices of the commodities we sell must be as low in the United States as anywhere else, otherwise we could not sell enough to pay for what we imported. In case exports in this way’ are made to balance imports, no gold would have to be transferred either way, and there would be no disturbance in monetary conditions. But, if we fail to sell commodities enough to pay for what we buy abroad, then gold must be transferred to cover the. difference; on the other hand, if the balance be in our favor, then gold would come to us. U nder these conditions all that would be necessary to enable us to compete on even terms with other countries, would be to keep prices of commodities so dealt in at the international level of prices, by keeping the money volume properly restricted; otherwise the volume of money would be automatically reduced by the exportation of gold. But take the situation as it actually exists between England and the United States, or between England and India. England has invested from ten to twelve thousand million dollars in other countries, the income from

which amounts probably to not less than $500,000,000 annually, which is more than the combined value of our entire wheat and cotton crops for 1893. j The United States, on the other hand, i according to conservative estimates, i owes to other countries, mostly to En- , gland, to be paid annually as interest, i $200,000,000 to $250,000,000 That is. in ! order not to be obliged to part with gold to settle balances, we must not ! only sell commodities enough to [ pay for what we buy, but to bay $200,j 000,000 to $250,000,000 interest on what we owe other countries besides In or- , der to do this, prices in this country must not only come down to the international level of prices; but must go enough below that level to induce the rest of the world to buy of us $200,000, - 000 to $258,000,000 worth of commodities more than we buy of the rest of the world. Nor can tariffs materially change these conditions. It is admitted, however, that to the extent a tariff operates to check imports, it will tend to reduce the amount to be paid abroad; but if it operates to raise prices of the goods we export, and thereby to check exports, then it will, in so far, tend to neutralize the effect of a check on imports Under these conditions, it will be seen how futile must be the attempt to keep up prices by currency or credit inflations Such devices will only expedite the expulsion of gold by making it impossible to pay what we owe with commodities, and as gold is exported a violent contraction of credit always sets in, followed by a disastrous collapse of prices Now turn to England, a creditor nation, with an annual income of $500,000,000; she may import $500,000,000 worth of commodities more than she exports without having to transfer an ounce of gold to settle balances It is not necessary, therefore, for prices of commodities, internationally dealt in. to be kept at as low a level in England as in other countries She does not need to sell as much as she buys and never expects to. Individuals may and do suffer there as here, but as a nation England stands on a very different ground from that on which the United States stand. Nor is that all. England controls India absolutely, and can play imports from India against imports from the United States, and thereby keep down prices in both countries. This is exactly what England is now doing, especially with wheat and cotton.

Of course, in lieu of transferring gold to pay interest, or in settlement of balances, we can sell bonds as long as our creditors will take them. In other words, we can give new notes for interest due, as long as our creditors will be satisfied with that kind of payment, and that is really what we have been doing to a very large extent for many years. But that road leads necessarily ,to bankruptcy, and the longer it is followed the worse our condition becomes. The conclusion, therefore, is irresistible that no nation largely in debt can permanently maintain the single gold standard. And historically no debtor nation has ever been able to do so. Italy a few years ago bought with bonds, on which she now pays gold interest. $200,090,003 in gold; but in a few years it was all gone, and gold is now at a premium in Italy of from 15 to 20 per cent Indeed, even her coined silver has largely gone to France, and she is left at last with only inconvertible paper money. So it is with Spain, Portugal, Greece, and so with Australia and every South American state that has undertaken to establish the gold standard; and so it will be with Austria when she liberates her gold, and the United States will prove no exception if we pursue long enough the path we have so foolishly entered upon. Under the bimetallic standard, with silver widely disseminated among the people, and constituting a principal part of the general supply of currency, the exportation of metal from accumulated stores to settle balances, would have little effect on the money volume as a whole. If gold left us at times, silver would always be at hand to take its place as basic money. But the difference is measureless if silver itself, or certificates representing it, is to be redeemed in gold, as must be the case with the single gold standard.—A. J. Warner, in N. Y. Sun.