IN 1923 certain British economists, in characteristic half-serious half-humorous vein, proposed that, in the process of paying reparations and inter-allied debts, Europe should first send her monetary gold to the United States and then turn her back on the gold standard once and for all, leaving this country, quite literally, holding the bag. In the relatively tranquil period that followed, this suggestion, even as an economist's whimsy, fell into the limbo of forgotten things. Today, however, it is becoming altogether too real. The United States is, in consequence, confronted with a gold problem which almost defies solution.
In 1923 the total visible monetary gold stocks of the world amounted to eight and a half billion dollars, of which we possessed something less than four billion, or 45 percent. At the present time American holdings are approaching fifteen billion dollars -- approximately 60 percent of the world's visible stock of monetary gold. It is true that the present dollars are lighter in gold content than the dollars of fifteen years ago; but they represent more, not less, of goods, services and days' labor. In the past fifteen years we have sunk in increments to our gold supply a much greater value of goods, services, and whatever else nations give up in acquiring gold, than the equivalent of the stocks of monetary gold of all foreign countries a decade and a half ago.
We should certainly have been better off if the British economists' little joke had been realized before it grew stale and then grim. If, in 1923, our debtors on war account had sent us their gold supplies in part payment of their debt, we should, in effect, have obtained the gold for nothing,[i] rather than at the heavy cost at which it has in fact been acquired.
In 1923, of course, we were all concerned about the restoration of the international gold standard. This would probably have been precluded if the United States had then acquired the great bulk of the world's monetary stocks of gold.
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