THE YEARS since 1929 have witnessed unpredictable changes In the production, distribution and use of gold. Today the United States, Great Britain and some other countries find themselves with actually too much gold. The world's vastly expanded and revalued stock of the metal is more than ample but it is still very unevenly distributed. Some countries still have far too little gold to enable them to link their currencies to the metal. These countries, to be sure, have serious monetary problems; but a surplus of gold is not one of them. Here, however, the surplus is a distinct problem.

The changed position of the "haves" and the "have nots" is illustrated, for example, in the figures representing the gold reserves of the government and central banking system In Germany and the United States. Before the war, in 1913, Germany's centralized gold stock was worth $279,000,000. In 1929 it was worth $544,000,000, and in May, 1937, $23,000,000. In the case of the United States the corresponding figures were $1,290,000,000, $3,900,000,000 and $12,025,000,000. Thus, Germany's holdings today are not even 10 per cent of the prewar figure. and barely 4 per cent of the 1929 total. Our own stock, on the contrary, is almost 10 times as large as it was in 1913 and more than three times the value of our holdings in prosperous 1929. Taking the world as a whole, in 52 countries the gold reserve Increased from $4,071,000,000 in 1913 to $10,168,000,000 In 1929 and $23,496,000,000 last May.

New Value Of Gold Stimulates Production.

WHILE it is true that these figures reflect a tremendous increase in gold production by mines since the advent of the depression, the principal change reflected in them is the revaluation of gold through currency devaluation. A cut of 41 per cent in the content of the gold dollar meant a 69 per cent increase in the value of gold stocks. Secondly, the swollen reserves of the United States and other countries reflect the fact that gold coin has been nationalized and has disappeared from hand-to-hand circulation. Such gold now appears in Treasury stocks. The holdings of Occidental governments, moreover, lave been swelled by a large volume of the metal dehoarded in India, as well as by gold jewelry and ornaments which found their way to the melting pot in Europe and America during the depression.

The United States increased the official price of gold by about 69 per cent in 1933-34. Different countries followed different policies in this respect Taking the countries of the world together, and allowing for differences in population, the average price of gold is now some 85 per cent higher than it was in 1929, according to the Bank for International Settlements.

Under the stimulus it is not surprising that mining, already benefited by depression-reduced costs, was greatly activated. What was previously being thrown aside as waste rock has in many instances become valuable ore, simply because the price of gold has !seen raised horn $20.67 per ounce to $35. In 1936 the world's actual gold production was 80 per cent greater than the average of 1926-29, and 131/2 per cent larger than the 1935 output In a brief time the world's annual gold output will be twice the weight of, and over 31/2 times the value of that ot 1929.

The United States produces less than one-eighth of the world's total output. If we had only our own output to absorb, the Treasury would have no gold problem. Since 1929 the increase in the value of Ills country's centralized stock has been 60 per cent greater than all the new gold mined throughout the world. Today the Untied States holds more gold than is held in the treasuries and banks of all other countries of the world combined. Our stock is still increasing at a current rate of nearly $2,000,000,000 per annum.

From January 30, 1934—when the depreciation of the dollar was halted — until now, over $5,333,000,000 of gold have come to the Treasury, or about $49 of new gold for every man, woman and child in the country. As a result of this inflow from abroad, and from domestic mines, melted jewelry, etc., the Treasury today actually holds, almost twice as many dollars in gold as there is currency in the pockets of the people.

Treasury Owns More Than Currency Could Buy.

TO PUT IT in another way, if the Treasury were suddenly to offer its gold for sale, the people of the country—individuals, banks, business houses, etc.—do not have in their pockets and vaults enough currency to buy much more than half the yellow hoard. Behind every cent, every nickel, dime, silver certificate. Federal Reserve note, etc., in circulation, the Treasury holds enough gold to redeem it almost twice over; only, Americans cannot any longer convert their currency into gold. "Ay, there's the rub;" and, since this Nation is on the whole content to use inconvertible currency, what is the need of holding, and particularly of increasing, so large a gold stock at the rate of nearly $2,000,000,000 per annum?

The obvious answer is that there It no need to do so. And because there is no need the world of gold miners and gold holders are afraid we may decide to alter our national policy of paying $35 per ounce for all the gold anyone chooses to send to our shores for sale. It is feared that the Administration may decide to pay something. leas than $35, or perhaps stop hying imported gold altogether. After all, the 3-year-old policy of paying $35 per ounce has been officially described as "on a 24- hour basis." It is not unchangeable. Therefore gold producers are concerned and gold securities are weak on ,the stock exchange.
When the United Stales buys foreign gold, the sellers of the metal receive American funds which, in the last analysis, must be spent or Invested here. In other swords, we do not get gold for nothing; we give up to foreigners real wealth in exchange for it. We give up the products of our labor and of our soil for a metal whose usefulness to us under existing conditions is only exceeded by that of the completely useless silver for which the Treasury still continues to pay foreigners hundreds of thousands of dollars every week of the year.

Anomaly Of Policy Not Enough For Change.

ON, THE FACE of it, the process of offering $35 per ounce for metal newly dug out of the ground in Africa, Canada, Mexico, the U. S. S. R., Australia, etc., only to replace it, "sterilized," in the ground at Fort Knox, Ky., would certainly strike a visitor from Mars as unintelligent. The latter adjective, in fact, would be used by many who hail from less-distant parts than Mars. The mere fact that it is unintelligent or us to keep buying gold is, however, unlikely of itself to lead to a change in policy. More important, perhaps, is the matter of the inconvenience to the Treasury as a result of the gold sterilization policy it voluntarily inaugurated last December.

Under this policy, unlike the previous system, new incoming gold is kept out of the monetary and , credit system. Instead of finding itsway to the "credit base" and thus increasing the likelihood of Inflation, as it did prior to last December, now it is bought up by the Treasury and, as it were, is put in cold storage. The Treasury was, of course, already running a heavy deficit. Having, there/ore, no stir- plus of its own with which to buy the imported gold, and being unwilling to have the latter automatically become new money by issuing gold certificates for the meta!, the Government has been forced to borrow the necessary cash from the public.

In other words, since December 21, 1936, gold sterilization has been causing our public debt to grow at the rate of almost $2,000,000,000 per per annum more than would otherwise have been the case. It is one thing for the Government to go Into debt in order to give PWA Jobs to unemployed Americans, It is quite another thing to do so when the only benefit goes to the workers in foreign mines and steamships.

Any Change Certain To Have Disadvantages.

WHY SHOULD we go on subsidizing gold and sliver miners and their governments in South Africa. Mexico, the U. S. S. R., etc.? Should the Treasury abandon the sterilization policy? Should we, moreover, drop the price of gold until foreign bullion ceases to find our market attractive? Or should we stick to our present policy regardless of its obvious disadvantages?

These questions cannot be answered categorically. Every change in our current policy since 1932 has had undesirable effects, and any policy now adopted, even one, involving no change. would have disadvantages. Opinion is divided as to what our gold policy henceforth should be.

First, as to sterilization of new gold, this Treasury policy is designed to deal only with the gold inflow after it has taken place. It attempts to counteract the effects of a disease without eliminating the germ causing it. If new gold is not to be kept out of the credit base by sterilization, as is now being dine, the remaining alternatives are to permit it to enter the base, as it did before last December, and thus increase the pressure toward easier money and price rises; or permit it to enter the credit base, but increase the present legal requirements as to bank reserves. The latter course would have serious disadvantages, particularly since it might drive banks out of the Federal Reserve System. As against "a" or "b," the present policy of sterilization appears to be the lesser evil, as a palliative.

Sentiment Dividend On Wisest Procedure.

SECONDLY, as to the more fundamental policy on the price of gold. opinion is sharply divided, even among those who in 1933 most 'disagreed with the devaluation propaganda of the Committee for the Nation. Some would lower the price. Others, for different reasons, would refrain from doing so.

Three possible policies suggest themselves—(1) raising, (2) lowering, (3) maintaining the present price of gold. In certain farm and inflation circles there is still a sentiment in favor of a higher price for gold; but this element is not now in the ascendency. There are many, including a large proportion of economists, who recommend lowering the price of gold. These, In other words, favor an increase in the value of the dollar in terms of gold.
This group is divided into sub-groups of which one would have the United States discontinue its present artificial price of gold and permit the dollar automatically to find its true level among the world's currencies before again attempting stabilization. A second sub-group would have the price of gold lowered simultaneously here and abroad by international agreement. Under this plan, stability of international exchange rates need not be disturbed, yet the bonus to gold producers would be eliminated, A third sub-group favoring lowering the price would establish a free gold market and not peg the price of gold at all. In other words, this group would have the United States adopt a system similar to that of Great Britain today.

The opponents of any change in the present $35 price of gold include not only the groups who originally favored abandonment of the old $20.67 price and devaluation, but also not a few anti-inflationists who vigorously opposed abandonment of the gold standard in 1933.

The opinion that a lower gold price would mean lower commodity prices its, in fact, rather generally held in this country. This fact in itself would probably tend to assure the deflationary effects alluded to, should the price of gold be lowered. Under the circumstances, a lower price of gold, whether by international or unilateral action, does not appear likely in the near future. It would require considerable public education.

World Would Resent Limit On Production.

IT WOULD BE only logical to seek a curtailment of mine production, so largely centered in the British Empire. But if the gold producing countries show no willingness to limit or absorb their own output, there is no good reason why we should take it indefinitely. Nor Is there any reason why we should give any concession in exchange for a restriction of production by minIng countries. It is doubtful, however, whether such countries would voluntarily impose a restriction on mining sufficient to solve America's gold problem. One very great difficulty would be to get the U. S. S. R. —already the world's second largest gold producer—to slow down production.

In view of the fact that this country has more gold than It needs and other countries have too little, it would seem logical for this country to shut its market to foreign gold, temporarily. It would further seem logical for foreign countries poor in gold reserves to arrange to exchange their surplus products for American, South African and Russian gold. If economic forces were , permitted free play, the removal of American and British bids from the world market at the prevailing price would result in a rise in the dollar and the pound sterling in , terms of gold and other currencies.
In countries holding little monetary gold today—Germany, for example—the dearness of the dollar and the pound would tend to make it more attractive for gold producers in South Africa and the U. S. S. R. Ii send their product to Germany, etc.., for sale, using the proceeds in. Germany for needed supplies. In this way gold stocks would gradually tend to be built up outside of the dollar-sterling area. The United States could. while leaving the present selling price for gold unchanged at $35 entirely embargo gold imports until further notice and, as a collateral measure, simultaneously attempt to lessen capital imports by taxation or otherwise. It could, moreover, take other steps at home designed to counteract any tendency of prices to sag as a result of public psychological reaction to the gold policy.

At present no change in the $35 price appears likely. The Administration, Congress and the public are indisposed to experiment with a possibly deflationary measure at this particular time, The problem of the gold surplus and the related problem of "hot money" (the inflow of foreign capital) are serious, but not vital. In most parts of the country these problems. If recognized at all as problems, are not understood. Unless the problem becomes critical, or unless commodity prices give signs of soaring out of control, nothing is likely to be done to alter the present price of gold in the United States.