Apology for the Dollar

Last week when Secretary Morgenthau announced that he would review the New Deal's monetary policy by radio, financial papers worked themselves up into a lather of anticipation: he was speaking to pave the way for more dollar devaluation, for remonetization of silver, he would make "an important announcement."

He spoke and the U. S. heard, not of events to come, but a belligerent defense of steps already taken, a rebellious defiance of foreign critics and domestic detractors. His defense on major points:

Stabilization. "The world should know that when it is ready to seek foreign exchange stabilization, Washington will not be an obstacle.

"Why should we be singled out and admonished that the moral duty to restore order is primarily ours?

"We revalued our currency no more than was necessary and we can go either way. Our hands are untied."

The Roosevelt Dollar. "First, you have an absolutely sound dollar.

"Second, the monetary policy of this Administration rescued us from chaos; held the fort through the most trying period of our recovery program; and is now the spearhead as we advance steadily toward our goal.

"Third, of the great trading nations that revalued their currencies, we were the last, until quite recently, when Belgium joined us."

Competitive Devaluation. "So far from engaging in a competitive devaluation race with other nations, we hold out to them a currency of such steadiness that the normal tendency may very well be for the rest of the world to move gradually toward practical exchange stabilization. If that can be achieved, the final step should come easily and almost of its own accord."

Foreign Trade. "In estimating the future of our foreign trade in relation to our monetary policy, we may as well face the question whether we wish to sell abroad vast quantities of goods that buyers cannot pay for, unless we lend them the money. Of course if we want more paper there are plenty of international bankers to arrange the details. We felt rich on that paper during the roaring twenties. Now we know better.

"In place of paper, under the operation of our new monetary policy, we have been receiving large shipments of gold and silver. Some of it came to settle trade balances, and some of it represents capital seeking refuge in our sound currency. Various economists will tell you that this policy is likely to end our foreign trade; that it first will strip the world of gold and then our foreign trade dies. But we are not stripping the world of gold. We have more gold than ever before, but the world supply of monetary gold is also increasing rapidly.

"Objection to our course is sometimes based upon the assertion that we would bring vast quantities of the world's gold and silver here, only to be locked up in the United States Treasury. The phrase commonly used is that the gold and silver thus become sterile. At least, however, it goes to swell our monetary reserves. Loans in default are not very good backing for currency; indeed they might, without undue asperity, be described as also sterile.

"If we must choose between the two, this Administration elects payment of international balances in monetary metals."

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