DOLLAR INFLATION

Hokitika Guardian, 23 November 1933, Page 5

DOLLAR INFLATION

AMERICAN POLICY TREASURY ADVISER OPPOSED. * United Press Association—_B y Eleetru J oiogiapn—Lopyngfl l, WASHINGTON, November 21. Mr 0. M. VV. Sprague has resigned as special adviser to the Treasury. "There is no defence- from a tirnt into unrestrained inflation, other tha n an aroused and organised public opinion. It is for the purpose or contributing, 'as I may, to sued a movement tout 1 sever connection with your administration,” he declared in iRs letter to Mr Roosevelt. Mr Sprague came to the Treasury from an important post in the Bank of England. For a considerable time, it was known tfiat lie did n-ot agree with tlie Roosevelt monetary policy. Mr (Sprague s resignation . was a curt and concise document. It is in the form of a letter to President

Roosevelt. After expressing Ins displeasure at the necessity of his leaving his post, fle chided the President for declining to discuss matters with him since tne fiasco over the stabilisation plans at the London Conference,

He-states he is unalterably opposed to the gold purchasing, for two reasons; firstly, that he believes if will prove ineffective in raising prices; and secondly, that it would so undermine Governiment credit as to make a repudiation plan or the issuing of flat money inevitable alternatives. He says: “I am convinced . the gold policy will prove effective in securing the speedy rise of prices. This is not because of any inability to depreciate the dollar. When a Government announces a determination to depreciate, its own currency, it can certainly be accomplished, and without the necessity of nc- . fluiring any considerable amounts of gold in other countries, since no sensible person - will desire, i n such cirl cums.ances, more of that currency, But a mere depreciation of currency will not bring a general rise in prices at a time when there is a large, excess in plant capacity and millions of unemployed wage earners. There is I nothing in the depreciation of the dol- : lar to induce an increased demand for materials or labour. A few prices will rise, particularly those commodities such as cotton, that are exported in large amounts. A few others may advance somewhat, bnt the advance will rest on an unstable foundation, since there is nothing in dollar depreciation to increase domestic consumption," Mr Sprague expressed the opinion that a higher price level would come only after a trade recovery, and would not produce it, He says: ‘‘Our immediate concern is to extricate ourselves from depression rather than to deal with the course of prices after that happy event," Discussing Government credit, he said: ‘‘The National' Recovery programme involves expenditure far in excess of the * current revenues. Certainly as much a s two 'billion dollars must- be borrowed during the remainder of the fiscal year. Government 'bonds are an unsatisfactory

investment at a time when a government is determined to depreciate its currency. Already many issues of Goernment securities have dropped below par. I believe you are faced with the alternative either of giving up your present policy, or meeting Government expenditures with additional paper money. You then, no doubt, will secure a, rise in prices, for you will be faced with a distrust in the currency that already' is manifest in a growing flight from the dollar.” He closes his letter with an announcement that, as a private citizen, he will continue to fight for soundmoney, saying: “I have now reached the conclusion that there is no defence from a drift into unrestrained inflation other that an aroused and organised public opinion. It is for the purpose of contributing, as I may, to such a movement that, with feelings of profound disappointment, I sever my connection with the ' administration.”

U.S. FISCAL POLICY “BATTLE.”

REASON FOR,.MR SPRAGUE’S ACT

NEW YORK, Nov. 21

The New York “Times” Washington correspondent says: “It was obvious to-night that the Administration fully realises Mr Sprague’s.resignation is the opening gun in a public battle over the President’s fiscal policy. For some time, in fact since the London Conference, Mr Sprague has been out of sympathy with President Roosevelt’s policy, and he wished to resign at first, though Treasurer Woodin and other spokesmen of the President urged him not to resign, or that, later, if he did resign, to refrain from publishing such a “blast” as he did to-day. These requests Mr Sprague chose t 0 ignore, and, in doing so, ho has obviously embarrassed the Administration. Heretofore, the opposition to the gold policy lias been muted and scattered. In view of the seriousness of the economic situation, and the recent break in G-overnmenfc credit, many opponents hesitated to speak their minds, or to attempt to organise opposition. Now Mr.Sprnmie has resigned for t-*»at very purpose, ami

this may fuse the cp iv ’>.sition, end perhaps In oo the Administration’s policy more into! the open. Otherwise, such opposition might not have ap-

peared in any formidable shape until Congress convenes in January'.

PRESIDENT’S ANSWER TO SPRAGUE.

(Received this day at 11 a.m.) NEW YORK, November 22

A message from Warm .Spring* (Georgia), states that Mr Roosevelt is going ahead with his United States dollar revaluation programme, and is leaving the issue with the acting-Secretary (Mr. Morgenthau), while he continues his vacation.

This i s accepted here' a s the President’s. answer to the resignation of Mr Sprague, and his proposal to organised movement against the administration of the monetary programme.

Mr Stephen 'l'. Early, the President’s secretary, replying to questions, said that Mr Sprague’s action would not affect the. monetary programme. Mr Sprague had not been seen in the President’s monetary conferences since the London Economic Corerence.