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ESSAYS IN PERSUASION

PART

is partly, though perhaps only temporarily,reversed;—which, in itself, is one reason forcaution.

What is going to happen next? There aretwo leading alternatives. It may be that theFederal Reserve Board will come to the conclu-sion that the incipient boom conditions in theUnited States are getting dangerous, and willtake the position firmly in hand, just as they didtwo years ago. This, almost certainly, is whatthe Board ought to do. In this event, thesituation would be back again very nearly whereit was eighteen months ago, and we should befaced, as we were then, with the alternative ofrelatively steady sterling prices with the dollarexchange below parity, or of stern Deflation inthe effort to keep exchange at parity. A pre-mature announcement of the removal of theembargo on the free export of gold would com-mit us in advance to the latter alternative,—thealternative which we deliberately rejected twoyears ago. This is what the fanatics desire.But with our unemployment figures what theystill are, it would not be wise.

The other alternative is that the FederalReserve Board will allow matters to pursue theirpresent course, in which event we may expectthat dollar prices will advance a good dealfurther. During part of 1924 the Board ’sopen-market policy was decidedly inflationary,and has been largely responsible for the sharprise of prices already experienced. At thepresent moment their policy is more cautious;