by John Brooks
The crisis had passed, or that crisis had. The dollar had escaped devaluation, and the international monetary mechanism was intact. Nor was the solution a particularly radical one; after all, gold had been on a two-price basis in 1960, before the gold pool had been formed. But the solution was a temporary, stopgap one, and the curtain was not down on the drama yet. Like Hamlet’s ghost, the pound, which had started the action, was offstage now. The principal actors onstage as summer approached were the Federal Reserve and the United States Treasury, doing what they could in a technical way to keep things on an even keel; the Congress, complacent with prosperity, preoccupied with coming elections, and therefore resistant to higher taxes and other uncomfortable retrenching measures (on the very afternoon of the London panic, the Senate Finance Committee had voted down an income-tax surcharge); and, finally, the President, calling for “a program of national austerity” to defend the dollar, yet at the same time carrying on at ever-increasing expense the Vietnam war, which had become as menacing to the health of America’s money as, in the view of many, it was to that of America’s soul. Ultimately, it appeared, the nation had just three possible economic courses: to somehow end the Vietnam war, root of the payments problem and therefore heart of the matter; to adopt a full wartime economy, with sky-high taxes, wage and price controls, and perhaps rationing; or to face forced devaluation of the dollar and perhaps a depression-breeding world monetary mess.
Looking beyond the Vietnam war and its incredibly broad worldwide monetary implications, the central bankers went on plugging away. Two weeks after the stopgap solution of the dollar crisis, those of the ten most powerful industrial countries met in Stockholm and agreed, with only France dissenting, on the gradual creation of a new international monetary unit to supplement gold as the bedrock underlying all currencies. It will consist (if action follows on resolution) of special drawing rights on the International Monetary Fund, available to nations in proportion to their existing reserve holdings. In bankers’ jargon the rights will be called S.D.R.’s; in popular jargon they were at once called paper gold. The success of the plan in achieving its ends—averting dollar devaluation, overcoming the world shortage of monetary gold, and thus postponing indefinitely the threatened mess—will depend on whether or not men and nations can somehow at last, in a triumph of reason, achieve what they have failed to achieve in almost four centuries of paper money: that is, to overcome one of the oldest and least rational of human traits, the lust for the look and feel of gold itself, and come to give truly equal value to a pledge written on a piece of paper. The answer to that question will come in the last act, and the outlook for a happy ending is not bright.
AS the last act was beginning to unfold—after the sterling devaluation but before the gold panic—I went down to Liberty Street and saw Coombs and Hayes. I found Coombs looking bone-tired but not sounding disheartened about three years spent largely in a losing cause. “I don’t see the fight for the pound as all having been in vain,” he said. “We gained those three years, and during that time the British put through a lot of internal measures to strengthen themselves. If they’d been forced to devalue in 1964, there’s a good chance that wage-and-price inflation would have eaten up any benefit they derived and put them back in the same old box. Also, over those three years there have been further gains in international monetary coöperation. Goodness knows what would have happened to the whole system with devaluation in 1964. Without that three-year international effort—that rearguard action, you might say—sterling might have collapsed in much greater disorder, with far more damaging repercussions than we’ve seen even now. Remember that, after all, our effort and the effort of the other central-banks wasn’t to hold up sterling for its own sake. It was to hold it up for the sake of preserving the system. And the system has survived.”
Hayes, on the surface, seemed exactly as he had when I last saw him, a year and a half earlier—as placid and unruffled as if he had been spending all that time studying up on Corfu. I asked him whether he was still living up to his principle of keeping bankers’ hours, and he replied, smiling very slightly, that the principle had long since yielded to expediency—that, as a time consumer, the 1967 sterling crisis had made the 1964 crisis seem like child’s play, and that the subsequent dollar crisis was turning out to be more of the same. A side benefit of the whole three-and-a-half-year affair, he said, was that its frequently excruciating melodrama had contributed something to Mrs. Hayes’ interest in banking, and even something, if not so much, to the position of business in Tom’s scale of values.
When Hayes spoke of the devaluation, however, I saw that his placidity was a mask. “Oh, I was disappointed, all right,” he said quietly. “After all, we worked like the devil to prevent it. And we nearly did. In my opinion, Britain could have got enough assistance from abroad to hold the rate. It could have been done without France. Britain chose to devalue. I think there’s a good chance that the devaluation will eventually be a success. And the gain for international coöperation is beyond question. Charlie Coombs and I could feel that at Frankfurt in November, at the gold-pool meeting—a sense everyone there had that now is the time to lock arms. But still …” Hayes paused, and when he spoke again his voice was full of such quiet force that I saw the devaluation through his eyes—not as just a severe professional reverse but as an ideal lost and an idol fallen. He said, “That day in November, here at the bank, when a courier brought me the top-secret British document informing us of the decision to devalue, I felt physically sick. Sterling would not be the same. It would never again command the same amount of faith around the world.”
Index
A. B. Dick Company, 145, 146, 147
Abadan refinery, 271
Account number, taxpayer, 90
Adrian H. Muller & Son, 245
Akron Beacon Journal, 304, 307
Alaska, 272
Allied Crude Vegetable Oil & Refining Co., 178, 179, 181
Allis-Chalmers Mfg. Co., 217, 218
American Bar Association, 312; taxation section of, 112
American Broadcasting Company, 156
American Education Publications, 156, 165
American Law Institute, 303
American Photocopy Co., 148
American Potash & Chemical Corp., 312
American Public Finance (Schultz & Harriss), 78
American Scholar, 162, 164
American Society of Corporate Secretaries, 278
American Telephone and Telegraph Co., 8, 9, 15–28, 278; contributions by, 154; stockholders’ meeting, 279–285
American Way in Taxation, The (Doris, ed.), 92
Anti-Intellectualism in American Life (Hofstadter), 108
Anti-Trust Division, Department of Justice, 268
Architecture, 315
Arkin, Frances, 282, 284
Arnold, Fortas & Porter, 94
Arrow Stores, 243
Arthur Young and Co., 291
Asbrink, Per, 358
Astor, John Jacob, 119
Atlantic Monthly, 11
Atomic Energy Commission, 250
Attapulgus Minerals & Chemicals Corp., 256, 257, 258
Auchincloss, Louis, 80
Australia, income tax in, 82
Austria, bank failure in, 338
Automobile dealers, 44, 71
Automotive News, 60, 65
Authors League of America, 109, 163
B. F. Goodrich Co., 297, 304, 306, 310
Bagehot, Walter, 317, 345
Bailey, Herbert S., Jr., 163
Balance of payments, 319, 322
Baldwin-Lima-Hamilton, 223
Bank failures, domino principle of, 338
Bank of International Settlements, 328, 329, 332, 364, 365
Bank of Austria, 338
Bank of Belgium, 362
Bank of England, 194, 316, 320–326, 333–375, 380
Bank of France, 316, 332, 360
Bank rate (Britain), 334, 335, 343, 347, 376, 377
Baring, Sir Evelyn, 342
Baring, George R. S. (see Cromer, 3rd Earl of)
Baring Brothers (London), 357
Barrett, Emerson P., 302
Barron’s, 156
Basel, Switzerland, 329, 332, 333, 334
Basic Systems, 156
Battelle Memorial Institute, 150–153, 168
Bazelon, David T., 78
Bear raids, 227, 328
Becker, Horace W., 169, 170
Belgium, tax collecting in, 88
Bell Telephone Co., 268
Berle, A. A., 276, 277, 285
Bicks, Robert A., 201, 202
Bid-rigging, 200
Big Business: A New Era (Lilienthal), 251, 267, 269
Bishop, Robert M., 177, 180–184, 187, 191
Black, Eugene R., 255
Black Thursday, N.Y. Stock Exchange, 18
Blessing, Karl, 358, 361
Blume, Neil L., 52
Board of Trade (Chicago), 178
Bonsal, Dudley J., 120, 132, 136–144
Bowers Stores, 243
Bradford, E. W., 238
Brand, Martha, 291
Breech, Ernest R., 27, 30, 32, 41, 53, 54
Bretton Woods agreement, 320, 322, 329, 340
Bridge, Roy A. O., 324
Bromberger, Allen, 265
Bromberger, Daniel, 265
Bromberger, Nancy, 265
Bromberger, Sylvain, 265, 266
Brown, George, 326, 335, 342
Brown, Roy A., 30, 32, 43, 52, 56, 63, 68, 73
Brunet, Jacques, 358
Brusati, Louis A., 287, 288
Buckingham, Doolittle & Burroughs, 306
Burch, John C, 246
Bureau of Applied Social Research, Columbia University, 35
Burens, George E., 213, 217, 218, 219
Burke, Clarence E., 217, 218
Business Week, 68, 278
Callaghan, James, 326, 335, 342, 345, 374, 375
Campbell, Alexander, 210
Canada: Currency credit to, 347; tax collecting in, 88
Canadian Institute of Mining and Metallurgy, 130
Canadian Shield, 121
Capital gains, 96, 101, 103; taxes on, 86, 87, 102
Caplin, Mortimer M., 88–97
Carbon paper, early use of, 147
Carli, Guido, 358
Carlson, Chester F., 150, 151, 153, 168
Carrier Corporation, 255
Cary, William L., 197
Cascade Pictures, 46
Case, Josephine Young, 292
Cauca Valley (Colombia), 250, 267
Central banking, 330, 331, 332
Ceylon, expenditure tax in, 115
Champion, George, 187
Charitable contributions, as tax deduction, 110
Charitable foundations, tax exemptions on, 109
Charyk, Joseph V., 295
Chase Manhattan Bank, 186, 187, 192, 193, 315
Chenoweth, Richard A., 306, 307
Chile, 272
Chrysler Corporation, 149
Churchill, Winston, 338
Clapp, Gordon R., 250, 270, 271
Clark, Harold E., 167, 168
Clayton, Richard H., 122–139, 143, 144
Clayton Antitrust Act (1914), 201
Cleveland, Grover, 84
Cleveland Plan of charitable contribution, 154
Coates, Francis G., 131–136, 140–143
Cohan, George M., 105
Cohan rule, 105, 108
Cohen, Sheldon S., 91–97
Collier’s, 255
Colombia, 250, 267, 272
Columbia University, 35
Commerce Clearing House, 107
Commodity futures, 178
Communication, problem of, 199–223
Communications Satellite Corp., 278, 293
Communist countries, income tax in, 88
Community property laws, 116
Conduct and Complaints Department N.Y. Stock Exchange, 189
Cone, Fairfax M., 43, 44
Confusion of Confusions (De la Vega), 2
Consolidated Edison, 278
Consumer Reports, 58, 59, 66
Consumers Union, 60
Continental central banks, 364
Continental Illinois National Bank & Trust Co., 189, 190, 191
Cooke, Morris, 267
Coombs, Charles A., 319, 323, 326, 328, 332–334, 341–354, 359, 361–372, 383, 386, 388
Copeland, Robert F. G., 48
Copiers, as opposed to duplicators, 147
“Copy” as “counterfeit,” 146
Copyright laws, 163, 164
Cordiner, Ralph J., 208, 210, 211, 215, 219, 221, 222, 223
Corner, game of, 224–248
Corporate pension plans, 103
Corporations, income taxes on, 86
Coyle, Frank J., 176, 177, 180, 189
Cranley, John J., 18
Crawford, David M., 131–139, 143, 144
Creditanstalt (Bank of Austria), 338
Cromer, 3rd Earl of, 324, 332, 335, 342–343, 357–361, 364–366, 373
Crooks, Richard M., 182, 183, 184, 198
Crusoe, Lewis D., 28
Currency devaluation, 321
Currency weakness, 321
Curtis Publishing Co., 126
Curzon, Lord, 271
Dallas, Alexander J., 83
Darke, Kenneth, 122–139
Darius, King of Persia, 270
Davis, Evelyn, 282–284, 290–295
De Angelis, Anthony, 179
De la Vega, Joseph, 2, 3, 4, 5, 6, 7, 8, 11, 13, 15, 22, 24
Depletion allowance on petroleum, 86, 96, 103, 104
Depreciation, as tax deduction, 103
Dessauer, John H., 165, 166, 167
Detroit Free Press, 58
Deutsche Bundesbank, 361, 364, 365
Devaluation, 321, 322; of pound sterling, 374, 376; by various countries, 379–380
Development & Resources Corp., 250, 267–275
Dial-A-Matic Autostat, 148
Diamond, Walter H., 88
Dick, C. Matthews, Jr., 146
Dick mimeograph, 148
Dillon, Douglas, 341, 342, 347, 362
Discount rate, Federal Reserve System, 385
Dividends, withholding of taxes on, 96
Dollars: gold exchangeability of, 320, 323; weakening of, 347, 382–388
Doris, Lillian, 92
Douglas, Paul H., 117
Dow-Jones average, 2
Dow-Jones News Service, 4, 13, 14, 15, 134
Doyle, Arthur W., 311
Doyle, J. C. (Larry), 45, 48, 61–64, 69, 72, 73
Drew, Daniel, 119
Dreyfus & Co., 18
Dreyfus Fund, 18
Dry writing, 152
Dutch Cookie Machine Co., 303
Duplicators, as opposed to copiers, 147
DuPont de Nemours & Co., E.I., 312
DuPont, Homsey & Co., 185
E. F. Hutton & Co., 132
E. I. duPont de Nemours & Co., 312
E. L. Bruce Company, 224
Eastman Kodak, 148, 150
Eberstadt, Ferdinand, 260
Ebtehaj, Abolhassen, 270
Economist, 365, 367, 373
Edgar Brothers, 258
Edison Mimeograph, 147
Edison, Thomas A., 145
Edsel automobile, 26–75
Effler, Carl, 299, 300, 302, 306
Eisenstein, Louis, 113
Electrical-manufacturing industry, price-fixing and bid-rigging in, 200
Electrophotography, 150
Ellis, Ridsdale, 309
Entertainment deductions, 104, 105, 106, 107
Erben, Henry V. B., 207–211, 221
ETC: A Review of General Semantics, 65
Eurodollars, 192
European countries, income tax in, 82
Excise taxes, 114
Expenditure ta
x, 115
“Expense Accounts 1963,” 107
Export-Import Bank loan, 347, 348, 349, 352
F. Eberstadt & Co., 257
Fairman, Francis, 207, 208
Fair-use doctrine, 164
Federal income tax, 76–117
Federal lotteries, 114
Federal Pacific Electric Co., 217
Federal Reserve Act, 347
Federal Reserve Bank, 329, 341
Federal Reserve Bank of New York, 314, 315
Federal Reserve Board, 316, 329
Federal Reserve standby credit, 347
Federal Reserve System, 316; discount rate, 385
Feiffer, Jules, 222
Feller, Max, 299, 301
Financial Committee of League of Nations, 329
First National City Bank, 186
Floor specialists, N.Y. Stock Exchange, 16
Fogarty, Charles F., 122–138
Foodelectric, 248
Fool’s gold, 121
Foote, Cone & Belding, 40, 42, 43, 59, 71
Forbes, Harland C., 278
Ford, Henry, II, 27, 30, 32, 41, 51, 54, 63
Ford Foundation, 67
Ford Motor Company, 26–75
Ford Motor Company, Ltd. (England), 73
Foreign Tax & Trade Briefs, 88
Fortune, 149, 153, 203
Forward Product Planning Committee, Ford Motor Co., 28
France: income tax in, 81, 82; tax collecting in, 88; value added tax in, 114
Frank, Walter N., 187
Funston, G. Keith, 181, 185–188, 191, 194–198
Galloway, Wayne, 300, 306
Ganey, J. Cullen, 202–205, 213, 217, 223
General Electric Co., 203–207, 212–214, 217, 221, 222, 278, 279, 286–289
General Foods, 72
Germany: bank failure in, 338; revaluation of currency in (1961), 322; value added tax in, 114
Gezon, L. B., 213, 214, 219
Ghana, 250, 272