Washington, Oct. 7.

THE Government of the United States is about to make a profit of about $2,000,000,000 and the money is coming from the American people, who patriotically turned in their gold and gold certificates last March. This is the capital levy or contribution which the nonhoarding public will make if the devaluation of the gold content of the dollar goes through as planned, namely on a basis of a discount of one-third from its previous par value.

There's nearly four billion dollars of gold locked up in the twelve Federal Reserve banks of the country and their branches. At the moment it belongs to the stockholders of those banks, which, of course, are owned in turn by the member banks. But it is inconceivable that banks would be permitted to make the immense gold profit which will accrue to holders of gold, for this would mean enabling one group of citizens to profit at the expense of all the rest. So the plan that no doubt will be followed by the Government here will be that which has been pursued in other countries when devaluation has occurred--namely, virtual confiscation or taxation of the profit.

The profit arises from the fact that gold has always been valued at $20.67 an ounce; but if the amount of gold content in every dollar is reduced by one-third and yet the unit of value is called a dollar, then less gold will be used for every dollar or, to put it another way, the gold supply will be converted into fifty per cent more dollars. The gold supply locked up is in the neighborhood of four billion dollars. Some of this belongs to the Treasury anyway, but most of it belongs to the American people who deposited it in banks and obtained lawful currency certificates in exchange.

Gold today is valued at close to $30 an ounce in terms of the British pound or the gold franc. This is in anticipation of the devaluation process. If of course the American Government decides to devalue the gold content of the dollar not by a third but by one-half, the price of an ounce of gold would jump to about $40 in terms of the new dollar. Thus the four billions of gold supply would be worth eight billions of dollars and the Government would make a four billion profit.

Since the custom heretofore has been to issue currency based upon a reserve of 40 per cent of gold, so that approximately two and a half times the amount of gold reserve could be issued in the form of gold certificates or other currency redeemable in gold, the increase of two billions of gold to the account of the Treasury of the United States would make it possible to issue about $6,000,000,000 of new currency on a metal basis, namely, on a gold reserve. Congress authorized the President to issue greenbacks up to $3,000,000,000, which would not have any metallic reserve behind them, so it would be difficult for the new money issued with that gold profit behind it to be called true inflation.

The Government heretofore has by means of a franchise tax been taking all the profits of the twelve Federal Reserve banks in excess of a 6 per cent dividend, but Congress at the last session repealed the franchise tax so that the member banks could get the profits. So as the law stands today the profits in any gold rise belong to the member banks of the Federal Reserve system.

Knowing that the Government could restore the franchise tax, it is possible of course for the Federal Reserve banks to agree voluntarily to surrender the profit in gold to the Treasury and thus avoid litigation.

The legal points involved, however, are not by any means easy to resolve. If actual devaluation comes before Congress can specifically deal with the profit accruing to the Federal Reserve banks, then a law making retroactive the profit on gold might be subject to attack as unconstitutional. A suit might arise on the part of a member bank to restrain a Federal Reserve bank from surrendering to the Treasury the profit on gold.

The present quotations on the dollar in terms of the pound or franc show the dollar to be worth about 66 cents. If devaluation ratifies the existing level, then the total gold profit will be about two billion. It is not known how much the gold hoarders retain, but it is believed they have about $200,000,000 and will make a profit of $100,000,000. The Government will try to take it from them by taxation.

As for those who were able to convey their money to Europe and the speculators in gold exchange since March who have been buying Swiss francs and bonds as the dollar has been going down from par to 66 cents, they will make enormous profits, too. The speculative element always does. The patriot who turned in his gold last March will not. That's the usual history of tinkering with the currency and the unit of value