Washington, November 17, 1933.

Although President Roosevelt has been conferring with some of the conservative members of the Democratic party like Bernard M. Baruch and Alfred E. Smith, the new deal is going ahead full steam with no sign of any abatement of the gold policy, which has become such a factor of unsettlement in the world of business and finance.

There is reason to believe that the President would like to reassure capital that it has nothing to fear, or rather that its fears as expressed in the recent flight of money abroad are groundless, but the difficulty is that anything said publicly about monetary policy may reveal the purposes of the government as to ultimate stabilization and the administration does not feel the price level has risen sufficiently to stabilize.

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What has really brought matters to a head is the serious situation in the market for government securities. The whole administration program may be affected by the weakness in government credit. So it is earnestly desired by the administration that such support for the market for government securities as can be set up at this time shall be given. The Federal Reserve System might continue to buy government securities or some assurance may be given with respect to the inflationary powers which Congress bestowed on the executive as to the issuance of $3,000,000,000 of greenbacks.

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Thus far the President's friends here have insisted that he does not intend to issue the greenbacks. It seems certain that inflation of that kind will not be attempted. But the problem of financing future needs of the government during this fiscal year will raise the question of how more issues can be floated when the present market for government bonds has been depressed.

Since Secretary Woodin had not been on the job here, the impression gained ground that Mr. Acheson's point of view was being reversed. Under the circumstances any undersecretary of the Treasury or any government official with any degree of pride in his position would not wish to stay in office. Heretofore all the undersecretaries of the Treasury under Republican and Democratic administrations have been proud of their handling of government security issues.

Unless something is done to rehabilitate the position of the Treasury with the investing public, the chances of converting the immense floating debt of short time certificates into long term bonds are not bright. The Treasury made one slip last spring when it offered bonds redeemable in gold and the government repudiated this offer. This has not been forgiven, but investors have been disposed to regard it as an act of Congress rather than of an executive department and dictated by the emergency arising out of the impounding of gold during the bank holiday. A second instance of turnabout face is not so easy to defend. The withdrawal of Mr. Acheson serves to emphasize the perplexities that confront his successor. In fact the Treasury of the United States will have to get some help from President Roosevelt by way of assurances and pledges if future government securities are not to be driven downward in the markets of the world and if a way is to be found to get money for the government to carry on public works program without just turning on the printing presses.

Should stabilization be announced and a return to a gold basis authoritatively forecast, there would be an instantaneous change for the better. Even an issue of $3,000,000,000 or more of bonds would be accepted as within the government's credit capacity for the profit on gold held by the Treasury would enable the Federal Government to issue large sums of money which would have back of it a metallic reserve instead of an empty promise.

While this would be inflation in a sense, it would be easier to defend and probably would not result in the psychology of alarm which has surrounded the printing press idea