148 POST-WAR BANKING POLICY 
external price level should fall in consequence of a 
shortage of gold, America would supply the defici- 
ency. The movement of gold would continue until 
the price levels inside and outside America were 
brought once more into equilibrium. Although 
gold is still the nominal basis of most currencies, 
the real determinant of movements in the general 
world level of prices is thus the purchasing power 
of the dollar. The conclusion therefore is forced 
upon us that in a very real sense the world is on a 
dollar standard. 
THE OUTLOOK 
Such is the position as I see it to-day, and I am 
naturally led to ask how long it is likely to con- 
tinue. America is able to control the world price 
level because of two conditions. In the first 
place, her gold stocks are so great that she can 
afford to lose large quantities without running any 
risk of the gold reserve falling below the legal mini- 
mum; in the second place, her central banking 
system is so constituted that, given her great 
wealth, she can absorb large quantities of gold and 
at the same time deprive it of its credit creating 
powers. In a word, America is rich enough either 
to lose gold or to gain it. She holds now one-half 
the total monetary gold of the world. Moreover, 
her creditor position constitutes a permanent 
magnet for gold. Her debtors must pay, and, if they 
can find no other way, they must pay in gold. The 
only condition, as far as I can judge, under which 
America might be drained of her gold surplus is 
that she should continuously make foreign loans 
beyond her true capacity to lend. That she will 
lend excessively at times is quite probable—there 
are indications indeed that she ‘has done so re-