GOLD PREMIUM IN THE UNITED STATES.

Dominion, Volume 1, Issue 47, 19 November 1907, Page 9

GOLD PREMIUM IN THE UNITED STATES.

Sir, —I see by to-day's paper, that the premium on gold in the United States has now increased to 3J per cent., or, in other words, the United Stated paper currency is at a discount: of.-Sd. £. " Considering that " the United ■ .States is, if not the wealthiest, certainly/ the second wealthiest nation .-in tho-world,- it- is a peouliarly significant ■'■■'fact. .' Nineperice in the £ on all vendible things sold-in the United States) forfohe year' would, lrtcait ft trcmehdouß sum. But the serious' ' matter is that to, get rid of this premium it .will'lfe necessary, if the United Stales ;is to remain in the gold I standard, to considerably curtail the paper currency. This'must mean a general pulling down, of all prices within the United States, and ah era of. bad times unparalleled in tho past We know, too, that since 1893 most of the 1 large manufacturing ' and' - business concerns were amalgamated and formed • into trusts, and the ordinary shares . were put upoli the market and triken tip at high Values.' The financial institutions have been (mincing large companies and concerns uporf'tile value of these assets. ' If then,' owing 1 #) ..a genetal pull in and putting On 'of the screw, thfe Value, of these assets are reduced,' then these financial institutions will be in trouble. . While then " there will'be an era ojf low prices in the : United; States, : owing ''to the currency contraction, the premium: of'3f per cent, will stimulate exports from the United Stetjs countries, -and will act ; ,£(si <: an.' import duty against imports. A premium; of 3 J per cent. . upon gold in the States means that if an expprt?r shipped to England £100 worth of goods and .sold them there to-day, the price he would- rcceive would represent 9d. in the £ more. in/Qnited .States money to-day than before'* this-, premium obtained. •: Put into Unitfed'States money at 5 dollars to the £5, it means that 500 dollars' .worth;of goods landed and sold in England two months ago would represent 500 dollars then, as compared witn; 515' dollars for the same operation to-day. ■ r f. • On';tho other hand, a British exporter selling, goods" in the United States, and who had.:two months ago, exported' £100 worth of goods to the States, would requiro to sell them'in the United States for 500 dollars to get lhis money back To-day he would need to sMI these .same goods for 515 dollars iri order .to get baok his £100. The effect, then, of this'3J per' cent, premium <means-that while it is in progress it is a premium or bonus,upon 'exports from the United States to:other ,countries,. and ■is a., bar., or tax against imports, from. other..countries,io.-the unitod States.,. . . /•'But the gold'premium in the United States is really a iiiinor matter were it' not for the serious.struggle for gold in late years.' The discount rate at the lend of each year lately has beon steadily rising, notwithstanding an unprecedented large annual production of • gold. , ~ln November, 1904, the Bank of England rate of discount was:3 per cent., and in the same month in the years 1905, 1906, and 1907-it was 4, 6, ahd'7 per cent, respectively. Nqw.7 pw cent., is a phenomenally high rate, ruinous to'trade and commerce.' Not only in England, but in every. European country high rates .obtain. ■ _ ..."■'' Those who seek for an explanation of the present position by a reference to'the events of the last few.. y£ars have to reconcile a peculiar state -of facts; Gold was neverso plentifully: produced, and yet there is a gold famine'.' To seek' the true explanation we must jo back to the year 1893. In that year silver was, for the first tipicS, refused mintage int? fti'l powered money in India and the United States. Since then Mexico, japan, and a.great many other countries are making a demand upon gold,-and the blow dealt to silver by legislation against that metal has diverted all the demand for money to the yellow - metal. . It has taken .all. the' intervening: fourteen . years to bring matters to the present; climax. as to 'he future. It is undoubted that- the world has not too much metallic money even when using both metals. The attempt to oust silver as. money, and to put i -in f!r burden-on gold, with paper moiwy to nil the silver void, must end in .disaster, as was foretold at tho Monetary Conference at Brussels on .1892. The ;counti7-which is coming through the present crisis with the loast disturbance is the'country which has always recognised both■ .metals :■ as'' full legal tender—that is,' ± ranee. As a man can stand firmer on two legs than oh ono, so a monetary system based upon a-promise'to 'pay cither in gold o-'silver is safer and moro stable than one based upon gold only; With' apologies fo'r the length of this letter, which the importance of the subject will I hope, excuse, and thanking you in antici' pation.'*—l am;*, etc., ■ur.ir i. ' V "RUDOLF." ' : Wellington,-November 16.