A DEVIOUS STEP IN FINANCE.

Dominion, Volume 9, Issue 2783, 30 May 1916, Page 6

A DEVIOUS STEP IN FINANCE.

Sir,—lt is proposed to withdraw all halfsovereigns and replace them by cotes, our gold currency thus disappearing entirely. When the same thing was done in Mexico, the result was to place the currency on a silver basis. If gold dis» appears from circulation, how are we to maintain, the value of our silver coins, when they are no longer exchangeable for gold? They_ are not worth their face value as bullion, but so long as fcen shillings in silver" can be exchanged for half a sovereign in gold, that does not matter. With the withdrawal of all gold coin, this will no longer be possible; wo will be on a silver basis, as in fiexico.

But tbis i s not nil. If silver, as tho result of such a-step, should losn its face yalue in N.Z., "it would still have that value iu other British possessions whero sounder finance prevailed; consequently, New Zealand bankers and other holders of silver coin would eiport it to those coun. tries. The flight of gold would be followed by the flight of silver, and «•« would bo .finally committed to the misery of an inconvertible paper currency. Tho curse of such a-fluctuating ourrency can only Iks realised by those who, like myself, have lived in countries where such conditions prevail. Lot us hesitate before we are lost. It is easy to abandon a gola basis, but difficult to vfttuvn to it. it may be said tha't the notes have a Government guarantee. What does that mean? .What form will, the guaranty assume? At best it can oiijy.be a promise to redeem the notes in gold at some future and uncertain date; a very unsatisfactory settlement, as the duration. of the war is indefinite. 'The Government with ; tho best credit in the world may not be able to maintain the par value of their paper once the gold standard ie abandoned. The' United States could not do it during tho Civil War, and their credit was of the best.-I am etc., J.D.L.

Aucklaiid.