RESTORATION OF THE GOLD STANDARD

Dominion, Volume 14, Issue 108, 31 January 1921, Page 8

RESTORATION OF THE GOLD STANDARD

Before August, 19U, tho view was commonly expressed that a big war would be impossible because of its inevitable effect upon the network of international finance and the danger of widespread bankruptcy. That theory was proved sadly untrue, and during the last six years the grounds for the pre-war predictions have been largely forgotten, states the New York “Evening Post.” Moreover, the experiences that were endured for four years have tended to make the world financially callous. Consequently, we have been slow to recognise the real facts in the present situation, and to take effective steps to apply a remedy. The result is demoralisation of prices, industry, and trade throughout the world at a time when maximum production is needed as never before. The prevalence of social disorder also is in large measure an outgrowth of these conditions. The world’s system of international exchange is broken down. Until tho wreck is replaced by a new workable svstem, distress, dangerous radical agitation, and uncertainty and instability in business will continue. The merchants and manufacturers in the United States or any other country cannot look forward to the return of permanently sound business conditions until international finance is restored to a normal basis.

Afnst of the discussion of foreign credits during the last two years has been beside the point. The proposals for the extension of credit to European countries by encouraging inflation have actually tended to aggravate a situation already desperate. Tho heart of the trouble is the demoralisation of the currency system of many countries. . The paper ruble has become practicably worthless. The mark, lira, and franc are worth but a fraction of their nominal values as a result of the wholesale issues of paper money which have continued since the war ended. In England the issues o” paper currency have been held better in check than in the Continental countries; yet even England is bv no means on n gold basis. India, China, and the South American countries are commercially embarrassed by the lack of reliable foreign exchange methods.

To restore international trade to a normal basis the gold standard must again he established in the leading countries of the world, and it should be done speedily. It is essential that; merchants, manufacturers, bankers, anil investors be able to trade in terms of gold..in order tont inordinate risks may be eliminated, trade expenses cut down, and business placed unon a dependable foundation If a reliable standard were re-established we could depend upon investments and eommeivial credit to take care of other needs. The United Suites is i’> a peculiarly responsible position. Tn the first place, it has an enormous foreign trade pt stake, both import and export trade, on which domestic business is dependen 1 . Secondly, the United States is n creditor of tho European countries, ami it is only nusincss common sense for tho creditor 1n asu=t n debtor to beeome solvent. Tn the third place, the United States has a large stock of (gold accumulated during lhe war. It will probably bo necessary for the European countries to draw upon this stock in order to provide adeqita e currency reserves. It would be verv much better to have these withdrawals made systematically ratocr than nt haphazard. Through the process of deflation this country is making rapid progress toward a position in which it may by able to relinquish nnrt of its stock oi gold without precipitating disastrous results nt home. . The iini ion ch l !* for fi l>roa,<i. snnil v svnipatoetic leadership in Ainorien with the siinncit of Congress. If waolcsa <> bankruptcy is to be .averted sooner nr la’cr America must actively assist Hie Enronon.n countries in working out constructive plans for prcve-iting thy further issue of paper i-on'"'. tor redtieur.’ immediately -and drastically the quantity of p.-iner monev now ontsbniding. and. or accumulating (he gobi reserves reoyisite f(>r (lie i-ertoraGon of toeir currencies to a convertible basis. It is not philanthropy that is needed, but sound business indgmetit. The plans should bo worked out in a tofsinesslilre manner, with proper assurance that whatever sacrifices the United Stales makes will he fully coiin(erbalanood bv the establishment of sound financial and currency policies in the European countrirt, included in the arrangement.