MONETARY PROBLEM

Evening Post, Volume CVIII, Issue 152, 24 December 1929, Page 10

MONETARY PROBLEM

THE GOLD STANDARD

INTERNATIONAL TASK

(From "The Post's" Representative.)

LONDON, 7th November.. In the course of his inaugural address to' the Philosophical Institution at Edinburgh on "Money and the Future of Civilisation," Sir Josiah Stamp compared the demands made by industrial and international financial conditions upon the monetary system before the. war and now. The problems had been intensified by internal conditions, but the solution had become, to a much greater extent, only possible on an international plane. Although much could be done by each I nation perfecting its own credit and banking machinery, complete solution could only be obtained by raising the general level of international practice and knowledge. A highly-developed industrial country backward in regard to its development for credit and currency control and elasticity could keep back the whole advance. Much, depended, therefore, upon the probity and skill of Governments and the practice of central banks. It was extremely unlikely that the general level of nations would be sufficiently advanced for the next hundred years to dispense entirely with a metallic standard. As the nations had inevitably to live with a gold standard, wayward and intractable, the least we could do was to make friends with it and understand it and make it amenable. We certainly seemed likely to find it rather a bad master, and our task was to make it a good servant. There were four main points of entry into the heart of the gold problem. Each had its peculiar difficulties, and it was impossible to say along which line success would be most valuable. They were:—

(1) Control of volume at tEe source. (2) Distribution of volume to the maximum advantage. (3) Best use of a given volume to meet widely different possible needs. (4) Automatic means of bringing in aid and auxiliary standards when the value of gold should pass critical points.

Upon the first point it was clear that if an international corporation, in which, we were all interested, had owned or controlled the gold mines as sources of supply and could have produced much or little apart from purely commercial considerations,' as the problem of stability required, we should have had a very different situation from the present. It is true that as gold appreciated or depreciated in value, under present conditions, the natural tendency to mine more or less has set in, but it was slow and remote in operation in comparison with direct control.

The uneconomic and nnco-ordinated way in which gold reserves were nowdistributed made the total volume of gold available for the purpose even more fortuitous than the total production. The existence of a really effective central corporation of an international character such as an international central bank was vital to this aspect.

While the credit systems of different countries had to meet such different needs, it would not be possible to have the various formulae and ratios governing the use of credit made really uniform. But the standards made by an international clearing-house of ideas and experience would do much to make the practice advantageous in one country available to others, and to encourage bold and'safe experiment in each. If, despite all efforts, the ratio of gold plus its super-imposed credit to production should be so seriously changed as to upset all long-period contracts, then silver, platinum, or other auxiliaries to an automatic commodity base could only be brought in by international co-operation.

The great gain in the last five years was that the practical character of the problem was now being recognised, and the immediate dangers to civilisation from its non-solution were being ap-pre-eiated.