UNCERTAINTIES ABOUT GOLD.

Hawke's Bay Herald-Tribune, Issue 127, 15 June 1937, Page 4

UNCERTAINTIES ABOUT GOLD.

Yesterday' s weekly cabled tisade revie-sv from London put special emphasis on the need fou "laying the gold bogey once and for all." Despite the assurances given by President Roosevelt that no change was, in contemplation for rqducing the American standard pricQ of gold, 35 dollars an ounce, there would still seem to Ive considerable uneasiness in the world 's markets, and esperjially in London, as to what may happen. General Smuts, who seldom speaks without good warrant, has said that thfise rumours have been set afloat and maintained by those who seek, by misleading the public and creating distrust, to profit tbemselves by consequent disturbances on the stock ma*rket. A London financial journal puts it still more bluntly wben it says that there is undoubtedly some "dirty work' ' iji connection with these gold scares. Whatever real anxiety there may be arises mainly from the fear as to what further experiment may occur to the American Presideart as worth trying in order to Check the inflow of gold irrto the United States sirtce the beginning of 1934 as the rfcsult of reducing the "gold content" of the dollar .and thua forCing up the value of gold as express^d in dollars. Since theri the reported gold reserYes of that couiitry have, in terms of the new dollar, increased Iby more than „ 7000-inillion doil'ars, the apprdximate equivAldnt of £1400^ million sterl^ng. At the end oi April last they stodd at 11,700-million dollars, or 4750-million dollars more than in january, 1934, when, too, they had reached a higher level than ever hefore. No possible use could he found for this vast accumulation and for fear that its existence might lead to undue expansion of credit an,d a resultant disastfous "boom" ia proCess of "sterilisation" — Government "hoardiiig" on a grand scale- — has heen adopted. Afc the same time measures have been taken to still fufther rtediiCe the capacity of the trading banks to grant credit. This has been done by requiring them to iricrease pfogressively their deposits with the Reserve Banks until now these are just ahout douhle what they were three years ago. Thus the great trouble with the United States is really a congestion of available money capital, which, if let looSe, would inevitably result in wild speculative use heing made of it, to be followed almost as matter of course by another reactionary depression. To what extent this inflow of gold was the result df devaluation of the dollar is a disputed question. Acoording to some contentions, 'the uncertain conditions in Europe made an inflow of capital inevitable, regardless' of devaluation. The National City Bank of New York, however, points out that the movement was greatly aocentuated by devaluation. The lower dollar cheapened American goods and shares in terms of foreign currencies, and so enhanced the attractiveness of American markets. Moreover, the cheapening of the dollar was in itself partly responsihle for foreign internal difficulties that were promoting a flight of capital to the United States. This Was particularly true of the gold bloc countries, whose fate was practically sealed by the devaluation of the dollar, and from whom the United States has received great quantities of refugee capital in the form of gold. However this may be, the hroad result is that in the United ' States there is an immense store of gold for which no profitahle use ean there be found and this must almost necessarily create a feeling of uneasiness as to what recourse may be taken to stem the still steadily inflowing tide.