The Guardian AND EVENING STAR, With which is incorporated “ The West Coast Times.” MONDAY, JUNE 20th, 1921. MONEY VALUES.

Hokitika Guardian, 20 June 1921, Page 2

The Guardian AND EVENING STAR, With which is incorporated “ The West Coast Times.” MONDAY, JUNE 20th, 1921. MONEY VALUES.

Tjik relative merits of gold, paper money and exchange is a fruitful source of discussion these times, when economic issues loom so large. The gold standard is still tlm safest and best standard devised to ensure stability in finance. A plethora of paper money deprecates its value, and operates adversely on exchange rates, “while the last mentioned are stabilised bv the gold standard. Tho gold backing is the soundest form of asset, and though this is disputed by many close students of economics, the facts throughout the world to-day broadly speaking, support that statement. If behind the paper issue there is a backing in gold of a set value specified by law to secure the paper money, the country which lives within those limitation, and maintains its gold reserve, will escape the losses imposed by a high rate of exchange against it, because it has a guaranteed asset against its paper liabilities. Coincidentally it will* lie in the happy position of benefiting from exchange with other countries with which it trades which has not the same stabilised currency behind them. This statement of the position seems to get right to the foundation of the economic problem of the times, and should be an incentive to countries to set up a strong gold reserve to secure tlit' advantages to be gained from exchange rates. It is prudent finance to work for a substantial backing and a restricted issue of paper money, and this in effect is the concluson of th ( , main experts to-day. 'Hie Currency Committee, appointed by the 'British Government ft few years ago, of which the Governor of the Bank of England was chairman, puts it thus: “We have found nothing in the experiences of the war to falsify the lessons of previous experience that the adoption of a currency not convertible at will into gold or other exportable coin is likely in practice to lead to over-issue, and so to destroy the measure of interchangeable value, and. cause a general rise in all prices and an adverse movement in the foreign exchanges.” The same conclusions were arrived at by the Financial Conference held at Brussels at the end of 1920, when the representatives of thirty-nine nations wore unanimous on the point. The calibre of those present, and the importance of their conclusions may be iudged by the statement of the chairman of L.C.W. and Parr’s Bank, one of the largest banks in the world, at the annual meeting of that institution held at tho beginning of the year. He said “Only a few months ago there sat at Brussels n ofpiferejjoe of al] the best fin-

uncial intellects of Europe. They draw up a series of resolutions, showing the principles of which alone the economic restoration of the world was possible. With all their resolutions 1 believe that the best opinion everywhere is in agreement.” Gold, it is admitted, has its shortcomings as a standard oi value, hut they are fewer than any alternative hitherto suggested. The choice of thi' gold standard has been neatly put by the Gold Production Committee’s report issued during the progress of the war. “Gold lias been adopted as the standard of value because, by reason of the operation of natural causes, it is available in such quantities and at such a cost of production in terms of other commodities as to give it a more or loss stabl e value. Its value in terms of commodities is directly influenced by the laws of supply and demand.” To this may be added the comment of an Australian financial writer who sums up the subject referred to in the following dear terms, which ft must be admitted seem to reproduce a very sound statement of the case, and oily which it is easy to follow and not difficult to realise is a rather common sense view of the great issues at stake. He writes: It is held by som e that an increase of Taper money may cause such increased production that there will ho no inflation oi prices. The experience of history, even in thy last few years, points in the opposite direction. Human nature has remained the same throughout the ages; causes which produced Certain effects thousands of years ago will assuredly produce the same effects to-day. That history repeats itself is not merely a trite saying, hut an undoubted truth. Note issues must not bo allowed to grow without a substantial gold backing. Whenever the gold backing lias not been insisted on listory has shown that industry has been diverted into wrong channels—luxuries liavy been produced in place of necessities, aggregate production has declined, and tliero has been less saviiw. Even the thriftiest members of society have been unable to retrain themselves from joining in the scramble for the diminished quantity of goods. The cause is largely psychological. People think that if they have twice as much money to spend they are better off, even though articles are tlireo times as dear.