VALUES.

Hokitika Guardian, 7 April 1923, Page 1

VALUES.

| GOLD STANDARDS -v.,1) COST OF C < I.MAIODITIRS. ADDRESS BY MR. AY. D. HUNT. A long and very interesting address on values was given to the Wellington Rotary Club Unt week by Air AY. D. Hunt, lie said, inter alia : “I cannot think of any subject that is of wider genera! interest to the whole community. or that is mere thought a hint t by everyone in their daily lives. The present and the probable future course of values of the articles they produce or deal in. or the securities they lend on is the daily thought of the farmers, manufacturers, traders and bankers. The whole system of politics revolves around the subject. Take out Government expenditure and taxation, and what is there left in politics? “Values can he looked at from two main points of view, tl-.e relative value, the general level values of all commodities. The quantity el average

commodities that would cost a sun equal to 101) in the iiist half of 1911 say £IOO. could in 1890 have licet

bought for C7B; in 1873, £l3l and in IKK) they would have cost £9*l. Since 1911, however, the same quantity of goods would, at the end of 191*3, have cost £127, at the end of 1910 Cl6l ;at Hie end of 1917 £214; and in Alareli. I9MO. they would have cost £320. Al the end of 1920 the price was hack to £231 : at 11 io end of 1921 £l7O. and at the end of lasi year .£l6O. Since the beginning of this year there has been a. slight rise in the general level of values, and it is now hack to Cl7l. “Why lias this general level of values fluctuated as it has done? Now, gold is a commodity just tin* -nwe as anything else; it is subject In the same law of .supply and demand that appleis to any other commodity. The only difference between it and other commodities is that it* lias been used to measure the value of all other commodities, its value therefore, must be measured in the commodities for which it* exchanges. There is this difference, however. that gold is not used it]) annually as produced. This world’s stock of gold is a very large one, and Is much steadier in value than any other com■m’odity. if banker.-, in gold using countries, do not gel a- much gold as they require as a basis for the credit they are giving, they are compelled to restrict credit until thoir liabilities arc in proper proportion to their gold reserves. In countries on a gold currency gold is not only the measure, but also the governor of value.

“The first country to go on to a gold standard was Great Britain, who adopted it in 1316; though no other country followed Britain’s example for many years. The resulting increase in the demand for gold put up the price ot gold : that is. its purchasing power increased. which meant that the general level of values ef commodities Icll. By 1397 nine-tenths of the world's commerce was on a gold basis. All ibis caused an enormous demand for gold Io sitppoit the credit of all the.-* new gold using countries, and the result was that the increase in gold sticks

wits not sufficient to keep pace, with the increase in demand. The price of cold, therefore, rose which meant that cuminudil v prices measured in g»!<! fell. “The period of 1S!)0 to 191 I is the most interesting period in the world's financial history. II was the only period in which the general level el values in almost all countries when measured in the currency of these cnim--11 ;,*-; was practically the same. Through everv country ef impoi tance being on e."hl standard, exchange between those countries became stable and comparatively simple. • In tile will- period every country in the world abandoned the gold standard er out such r,-1 riel ions upon iis u-e that ir did tint I'lmeiinn. No matter what tlieii currency was. t hv'dcparlure Irom; gold in 1911 put every country on a different footing. X* v. what i- il that ha- brought the general level ol value- in Great Britain down from 326 ill .March. 19M0 to 171 at the present timer I| is the belief that Great Britain will before very long restore the gold eunency on the old basis. 'I lie only countries in the world that have actually got back to the gob! standard situ*;* the v.ar came to an end are the Ini Led States ami .Japan. The I'nited Stales dollar is now the world's standard value, and the depreciation of every other currency in the world excepting Japan, is measured by the rate at which it will exchange inLo <1”1Britain and the United States is now • it the basis of I dollars ,0 cents to tin’ £l. as compared with I dollars 6.6(5 cents v.lien both were on the gold standard. The dilferenec between the exchange value rate. and par i* steadily decreasing, and n seems quite evident that before very long Great

I Britain will be back to the gold standj ei',l on her pre-war basis, (Applause). \Ye in this country have the same currency as Great Britain, and what interests us. therefore, is what is going to be the general level of values measure I iu sterling. Tt will tie; end upon the va rlil's stock of geld on the one hand, and on the demand for that stock <>n the other hand. At the present time we have the greatest stock' of gold the world lias ever seen—MO I pence per head of the world’s population, compared with 230 pence in 191-1. Tito difl'orowe in supply between now and 1911 is not great, hut where the great difference comes in is in the demand. There is not nearly the same demand to-day as there wits in 1914. The probability is tlnti* many countries "ill never redeem their paper eurrenoiein gold on their pre-war basis, but they will conic back to gold oil some basis, even if it means scrapping their present paper currency and starting afre-li; and as every country comes hack to gold it will increase the demand for gold. This increase in the demand for gold will increase the value ol gold, that is, it will increase its

purchasing power, and thus reduce the general level of values measured in gold. It seems to me that the general level of values in the years that* are ahead of us will full as it did in the years 15,3 to 1896. A great deal, however. will depend upon the production of gold through tile years that are

ahead. It is obviously to the advantage of Great Britain to restore the gold currency on the pre-war basis as soon as possible. Apart from her huge debt to the United States. Great Britain is still a. great creditor nation, and the amounts due to her arc payable in sterling. As far as these debts are concerned it is obviously to her advantage io make sterling as valuable ns possible, and tin’s advantage is not afteefed in any way by her debt to the United Slates, boeail.se this has had to be paid in United States dollars, and the amount of the debt is, therefore fix,*il regardless of the value of sterling.

“I” sum ui) the oullook for future values il seems to me (a) that us long as the volume ol gold-financed trade hears a smaller proportion to the worl IK stock of gold than it did before tin* war. the level of values measured in gold will he higher than prewar values; (h) that every country returning to a gold standard will cause a- full in the level of rallies measured in geld, and that extent of this fall will correspond with the financial intPorlnee of the country in question.”