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Hokitika Guardian, 13 September 1923, Page 2

This question is dealt with in tb» current review of the Westminster Bank in an article which urges the authorities to consider the question in all its bearings before coming to a decision which afterwards might- be regretted, and judging from.all the circumstances of the case the time does not n.ppear to be yet ripe for an attempt to restore a free gold in ir.cot to Loudon. The writer of the article mentioned says, that the true solution lies in a reversal of the How of gold, so that all excess bullion now in the United States leaves American shores and is spread evenly through') it tbe rest of the world. Then, instead ot lying as an incubus upon the business life of one nation, it could resume its proper function as a basis of currency and credit, and clear the paths for international commence. Unfortunately, this is not likely to happen for perhaps some years yet. Jt. can only take place when the industries of Europe have been restored to tneir normal level of production, when currency inflation lias ceased, and national expenditure is met out of revenue. Such a condition would require that- each country - should cease to import more goods than can be balanced by exports, and although these facts have lieen. apparent for years past, it is very necessary that they should Ihi clearly kept in view. In support of the argument in favour or re-establishing London as a free gold mar get, it is adduced that tho more stable nations of Europe, such as Sweden. Holland and Switzerland, would follow the lead of England in this direction with tho result that the free interchange of gold could lake place between a small group of countries, thus forming a nucleus for the remainder lo join when their financial position permitted. ■ Tbe only -steps necessary, it is considered, aro that London money rates should be raised to a point at which they would correspond with thoso ruling in New York, and that wo should restrict our loans to foreign nations.

To deal with the second point first, the wisdom of curtailing Biitish loans to foreign countries may -Ik> questioned, because of the probable adverse effect upon trade. It is generally accepted that a largo proportion of the money borrowed in England by n foreign country, or a Dominion, is spent in the purcha.se of materials, manufactured goods or in other ways beneficial to Britain’s outside trade, and certainly tho present is not a time in which Britain can afford to suffer in this direction. As to raising money rates to tho level of those in New York, thero is such a tiling as retaliation, and an advance might, cause a further rise in America, so that before the tiling had finished the country would he suffering unnecessarily from extremely dear money. There are experts who advocate stabilisation of prices as against deflation, claiming that the essential condition to a trade revival is that prices should remain at a fairly constant level, so that a manufacturer can lay his plans ahead with some degree of certainty, and need not live in the constant fear of lacing left with heavy stocks on n falling market. If something in this direction could be achieved, it would lie siHisfnctojy for home industries, but as regards export business, it would be of no advantage to have stable prices if foreign exchanges are liable to tho,violent fluctuations which have been itnceised in the last few years. During the last 18 months there has been an apparent stability in prices in England, but the prices of different commodities have been far from stable. It is considered by the writer in the Westminster Bank review, however, that if the number of gold standard countries could l>e enlarged, this might servo to minimize those price fluctuations which are now giong on beneath the surface of a stationary price level.

To quote the authority just mentionel, it by no means follows that an immediate return to gold is desirable. Britain has yet to see if it can maintain its present success in discharging obligations to tho United States before attempting to combine with it the responsibility of a free gold market, and all that it implies. As regards money rates, it is difficult- to resist the contention that a further advance in the Bank Rate to 4$ per cent., or even 5 per cent., which might be

required initially, would, under existing industrial and financial conditions in Great Britain be too heavy a price to pay tor tho advantages of a free gold market. Too marked a rise in money rates might destroy confidence and check tho trade revival which is already making a very halting progress. Finally, if we took tho plunge and then found it necessary to draw back, ahd once more prohibit tho export of gold, the effect on the world might be little short of disastrous, In many respects the present is a particularly favourable time for a return to the gold standard, but having regard to the prospect that conditions in Europo will continue to be unsettled for many months yet, those in authority would do well to consider the matter in nil its bearings before taking any action.