The Guardian And Evening Star, with which is incorporated the West Coast Times. SATURDAY, NOVEMBER 29th, 1924.

Hokitika Guardian, 29 November 1924, Page 2

The Guardian And Evening Star, with which is incorporated the West Coast Times. SATURDAY, NOVEMBER 29th, 1924.

I MIC CI'KIUvNCV I'UOIII.ICM. • *m: <il the most iiilcrc.stiiig recent |. dc\clopiimn m in tlit> int(*r-lmpcrial ni - ii'ncy situation, comments the l.vt- . tolloli “Tillies", has lieen the "f Mie South Ali ie.iii milieou ne‘.s thiit I South Africa should return to a gold a htt,sis, and mint gold Iroiu her own mines, to the extent of a million ami a hall a month lor use a.s tlotne.slie ettrreucy. The reason for the | lojiosal, of ' course, is fairly ohviou.s. At the ’ height of the post-war inflation in liiitai 11 "old was selling on the J.oinhm market at £<i an inline, ami production "as a laii'ly jirofitah'e business. For some time past the prior has been down t to about £1 10s an ounee, and every improvement in dollar exihniigo pulls it nearer to the old fire-war Huntings H value ol £:i 17s IOJd .per ounce, troy. So lar as South Alriea is concerned jr the stare has been reached, or is approaching. at wlriili, after exchange s charges are taken into eousideration. it would pay better to have the "old b minted at Pretoria at the standard fit ice than to ship it to f.ondon. prom the standpoint of the mine-owners the matter is quite a simple one, depending upon a more arithmetical caleula- . tion of the price of Hold and the rate t of exchange, hut for the general community the ffuestion is very much more complex. It was discussed some time ago by the Committee of Public Accounts of the South African Assembly, which had under consideration a Bill I extending the period dm ill" which paper money is 1 '"al tender. The Committee called before it Mr AV. 11. Clegg, governor of the Federal JJeserve Hank of South Africa, and rpistioiied him with a freedom usually lacking in currency discussions, in which the parties usually are afraid of exposing ignorance concerning a subject that is full of pitfalls. Asked why he opposed a return to gold, Mr Clegg advanced a.s his reasons that it was doubtful whether, if South Africa returned to a gold basis, she could maintain that basis; that it was hv no means certain that Britain, even when the sovereign was hack to gold parity, would re-establish a free gold market. These reasons not entirely satisfying the committee Mr Clegg amplified his statement. Ho said that if South Africa were on a gold basis and Britain were not. exchange rates would continually and widely fluctuate, which was undesirable. South Africa, would get less for her exports and her importers would pay less for their inrports, hut it was questionable whether the benefit in that respect would he handed on to the consumer. Asked if his arguments were not. in part at least, opposed to the reasons usually given by orthodox economists in support of the gold standard. Mr Cleg" said that "old was to-day so unevenly distributed amongst the nations of the world that the process whereby equilibrium of currency and prices used to he maintained could no longer he relied upon to operate. The theory underlying the maintenance of equilibrium was that when gold left a country it had the effect of reducing prices in that country, because there was a lessor amount of currency and loss basis on which credit might be built; and that contrariwise the country to which the gold was sent experienced a reverse process of a rise in prices, owing to its basis of credit being broadened and the credit lieing correspondingly expanded, and that the fall of the prices in the one country and a rise in the other tended to equalise things, and make the geld come hack again. It was very doubtful if such influence as South Africa could exert on the world’s gold circulation would have an effect on the theoretical lines. Asked what would be the immediate effect of a return to gold Air Clegg said there would be “still more deflation.” This is interesting, because Australian critics of

tlie South African proposal have declared that the increase in the currency caused by the use of the gold mined in the country would mean an era of acute inflation. One point made by Mr Clegg is corroborated by leading Englisli authorities—that llritain’s attitude towards a return to gold is largely influenced by her huge debt to America. >She must be sure, when sbe does return to a gold standard, that American claims ui>on her gold reserves shall not be so heavy as to make a second abandonment of the gold basis imperative. The discussion is of interest to gold producing - countries such its Australia and New Zealand, which may be tempted, if tbe exchange problem grows any knottier, to seek a remedy.