STERLING.

Hokitika Guardian, 17 February 1925, Page 4

STERLING.

(Mercantile Gazette). The British pound has us against the dollar reached a rate which approximates equality, and its upward movement has been assisted iis much as possible by America in its anxiety to find an outlet for the heavy stocks of gold now held by that country. American hankers have for a long time been as anxious to get rid of the metal as they were to-receive it four or live years ; go. Ever since they became possessed ol the gold, it lias been slipping bad; in price, the commercial value three years since touched £5 12s Gd, and as it can lie bought now for £4 Bs—with a probability of further recession, the stocks held have not constituted a profitable investment. The Americans locked the metal up and kept it carefully in their vaults fearing that high prices and an increased hank rate would follow should it get into circulation. They are now assisting to strengthen the pound so that they can export. We emphasise the fact that exchange follows the trade balance between different '•01111tries and artificial assistance to preserve parity cannot in the end. maintain exchanges unless the respective trading balances of the countries interested are in equilibrium. American bankers are entering into the market for foreign loans, they are compelled by economical forces to break away from their isolation. We think that the advance of sterling has been too rapid, and that the nound as against the dollar is not worth latest quotations. Ihe Americans are remitting gold whenever possible, and very large sums in dollars have been recalled to the continent from New York. The pound has gained by these transactions, but they in their nature are adventitious and the oresent rapid march towards narity will fie reversed, unless our trade balance with the Stales assumes closer figures than exists at present. The American holding ol gold, being as it is so far in excess of requirements, constitutes a danger which is recognised as a constant and continuous menace. That' a free market for gold will he established throughout the British Empire before verv long seems more than probable. Sovereigns will not however, he available -until the mint and the commercial prices of gold are equal, hut bullion in payment of international balances will he shipped to any country which exports more than it imports. There is no other way of adjusting balance except by despatching merchandise. Tf a countrv has large credits for goods sold and does not buy sufficient to cancel tin- balance, the exchange is in her lavour. and the cost of buying credits acts as an export tax. Wo have had some exnerieuco ol that 111 New Zealand and ll a free market in gold is established "e do mil know that our position "ill be miieii heller. Tf more gold is shipped here than is required for the business of the country, our hankers will have to face the same trouble which has confronted their American colleagues. The note currency would be curtailed to escape Ihe fax, and there would he a great desire if sovereigns could he issued. to get them into circulation, or to put it in another way. the hanks would increase their advances as lar us they could do so consistently with lately. This would stimulate deposits, which would again react upon advances and in time the ratio of gold to deposits would become normal. But the effect of all this would he inflation, unhealthy land speculation, increase of prices with the resulting necessity -il reconsidering all industrial awards. As to (he possibility of the sovereign I. ‘clou superseding the note issue, the experience of America points the other wav. No one in that country ever

asks for gold coin nor would like in have il forced upon them. The citizens of the United Stales prefer to <-arry four fifty dollar notes at any lime in their wallet, rather I hail ten gold coins in their pocket, no matter how strong is their sentimental feeling towards the yellow metal. And we iLink cur New Zealand people v.iil do likewise.