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Hokitika Guardian, 25 February 1925, Page 2

The question of the reversion to the gold standard is coming to the fore at Home. Whether the recent visit of the Governor and a director of the Bank of England to the United States was connected with the gold standard or not, the indications are that the measure indicated will Ik? re-adopted l>y Britain ltefore very long. The way, says an English financial journal, has been paved for the .step by the rise in the American exchange to within a little of parity. At first sight it might seem that a withdrawal of the prohibition of gold exports from this country (except under licence) would lead to" shipments of the metal on such : scale as seriously to reduce our gold reserves i but this does not at all follow. America does not want any more gold, and if the exchange went above parity she would be sending the metal to Great Britain. In this connection it may be noted that the new German reichsmark, the Swiss franc, the Swedish crown, and the Dutch guilder are all quoted at a premium over the dol, tor In New Yor!;, though, except in the

first-named case, the circumstance has not been followed by shipments of gol. from America, while the case of Get many the operation presumably represented a transfer of part of the proceeds of American subscriptions to the loan of £10,000,000 raised for Germany last autumn. If Great Britain decides that the time is opportune for the adoption of the gold standard, it would he only natural if representatives of the Bank of England should confer with the officials of the Federal Beserve Board of New York beforehand. London and New York as so inter-dependent in financial matters that a decided movc•ment in money rates in one centre b quickly reflected in the other. It possible that Britain could not risk the adoption of the gold .standard if the re-discount rate of the Federal Be serve Bank were fixed at a level whic. militated against the success of the policy, or threatened to do so, am once having taken the step Great Britain could not afford to go hack.

|x view of the increased interest now apparent in the subject mentioned above, an article in the January number of the Bankers’ .Magazine is <q fortune. It is by the Bt. Hon. F. Hilton Young AL.l’., a former Financial Secretary to the Treasury. 'I lie article largely deals with the evils of inflation, but its main thesis is that in matters of public finance the rule that two and two make four and nothing; more can be ignored. Hence the title “Illusions and Arithmetic of Public Finance.” What Mr Hilton Young tells ot the evils of inflation is scarcely new, for they have been so a) parent in the economic career of such countries as Austria, Germany, Poland, and Russia. The writer shows that even if a country which has adopted inflation on the grand scale tries to increase the national revenue from taxation in order to reduce tile rate of .inflation, it i found almost impossible-to do so. Ihe taxpayers have not enough currency to pav more taxes, and the country finds itself in one of tho.se vicious circles which are specific symptoms of the disorder of inflation. The revenue cannot be increased until the currency is worth more; and the currency cannot be made worth more until the revenue is increased. Perhaps .Mr mil ton Young is most interesting in dealing with the gold standard. He believes that the steady stream of gold to the United States Inis brought the paper pound so In (as indicated by the rise ill the Ante! icnn exchange) “that one good, shove more .should send it up to the sovereign.” “It seems v, urtli while, h adds, “to make the little elfoit of courage and confidence that the shovi will need. Now that the rise lias gone so far, even the most ardent believer in a regulated curienvy, ami the keenest advocate of stability might agrci with this. Once hack at a gold standard we have a known and sure basis upon which to conduct our monetary policy, and we can discuss improvements in safety and at leisure. I mav lie recalled that another wellknown writer on economic subjects, Mr Hartley Withers, expressed a similar view in his took on “Banking and C'-cdit.’’ Professor Casxe!. of Sweden, lias urged that Great Britain, should set an example to the rest ol the wort in this matter, and some ol Britain c leading bankers have spoken strongly in favour of ret inning to the gold standard as soon as possible. Assuming that before long Great Britain will lake the step, it will be a matter for satisfaction that it li»s been possible to do so without bringing about a rise in nionev rates such as was advocated I l)r Walter Leaf in the summer of 1 year.