THE VALUE OF GOLD

Hokitika Guardian, 24 May 1930, Page 3

THE VALUE OF GOLD

(“Otago Daily Times.”)'

New Zealand farmers and business men who are struggling \\itli immediate problems of keen competition anti falling prices abroad and suitionar;, casts at home may perhaps be pardoned if they. pay little attention tc the opening of the Bank of International Settlements at Basle on Mon day. It is, however, no exaggeration, hut the sober truth that no event cc recent- years has a. greater pjtential importance for the welfare of Neu Zealand than the foundation of this bank. The maiinenpnce of the gold standard means that movements in our price level are now largely deermined by chance movements in tilt supply of gold, which a r.j for the r: ost part beyond our control, and movenents in the demand for gold, v, here happily the human reason, has a \ ider field for its operations. During the hist few years there has, been a steady fail in the ri enera! pric evel, which, it is maintained by many competent authorities, is partly responsible for the prolonged business 'epression, and consequent unemployment, with, which nearly all countries ave 1 eei) afti.ie.ei. New Zealand exipr.ters will certainly have little diifi-

enlty in accepting this view, and it is to their immediate interest to discover, and if possible to prevent, tlie operation of the causes of this fall .ef prices. As in all such eases, the' causes are complex, but prominent among them is, the appreciation of gold,, due to til© competition of banking an, horities, anxious to strengthen their gcilc reserves. The details of the mechanism are complicated, but the general principle is simple. As with otlier commodities, so v. ith pil’d, intense competition on tlie part if buyers—in this case mostly banker—will raise its value, :yid a raising >f the value of gold is the’ same thing •s a fall in the general level of prices.. During 1929 the pressure on gold sinilies came mainly from , tiie United states and from France, but the elects wer© world-wide, touching Now Zealand very closely. The city e.tlitoi if the Manchester Guardian, who. i’ lot normally disposed to take- radical views of currency policy, recently declared that “two or three more year’ike 1929 would be likely very effectively to discredit the gold standard altogether, and to lead to the introduction of some more stable system of ‘managed’ currency.” There is scarcely a single economic or industrial problem of any importance the solution of which is not intimately yoimd up with this , question of the . fluctuating value of money. '/ .

Sir Jusiali Stamp, the.-enunent . ljsh economist and business 1 man, definitely places the question of prices ind their stability as of greater inioortance than all the other questionswhich make up the stable of current controversy, unemployment, taxation, -ationalisation, repara,tin,i.'is, tariff "ltd lie rest. Prices, he has recently suggested, are going to keep tis in the inndage of trade depression for a long into unless properly handled, and the inly way is through international ction. It is in this connection that he claim can be justified that the ew bank at Basle is of the greatest •uportanee for New Zealand’s eienniic welfare. Set up in the first iae.3 to facilitate the transfer of Cernan reparations, it has no necessary onnection with the stabilisation of lie value of gold, but its sponsors, if whom Sir Josinh Stamp, was one, oa.de no secret of their hopes that f.s machinery would be used lor pur,.ms much more far-reaching and ociaily valuable than the terminaion of reparation wrangles.

- Any single country iky itself, no natter how -important its trade, is lowerless to regulate the value of old. The virtues of the gold standrd arise indeed from its quality of universality, and the conscious and skilful control, which is necessary if this instrument of money is to be an obedient servant and not a harsh master, is possible only ooi the same broad foundation. The competition )f banks for gold reserves, with inevitable price depression, can be prevented only by international co-op-eration, and international co-opera-tion becomes much easier when an organisation is created which will help the national banks to get such funds as they need in times of stress. Given the intelligent support of national banking authorities, the new bank will be able to afford them such facilities as will encourage them to relax their present demands for gold and thereby make it easier to maintain; the value of gold at a stable level. , It would be an ironical, commentary on the vanity of human -visiles, but happily fraught with neater benefits for human welfare 'ban such commentaries usually are, if the only permanent result of the •lainis for war reparations, so far as 'hey have been foolish and extravagant, which have fruitlessly consumed l) much time and energy since 1918should b e a. stability of prices such as- has long been recognised as an ideal, but has too often been dismissed as Utopian and impossible.