FINANCIAL

Hokitika Guardian, 1 December 1930, Page 5

FINANCIAL

WORLD PRICE LEVELS

t. United Press Association —By Electric Telegraph—Copyright. J

(Received this day at 19.30 a.m.) LONDON, November 30.

The effect of gold on world price levels was the- subject of a broadcast address by Reginald McKenna. Great interest was taken in the address in view of the increasing attention of the monetary policy. McKenna explained that the falling prices level means diminution of the profits of industrial trading and enterprise. The effect if the fall comes when the profits; arc not excessive, is to stifle trade. On the other hand, a rising of price level imposes a vesible duty on all fixed money incomes, and all relatively inelastic incomes. Such wages, with a reaction on the standard of living increase* in quantity of money, will not necessarily prevent a fall in the price level, since the whole increase may bo absorbed by speculation. The monetary policy cannot govern tbe price level unless the use of money, as well as the quantity, can lie controlled.

The maintenance of a stabilised price is a world problem necessitating that the real value of gold namely its purchasing power over goods and services shall remain constant wherever it is used ns a standard. There was an unprecede ll ted draft last year of 17 per cent, in the wholesale price level. We naturally seek to discount whether a contributory cause is a diminuation in tbe supply of monetary .gold. We Kind that although; the newly mined gold, to the extent of probably one hundred millions sterling, has become available during that period for monetary and credit purposes, more than twice that amount has been absorbed by two countries without a corresponding addition to money in active circulation. That gold is as barren as when it lay in the mine.

Mr McKenna strongly advocated an international discussion agreement to prevent such an uneconomic decline in the active stock of gold. There should be a frank recognition by monetary authorities of the desirability of a stable world level. .Either more gold must be added to the quantity available as a basis for currency credit, or a more effective use iv.nst be made of tbe existing stock. Resource must be had in an international agreement.