WELLINGTON NEWS

Hokitika Guardian, 28 August 1931, Page 7

WELLINGTON NEWS

THE WORLD’S GOLD

(Special Correspondent)

WELLINGTON, August 26

The stocks ot' gold held in the United States now amount to 4,983,000,000 dollars (£990,600,000), and this it is said is equal to nearly one-halt the world’s supply of monetary gold. 'ln reporting the fact the Federal Reserve Bank states that despite efforts to check the flow stocks are now i491,000,000 dollars (£9B-,200,000) greater than in 1930. With all its wealth in gold the United States is suffering equally with other nations, so that the possession of an immense stock of gold lias not saved the country from the prevailing depression, at all events the serious economic conditions in U.S.A., and they are serious, are not due. to the gold problem. Why is gold flowing to the United States where it is not wanted? The answer to that is wrapped up in war debts and high tariffs. Sixteen nations have to pay war debts to the United States and they pay interest and amortisation indollors and not in pounds, francs, marks or shillings. The onus is on the debtors to obtain the dollars and they can do that only by selling goods either direct to the United States, and thus obtain dollars, or they may sell goods to some other country that possesses dollars through the sale of goods to America. The debtor nations would prefer to sell goods direct to the United States and obtain the dollars in that way, but the American Customs Tariff prohibits the sale of goods in that country, consequently the debtor countries being unable to obtain the dollars they require to meet their debt payments to the United States, are in consequence. obliged to send gold, and that is why gold is accumulating in the United States. It is claimed, by the Federal Reserve Board that efforts have been made to check the flow of gold, but these efforts have been very feeble. At 'most they consist of maintaining low money rates in New York and lending to foreign countries to a very limited extent. When money is cheap in London borrowers take advantage of the occasion to float loans, and they do so because they know of the difficulty of obtaining sterling with which to meet their obligations. They can sell goods in the Unitea Kingdom or other countries holding credits in London, but it is different with' the United States. Although money is exceedingly cheap in the United States that is no inducement to foreign borrowers because of the re- I payment difficulties due to the prohibitive tariff. This situation is bound to continue and the American position to become worse unless inter-gov-ernmental debts are cancelled or the tariff lowered. If neither is don e then Europe, which is 'America’s best customer, must further restrict the purchase of American goods, and a further full in America’s export trade "ill greatly increase the difficulties of the United States. It is not the possession of a board of gold that makes for prosperity, but healthy international trade. Nations must buy from and sell to other nations if the price level is to be maintained. The United States believed in one-way trade, she wants to export and not to import, which is against the law of economics. America has supplied a splendid example of barter, which is the essence of international trade. America has wheat to sell, and Brazil has coffee to sell, but instead of , money passing between the two countries goods are being exchanged. America will be obliged in her own interests, and not from any altruistic motives, to cancel th e war debts or make a drastic scaling down of those debts. The United States is wedded to a protection tariff and unless the Democrats win the next election the present high tariff will be maintained. Tile war debts are difficult and there is a growing opinion in that country that the war debts should be cancelled. Eminent bankers, financiers, '.and economists all support concellation, and processor Butler, Economist at the Columbia University, has indicated his intention of undertaking a nat-ion-wide campaign in favour of cancellation of war debts to reduction of tariff. Tile latter can be met with high duties but war debts must be paid to a creditor who makes it extremely difficult to discharge his obligation. The next step rests with the United States, and if war debts are cancelled that will see the early break up of depression.