N.Z.’S GOLD POSITION

Hokitika Guardian, 27 October 1931, Page 3

N.Z.’S GOLD POSITION

(By G.C. BILLINGS, B.Com. Acting Professor of Economics, Otago University, in N.Z. Financial Times. “It is the purpose of this commentary to emphasise as strongly as possible certain aspects of the relationship of New Zealand affairs to the present world depression. Some matters, such as the need for a check on the foolish extension of tariff policies are so much bound up with popular prejudice and ignorance, that attempts at remedy other than a long and necessarily slow campaign of economic education, seem rather hopeless. But the matter of the immediate depression and its return with fall tug prices does present a challenge to immediate action. Even those who do not admit that monetary conditions tire the most important cause of all our trouble can hardly deny that while prices continue to fall there is little hope of improvement in the state of industry. To bring about confidence in the future we must stop the present downward movement, and towards that end our powers should be directed with an inflexible will achievement. And if it is true that the most effective way is through greater co-operation between the central hanks of the world, then the ordinary person may well ask how long lie must wait for something to be done. But it may be that the failure of the majority of people to understand currency questions and the prejudice against changes in traditional systems-may constitute a bar to tins development. It is therefore the immediate purpeso of this comment to direct increased attention to the currency position in New Zealand, and to stress the necessity for reform. As Dr Condi life has pointed out. the question of gold stocks, gold output, and gold reserves against liabilities is one of the matters of most pressing urgency. Just how New Zealand stands in this connection is by no means clearly defined in the public eye. But shortly, it may be stated that at present the quantity of gold held by New Zealand banks has no connection at all with the quantity of notes issued. This quantity depends rather on the amount sainted to maintain, as far as possible, exchange stability with the pound ster ling. New Zealand has been using, more or less unconsciously a system devised and fairly widely practised today, to enable gold stocks to he economised. A definite recognition of this system in New Zealand would enab’e other steps, of a more far-reach-ing character to be taken. The whole point is that under such a system a reserve of gold in New Zealand,is not I necessarv. But even assuming that it is desirable to keep our present provision of one-third gold reserve against notes issued, the actual state of affairs is sufficient commentary on our fai ure to move with the times and to help to grapple with the mam problem of gold supplies. Some weeks ago our papers published figures showing the gold stocks and proportion of mild held to currencies in certain lending countries. The actual percentages are here repeated, and to them is added the percentage for New Zealand taken from the Monthly Abstract ol Statistics and representing the position on April 13th of this year:U.S.A 111.1 per cent. ~;l >1 ” I'ranee Germany ... 93.7 ” ” Italy ‘ 31.9 ” ” Britain 41.8 ” New Zealand ... 119. G ” It is perhaps a shock to most New Zealanders to find their own country a greater sinner, relatively, than the much discussed United States. Once against, therefore, it is urged that this

unnecessary gold should be scut to London to add to the resources of our central Empire store, the Bank of England. Even though the addition to stock would lie a tiny mite comparatively. the'victory of conscious control over the fetish of go'd ‘cover’ won d he an important stepping stone in the development of a more scientific cuirency policy. Such a step would be all the more easily possible if the note issue of the Dominion were in the hands of one authority such as the projected Central Bank. Then Dr. CondjifFo’s aim of a group of Dominion Central Banks co-operating with the Bank of England would represent important machinery functioning in the effort to use our gold stocks wisely and to pre-

vent a greater fall of prices. Such a development would at least make easier effective world co-operation, upon which so much depends. The success of such plans depends in large measure on an enlightened confidence replacing ‘the pathetic blind faith in tradition,” which is so characteristic of public thought in all countries. New Zealand has in the past made important contributions to the general system of economic organisation and lias aroused considerable interest in (he great countries of the world. Lie influence now of a bold attempt to bw ik new ground lor herself and ■ o gi-e a lead in solving the gold question would surely not be less than that of her other notable achievements.”