WELLINGTON NEWS

Hokitika Guardian, 17 November 1931, Page 7

WELLINGTON NEWS

THE' GOLD STANDARD. (Special Correspondent). WELLINGTON, November 13, South Africa is feeling the effects of (Britain’s abandonment of the gold standard, and lias been forced to borrow so as to have credit in London. From all the information available and from the writings of eminent economists and ■financiers it is obvious that no one is able to state what the repercussion will be, or when and at what figure sterling will be stabilised, and when Britain will revert to the gold standard. It V-’as believed that the departure off Great Britain from the gold standard would mean the inauguration of an £i’a of general commodity price inflation, but this theory w’as based on' the precedent of the war, when declining exchanges were accompanied by price inflation.

During the war the various European governments whose exchanges were most affected were printing paper money and expanding credit on a large scale, and the constant dilution of the purchasing media was reflected both in the price tables and in the exchange market. The situation is very different now for the cause of the difficulty is not so much internal inflation as a breakdown in international confidence which has precipitated a run on important money markets. It must be admitted, however, that when a country throws off the restraint of the gold standard it makes the way 6( inflation much easier, but it does not necessarily follow that a country will go that way. We may be sure that Great Britain will make heroic, efforts to guard against inflation. It is pointed out that the depreciated pound will enable foreign customers to purchase British goods more cheaply, while at the same time acting -as a protective tariff against foreign competition in the home market. It is obvious that the price of .British goods to foreigners can be lowered temporarily by money, but, as one authority explains, as the drop in exchange begins to be translated into higher prices for | foodstuffs and raw materials, what as- j surance is there that British manu-' facturers can retain the advantages of low costs conferred upon them by the, depreciated exchange. |

The prices of. foodstuffs ate being kept down in Britain, as we know, by the prices realised for our dairy produce and frozen meat. What the long-term effects of the current events are likely to be on London as a financial centre

is difficult to say. ‘'Unquestionably (asserts an American authority) London has a knowledge of and facilities for international financing not possessed anywhere else at the present time. On the other hand the fact that New York and Paris markets constitute the only international money centres .securely on a gold basis seems certain not to be overlooked.”

Recent developments have put Great 'Britain and Europe generally back where they were before resumption in 1925, which in retrospect seems to have been premature, “The post-war developments (states an exchange) have been more than the single gold standard was equal to handling, It is preposterous to say that this proves that the single gold standard js impracticable in a highly organised world.

If the world is not advanced far enough in civilisation to use a common monetary .standard, it will have to fall back on some more primitive means of exchange, but it will come back to a common standard for the same reason that it evolved one gradually over the centuries and again groped its way back to. the gold standard after the war.” The necessity for large unnatural payments on international debts, the innumerable obstructions placed upon international trade and the political discord and jealousy ■ existing between nations are the real source of difficulty.