EMBARRASSING GOLD.

Manawatu Herald, Volume XLV, Issue 2584, 24 May 1923, Page 4

EMBARRASSING GOLD.

PARADOX OF AMERICA’S HOARD. Sir Joseph Stamp, la to Assistant. Secretary to the Inland Revenue Board, writing on “The Great Gold Paradox” in the Weekly Dispatch, points out what gold cannot do. Now that the greatest assemblage of gold that the world has ever known has been collected in the vaults of New York, far-seeing men on both sides of the Atlantic are beginning to realise a remarkable economic paradox, he says. Briefly stated, it is that instead of this heap of precious metal proving a source of security to the country which owns it, it is a source of danger; and that instead of its making lighter the burden of the masses of the people in whose country it is lodged, it lays them open to innumerable problems. The United States Government to-day possesses nearly half of the total supply of the world’s gold (i.e. nearly £1,000,000,000), according to the latest annual report of Mr W. R. Crissinger, the Comptroller of Currency. This does not necessarily mean that America is either better clothed, housed, or fed than we ourselves. You cannot eat gold. You cannot make it into clothes. You cannot build houses of it. Gold is, in fact, an almost useless thing so far as ministering to the real needs of a human being is concerned. Its chief function is to serve as the foundation for the structure of credit, and as a basis of value and exchange. AN INSIDIOUS DANGER. This gold must either be kept internally and have an immense influence upon prices, or it must go out of the country to purchase goods.

The whole economic structure of America has been tending to become that of an exporting country, and of course, her tariff traditions are based in that way against imports, whereas with the payment of a debt by us, and also the desirability of exchanging this gold for goods, she is now almost inviting an influx of goods which must be against her whole economic inclination. She will naturally not like sending the gold out of the country to receive goods in exchange. That would raise a, howl about the tariff at once. Therefore, she is driven to keeping it within her own country. If it leaves her vaults and goes into general use it will have the usual effect of vastly increasing prices, unless there is an enormous increase in production. But there is an even more insidious danger—namely, that the possession of this quantity of gold may lead the Federal Reserve Board largely to inflate currency. What we want to do is to avoid the severity of trade cycles for every spasm of artificial influence leads further away from the desired object. Every burst of inflation raises new social difficulties, and

just as we are getting into tlu> comparatively level waters after the rough following on the wjvt, we naturally dread new disturbances which may arise in this way. We can only hope that the banking authorities in America realise the responsibility that they have to the world in the way in which they handle their gold problem.