PAYMENT IN GOLD

Rotorua Morning Post, Volume 2, Issue 410, 20 December 1932, Page 2

PAYMENT IN GOLD

EFFECT ON WORLD PROFESSOR TOCKER ANALYSES BRITAIN'S DEBT ACTION. DEPLETION OF RESERVES. Christchurch, Saturday. Remarking that Great Britain's determination to make its war deht payment to America in gold bullion affords an interesting commentary on the monetary affairs of the world today, Professor A. H. Tocker, Professor of Economics at Canterbury College, questioned hy a Sun reporter, did not think that the transfer of this gold would have any effect on the monetary policy of either country as it was a comparatively small amount. He pointed out that it would deplete Great Britain's gold reserves, and the smaller the reserves Decame, the less likelihood there was Great Britain restoring the gold standard in the near future. Under normal conditions, with hoth countries on the gold standard, such a payment would contract monetary reserves in Britain, and would probably force up the bank rate, restriet bank advances, force eommodity selling, and lead to a lowering of prices, which would decrease imports into and increas'3 exports from Britain, said Professor Tocker. On the other hand, the increased gold holdings in ^Ajnerica would set the reverse processes in motion, and the changes in the two countries combined would readjust the halance of puym'ents between them in such a way as to make future gold movements unnecessary.

At present, however, Great Britain was definitely off the gold standard while America remained qn that standard, but the gold standard was now in operation over such limited field, and world trade was restricted to such an extraordinary extent, that such movements of gold were likely to have little significant effect on the monetary system in either country. "In the case of England,' he con-( tinued, "the Government would probabaly borrow or buy the gold from the Bank of England for shipment to America, but there is now no neces- i sary relation between the gold reserves of the Bank of England and the credit and uiscount policy of that bank. Consequently, the depletion of the bank's gold reserves by the export of that gold may have no effect whatever on England's monetary policy or on her future balance of payments. "The receipt of this sum by the American Government will me'an a small increase in revenue, which may lessen her budget deficit slightly, but the addition of the relatively small amount involved to America's huge gold reserves is not likely to have any appreciable effect on monetary conditions in that country. The depression in, America is certainly not due to a scarcity either of gold or credit. The present gold reserves are quite sufficient to justify credit expansion, and strenuous efforts have been made for spme time past to increase the volume of credit in the country in the hope that this may stimulate business expansion, and improve prices. It app;ears, therefore, that the addition in gold will have little effect oa( economic conditions in America or Britain. ■ "It will, however, add th'e amount involved to the British Government's expenditure for the year, and add the same amount to the American Gqvernment'sc revenue; it will merely tend to increase the Budget difficulties in Britain, where the Budget has b'een balanced, and to lessen the difficulty ip America, where there is r huge deficit. 'jThe further depletion of 'Great Britain's gold reserves may postpone to the more distant future any expeetations of he'r return to the gold standard. Great Britain has, of course been operating on a managed eurrency Since the suspension of the gold standard ih September, 1931, and there is i).o doubt that it must continue on a managed currency for some time tq dome,"