THE GOLD STANDARD

Rotorua Morning Post, Volume 2, Issue 562, 20 June 1933, Page 4

THE GOLD STANDARD

One of the most important subjects to be discussed at the World Economic Conference is the return to the gold standard of all the countries that have abandoned it. Some people tell us that the days of gold are gone and that it is quite unnecessary to retaiin it as a .standard of currency, but they are mostly people with little practical knowledge of the necessities of international trade. We may regard it as certain -that a return will be made to the gold standard, the only point at issue being whether at the present time it is possible to do so. In the old days Britain maintained the ' gold standard easily enough. If the gold reserve was drawn on too heavily the bank rate was raised and gold flowed in again. In 1931, however, this method proved insufficient, as there was a continuous drain on London -gold owing to distrust of the soundness of British finance un-

der the Labour Government. Britain borrowed £130 millions from America and France in an effort to restore confidence, but it was vain and, on September 21, 193 T, sbe was forced off gold. The setting up of a National Government, strict economies and the balancing of the Budget made conditions sound again and sterling, by careful management, remained somewhere about 3w dollars. It was thought that ultimately it might be stabilised at j that point, though with £800 millions of gold in America and £500 millions in France it did not seem possible for Britain to return to gold, until its distribution became more favourable. It was intended to discuss the prGblem at the Economic Conference, but little more than a month ago the United States suddenly abandoned gold, although there was no necessity for her to do so with vast hoards of the metal in her vaults. It is said by some that it was a bareraining move for the Economic

Conference, but this does not appear to be true. Conditions- in the United States are f ar worse than is realised overseas. The farmers are ruined, with prices at a very low level and interest payable at high rates on mortgages raised in boom times. There are 12,000,000 unemployed, and manufacturers find that they cannot export goods at competitive prices to countries on the sterling basis. The country is full of people demanding inflation and Congress was ready to adopt the wild'est schemes The result was that President Roosevelt took the lead and went off gold, in the hope that he might be able to control the inflation more easily than could be done under panic legislation. It was a course compelled by domestic •forces, but that does not prove that it may not be used as an international weapon. Britain was forced off gold, but she found that she was better able to compete with countries still on the gold standard. President Roosevelt's reasons for his action were explained briefly as follows: It put the United States in the same economic position as other nations ; -it would raise commodity prices; it would enhance the possibility of the nations getting together on a comT mon economic programme; it would facilitate the return to, the gold standard, though probablv ori a different gold ratio,

substalitially below that at prer sent prevailing. This statement indicates that, though the President abandoned gold for domestic reasons, he is hot unwilling to use the departure as a bargain-

ing weapon at the conference. Britain. is determined not to be forced back on to the gold standard in order to meet the desires of American speculators and business men, with a great risk of being forced' off again by the pressure of the gold hoarded in America. She will certainly want to see her way perf ectly clear before she returns to gold. The i position -is interesting because ! Mr. Cordell Hull, the American representative at the Economic Conference, has some proposals to make which may have a bear- j ing on the-position. |