The Daily News. SATURDAY, SEPTEMBER 18, 1915. AMERICA'S GLUT OF GOLD.

Taranaki Daily News, 18 September 1915, Page 4

The Daily News. SATURDAY, SEPTEMBER 18, 1915. AMERICA'S GLUT OF GOLD.

So far back as the second week in January last the London money market was becoming uneasy about the financial and commercial future. The shrinkage of exports was regarded aa a bad sign, and exchange conditions pointed to the possibility of gold being exported to tho United States. This is exactly what has happened recently when the continued fall in the value of the British sovereign in America became an element of danger in British finance. Apparently the fiscal relations of nations have lost their equilibrium in consequence of the abnormal conditions arising from the war. Trade for Government contracts is a very different thing from a genuine export trade to foreign (outside) customers, for money spent in munitions is unremunerative. Most people are under the impression that the fiscal system under which international trade is conducted is a marvel of intricate mechanism, whereas, in reality, it is based on that most simple and primitive method which was instituted in earliest times of the world's history—barter, or exchange. Like the globe which we inhabit, the affairs of trade and commerce cannot stand still, but, must over revolve, or, commercially speaking, circulate. When' an upheaval in the ordinary conditions of commerce takes place there has necessarily to be an adjustment in order to preserve the equilibrium. Gold of itself is useless until it becomes the means of providing the various necessities of the world's population. As. a matter of fact, the vast organisation which controls the distribution of the world's products is based on exchange, gold merely forming the basic standard as applied to values. It is this exchange, however, that reflects the purchasing power of gold, hence we see to-day the United States being in the unique position of not wanting gold, because her immensely increased export trade is causing a glut of gold there, and consequently u loss of profit which arises through the closing of channels of investment. This is due to the marked diminution in the imports from England and her Allies, and it shows how necessary it is in these days to ensure that imports and exports will keep pace with each other. The result of this upsetting of normal conditions is seen in the fact that England ha 3 had to send to America many millions sterling in order to rectify the exchanges; but America has already more gold than she can profitably utilise, and the only available solution of the problem is that of sending the gold back by way of Iqan at interest. It is an accepted maxim that a nation must be impoverished if there is a steady outflow of commodities with a corresponding influx of mon.ev, far the life of a nation

is its trade, and that trade mu3t lie both inwards and outwards. America's difficulty is that most of her trade is outwards, and as the belligerent have little to Bell she is receiving gold instead of goods. The ultinjate object of currency is to feed and maintain the people. America is producing foodstuffs and war material for the people of Europe, but is getting gold in return, and, as we have shown, gold itself is neither food nor maintenance, being merely metal worth so much an ounce. It seems paradoxical to state that gold can make a nation poor, but in effect) it is a truism. In time, after the war, the anomaly will cease to exist, having righted itself, but in the meantime America is at a great disadvantage. This accounts for the urgent desire of American bankers to furnish the Allies, and especially Great Britain, with loans. It is not surprising, therefore, to find that the Anglo-French Financial Commissioners are proposing to borrow the huge sum of £200,000,000 in America—an amount that is a record in the history of American finance. Naturally, the German banking element in tie United States is actively antagonistic to such a loan being granted, and threats of vengeance on the members of the committee have necessitated the greatest secrecy as to places and time of meeting, but the latest news indicates that it will be floated. The alternative would be to continue sending gold to America for all purchases, and that would intensify the present glut The situation is unique, but not more so than the factors to which it is due.