CURRENCY AND GOLD.

Auckland Star, Volume LVIII, Issue 151, 29 June 1927, Page 6

CURRENCY AND GOLD.

: The Chancellor of the Exchequer is once j more on his defence before the House of Commons in regard to the gold standard. A< Mr. Winston Churchill told his audience, the object of the of the gold basis j for British currency was to stabilise the exchanges and at the same time, by checking ! inflation, to regulate prices by indirect means! No one denies this, and no one doubts that ! these objects, good in themselves, have been ; to some extent already attained. But the real i question at issue i≤ the effect incidentally pro- ! duced by the restoration of the gold standard. and here Mr. Churchill has had a great deal* ! of severe criticism to face. For it "is held by • many competent authorities that the process i of deflation, involving a fall in profits and a restriction of credits at one and the same time, has. done more than anything else t ) produce the commercial depression and the lack of employment from which Britain is suffering so acutely to-day. One of the disadvantages that must inevitably follow the restoration of gold is very much in evidence at Home just now. Lnder the system, any foreign creditor who has a right to draw money from London may. if j he prefers, draw it in gold. Taking advantage . of the facilities for "the free movement of ' gold." which is part and parcel of the eold standard system. France has been withdrawing gold in large sums from London, and as the British currency is once more theoretically based on gold, something should be done to prevent its further loss. The normal remedy is a rise in bank rate, which, by putting no current rates of interest, makes the money market a better field for investment than before, and so attracts gold to London from abroad. But as the governor of the Bank of England has pointed out, though he would like to raise bank rate, he hesitates to do 50 "in view of the opposition of industrial and ! commercial interests.*' In fact, everybody, J outside the banks, wants cheap money, and ; I any move that would make money dear and ! borrowing expensive would be not only unpopular, but under present conditions ■ j possibly dangerous. i ! Maintenance of the gold standard is most 1 important not only to Britain, but to France, ' Germany, and the United States a≤ well j Accordingly we find that the governors of the ! great banks which control the finances of these countries are now travelling to New York to I confer upon the management of the world's I ; gold reserves and the adjustment of currency : issues to their respective needs. This develop- ! men: represents a close approach, on one side,! to that "managed" currency of which Mr. J. M. j Keynes dreams. N I