GOLD SUPPLY.

Auckland Star, Volume LXI, Issue 227, 25 September 1930, Page 7

GOLD SUPPLY.

WORLD RESERVES.

Future Shortage Feared By

League Experts.

FINANCE COMMITTEE BEPORT.

(United P.A.—Electric Telegraph— Copyright)

GENEVA, September 24.

The Committee of the League of Nations, which has been examining questions concerning the world's gold supply, has issued an interim report.

This estimates the gold reserves in banks and treasuries at about £2,007,000,000 with about £183,000,000 in circulation in a few countries, in commercial banks, and in hoards outside Asia, of which £79,000,000 is in the United States. A considerable part of the latter is permanently lost for effective monetary purposes.

The report estimates tlie gold production of 1930 at about £80,800,000, after ■which, it says there will be an increase for three or four years.. Eventually production will decline each year until it will total about £74,000,000 in 1940. After that the decline is likely to be accelerated owing to the gradual exhaustion of the African mines unless new unexpected supplies are discovered, or new processes for increasing the yield and enabling old mines to be reopened are invented.

The committee expresses the opinion that, although the demand for gold for monetary purposes has been temporarily checked by the existing economic depression, the evidence points conclusively to a serious situation arising when trade revives unless alleviative measures are taken in time. It says it believes the supply of new gold will be inadequate in 1934 unless such measures are adopted. Remedial Measures. la the belief that remedial measures can be found within 10 years to remove the anxiety as to the effect of the gold shortage the- committee says it welcomes the discontinuances of gold coinage in domestic currencies,. It does not believe that course has weakened credit.

The hope is expressed that gold will be concentrated in reserves in central banks accompanied by limitation of its use as payment for international transactions. The committee says it believes the minimum legal gold cover against notes, which is largely traditional, could be reduced. These measures would effect economies in. the use of gold without weakening credit. They would require international agreement but the difficulties are not insuperable.

The report suggests the extended use of cheques, the replacing of small bank notes by subsidiary coinage, also the adoption of the gold, standard by countries which have not yet stabilised their currency. It urges countries which employ the gold exchange standard seriously to consider the consequences of any considerable conversion of their existing asset reserves into gold.

The committee expresses the opinion that confidence in the gold exchange standard system could be increased if there -were international agreement that reserves held abroad for the maintenance of currencies would not be subject to seizure or confiscation in time of war.