GOLD, CREDIT AND CURRENCY.

Auckland Star, Volume LXII, Issue 16, 20 January 1931, Page 6

GOLD, CREDIT AND CURRENCY.

Any attempt to deal with the present world-wide depression by international co-operative action is a step in the right direction, and the conversations that have been in progress between the French and British Treasury, officials, though apparently negative so far, promise much for the future. France is evidently not yet inclined to risk her prospects of financial stability by surrendering or helping to distribute any portion of her great accumulation of gold. This may be natural and logical enough, but the reasons put forward by the French Minister of Finance to justify this policy are open to serious criticism. M. Martin maintains that "gold follows credit/' and that the_ natural tendency of gold to pile up in certain directions should not be interfered with by "artificial" means. If by this phrase "gold follows credit" M. Martin means that gold accumulates as the inevitable consequence of a favourable balance of trade, this is obviously true. But it is equally true that "credit follows gold" in this sense that a gold reserve car. always be employed as the basis for an extension of credit facilities and an enlargement of the volume of currency. As to the objection raised by M. Martin against the "artificial" redistribution of gold, it may be pointed out that whenever an adverse trade balance is redressed, as it normally is, by a shipment of gold, this balancing of accounts involves an "artificial" interference with the accumulation jof gold. There is still much to be ,said on both sides of the controversy, but the financiers who are striving to treat this problem on international lines have already taken & long step toward .success.