EXCHANGE AND CURRENCY.

Auckland Star, Volume LXII, Issue 70, 24 March 1931, Page 6

EXCHANGE AND CURRENCY.

Mr. Chas. L. Stevenson, in his letter which appeared under the above heading in the "Star" of the 19th inst., makes a statement entirely contrary to actual facts ae proved, by experience when he says: "It is well knowa that a shortage of gold is largely the cause of falling prices." It is true that an increased circulation of gold will cause a rise in prices, but it i≤ equally true that an increased circulation of paper money will have an exactly similar effect to a corresponding increase in. the amount of gold money in circulation. This has been proved times out of number in the history of finance without a single exception. There is to-day more gold in the world than ever before. The United States of America has in recent years been deluged with gold, and yet, though times were exceptionally prosperous while that gold was circulating, now that gold has got into a few hande, and everything has become mortgaged up to the hilt, prices are falling, and there seems as much unemployment there as anywhere else. During the Great War prices rose, not because the quantity of gold suddenly increased, but because of' the total increase in the amount of money put into circulation, mostly paper money. Scotland was raised from a state of barbarism to opulence and wealth entirely with a paper currency. The whole cauee of the present, and all previous financial crises, is the load of debt and mortgage.? with which the world is beset, and only when these are wiped out can we hope to return to a more prosperous condition. And I will undertake to say that if I had control of the finances of this country I could restore it to a etate of. complete prosperity without any increase whatever in the amount of gold available. C.P.W.