The Auckland Star: WITH WHICH ARE INCORPORATED The Evening News, Morning News, The Echo. SATURDAY, MAY 30, 1931. THE WORLD'S MONEY.

Auckland Star, Volume LXII, Issue 126, 30 May 1931, Page 8

The Auckland Star: WITH WHICH ARE INCORPORATED The Evening News, Morning News, The Echo.

SATURDAY, MAY 30, 1931. THE WORLD'S MONEY.

For the cause that lacks assistance, For the wrong that needs resistance, For the future in the distance, And the good that tee can do.

One of the few financial experts who are recognised internationally as authorities on monetary problems is the great Swedish economist Professor Cassel. Not only is he celebrated as the author of several valuable works on financial questions, b$ he has twice prepared reports for the League of Nations on the world's currency. What Professor Cassel has to say on such subjects commands world-wid© attention and respect, and in his recent address to the Institute of Bankers at London he expressed certain strong and definite opinions on the depression from which the world is suffering just now and the remedies that should be adopted to combat it.

There may be some risk in interpreting literally the brief abstract of Professor Cassel's address supplied by cable. But apparently he attributes the fall in prices, with all its disastrous consequences, chiefly to the mistaken policy of "the leading central banks." These institutions, desiring above all things to maintain the gold standard and to prevent inflation, have insisted on keeping disproportionately large gold reserves. This means that they have artificially limited the amount of money in circulation by restricting their issue of notes to a certain low multiple of their stock of gold. The volume of currency, representing the demand for goods, has had no chance of adjusting itself to the world's constantly increasing production, and so prices have fallen, investments have become unprofitable, and trade and industry have in many countries collapsed.

All this is implied in Professor Cassel's declaration that it is .time for the principal banks of the world to co-operate and "end the depression" by announcing their intention "henceforth to supply the world so abundantly with means of payment that a further fall in prices would be impossible." Incidentally, Professor Cassel charges the monetary policy of the United States with the chief responsibility for the crisis. Under the Federal Reserve system, only a small proportion of the enormous amount of gold accumulated by the United States is treated as a basis for currency issue, and the very large reserves maintained by the'banks under this system have virtually sterilised a considerable percentage of the world's limited stock of gold. If this Avere made the basis of note issues to a reasonable extent, the demand for goods would be correspondingly increased, and inevitably prices would rise. Now, Professor Cassel is not advocating what is usually termed Inflation, nor condemning the institution of banking, but only the mistaken policy of those who now direct it. It may be noted that he appears to suggest that the reluctance of the banks to modify their established system of currency issue is due at least in part to a desire to maintain their monopoly of gold and the immense advantages that its possession implies. This, in his opinion, is the reason that they have resisted "efforts to gain control of the monetary system," and he insists that the time has now come to regulate the purchasing power of money by directing the issue of currency on rational lines. It is not clear whether Professor Cassel proposes to "ration" gold, and the currency based upon it, between the world's leading industrial and commercial centres, or whether the issue of notes is to rise and fall with the fluctuations in the market price of goods. What is chiefly important in this interesting pronouncement is Professor Cassel's conviction that the existing world-wide depression is largely due to the fall in prices caused by lack of purchasing power, that this comparative scarcity of the circulating medium is due to the insistence of the banks on excessive gold reserves, and that by co-operating together "the leading central banks" could husband or distribute their resources in such a way as to bring the present disastrous state of things to a speedy end.