Auckland B>tar WITH WHICH ABB IKCOBPOEATED 2STIjp turning fUnrutttrj s;ljr Grhn aitil cbr S'lm- THURSDAY, NOVEMBER 2/1933. wammtmmamammmmmrnmmmmmmmammmmtAt 1,1 "■ «■■■■■■■■■ HUNGER FOR GOLD. ,

Auckland Star, Volume LXIV, Issue 259, 2 November 1933, Page 6

Auckland B>tar WITH WHICH ABB IKCOBPOEATED 2STIjp turning fUnrutttrj s;ljr Grhn aitil cbr S'lm-

THURSDAY, NOVEMBER 2/1933. wammtmmamammmmmrnmmmmmmmammmmtAt 1,1 "■ «■■■■■■■■■ HUNGER FOR GOLD. ,

For the cause that lacks assistance, For the icrong that' needs resistance, For the future in the distance, And the good that ice can do

Gold buying is President Roosevelt's reply to the demand in America for currency inflation. Although the country now has monetary and credit resources as great as in 1929, before the slump began, and although the price level of nearly five years ago could be maintained if other conditions were normal, the fact is that prices to-day are held down because there is not the will to buy. From four to six months ago, in the early stages of the Roosevelt programme, the potential purchasing power of the nation began to have its effect in forcing up prices, and if the movement had not been checked by unwillingness to buy it could have gone much further without putting a strain upon the money system. A freer use of money, more than an increase in the supply of it at the source, is the need of to-day. The price problem in America, as in the world generally, is two-thirds a question of rapidity of circulation, and only one-third oi the supply of money. Knowledge of this, however, is little help or consolation to President Roosevelt in present circumstances. His earlier measures were to prohibit hoarding or the expoit of gold, to extend credit, and to reduce hours and fix minimum rates of wages. These steps drew large numbers back into employment, but at the same time raised the cost of manufactured goods, while primary products, and thereby the prosperity of nearly half the -population of the United States, continued to be low.

Now, to help the farmer -who has been clamouring for inflation, President Roose\eltj has launched his gold policy. His first step last "week, in offering to buy gold at an advanced price, has been followed quickly by a decision to make purchases abroad. So far as his immediate purpose is concerned this indicates a determination to secure gold, whatever the source of supply, and if he cannot get it inside the country he must buy elsewhere, which means in London or Paris. It may be asked why such a hunger for gold should manifest itself in a country already possessed of a huge supply, and the explanation is simply that the law requires a reserve percentage of 40 against the note circulation. Such ample cover may be regarded as unnecessary, but President Roosevelt holds to the contrary view. He is not prepared to reduce the percentage and thus build a larger note issue on the gold he now has. The alternative is to expand the gold basis. To attain his end he is ready apparently to outbid other nations and force up the price of gold in the world markets. For the gold standard group, of which Prance is the head, the consequences of a gold drain may be a serious matter, with a depressing influence on prices. And if prices in Europe are to be subjected to downward pressure in order to raise the lev el in the United States, it is by no means clear how far the world on balance will gain, nor is it certain that President Roosevelt will be allowed to carry out his policy free of foreign opposition.