U.S.A. GOLD STOCKS.

Auckland Star, Volume LXXI, Issue 144, 19 June 1940, Page 5

U.S.A. GOLD STOCKS.

MAY BE LIABILITY.

A COLLECTOR'S HOARDINGS.

MAT STRANGLE TRADE. (By JOSEPH ALSOP AND ROBERT KINTNER.) WASHINGTON. Kipling wrote a poem describing gold as a greet underground river, running round the world, fertilising trade along its course. The economists primly call gold a "commodity," and William Jennings Bryan got himself a Presidential nomination by bellowing that sit was a crown of thorns. Gold is a mysterious substance at any rate, and most talkabout it is fairly footless.

For example, there was a tremendous row about how the U.S. Treasury, by buying gold from Russia, was financing Russia's brutal invasion of Finland. This was hardly news, since the U.S. Treasury stands 'ready to buy gold from allcomers, at the standard price of thirtyfive dollars an ounce. What is news is the fact that the U.S. Treasury will soon cease to "finance" Japan's invasion o: - China, because the Japanese are just about scraping the bottom of the barrel where they keep their gold supply. Bolstering the Value. The reason why the Treasury cannot "stap financing Russia" and has had to wait to stop financing Japan until Japan's gold ran out is fairly simple. Back in the Kentucky hills 18,000,000,000 dollars worth of gold—the largest hoard ever accumulated by any nation in the history of the world— is stored in an underground fortress. The hoard is only worjth 18,000,000,000 dollars because thr Treasury is willing to pay 35 dollars an ounce for any gold offered for sale. If the Treasury cut its gold price, it would also have to write down the value of its underground hoard.

Thus poor Secretary Morgenthau is ii; the unhappy situation of a collector who has invested his fortune in antique shaving mugs, early English eyebrow

tweezers or something similar. By investing his fortune in them, the collector makes the market for the shavingmugs. If he stops buying, the price of shaving mugs drops and his fortune i* gone. Like the collector, therefore. Secretary Morgenthau must go on buying.

Nor would it do any good for Morgenthau to eay, "I will buy gold from you and you; but from you and you, the cut of whose jib I dislike, I will never buy." To get round such an edict, since gold is an unidentifiable and universal metal, the Japanese and Russians would simply send their gold to the London market. ;In the London market, they would get sterling, which they could then exchange for dollars. Meanwhile the English would pass on the Japanese or Russian gold to us. May Cease to be Exchange Medium.

It is at least pleasant that the Japanese have about come to the end of their gold, except for the 50,000,000 dollars worth, they produce annually from their mines. They started their invasion oi China with a kitty of 450,000,000 dollars and a large export trade. There is not 50,000,000 dollars of the kitty left, and the war has knocked their export trade into a cocked hat.

It is extremely unpleasant, however to think of what may happen after the war, when we have most of the French and English gold as well as the Japanese and Russian. Asiwell as being like a r ver, gold is also like the chips in a poker game, international trade being the

game. When the war is over, we will be in the position of having won the vast majority of the chips but, because we I are such huge winners, being unable to

cash them in. The game of international trade will be at a standstill, for want of a medium of exchange. And we won't have much to do with our gold except make a nice set of real gold chairs for White House musicales. That is, unless we wisely choose to lend the other players new stakes.