Bay of Plenty Times. WEDNESDAY, SEPT 10th, 1924. RETURN TO GOLD STANDARD.

Bay of Plenty Times, Volume LIII, Issue 8683, 10 September 1924, Page 4

Bay of Plenty Times. WEDNESDAY, SEPT 10th, 1924. RETURN TO GOLD STANDARD.

We have given the views recently of some, financial, authorities on the- probability of a return to the gold standard. Those authorities have counselled caution. Dr WF. Leaf, chairman of the Westminster Bank, on the contrary, would have a return quickly- He is perturbed at the expressed intention of the .Federal Reserve Retard to help Germany along the mad to a gold currency. He says that the intention of the Dawes (reparations) report is that the- resources of the Feiieral reserve banks should be freely used in the purchase of gold mark bills in order to maintain the parity of Die gold mark exchange, “It cannot be denied.” he continues, “that there is here a serious challenge to Die international position of tin* pound sterling. It nay be urged that hitherto the pound, in spite of the depreciation from which it has long suffered, has hold its own against the dollar, and that London is at least as much Die centre of international finance now as it was before Die war. London, no doubt, holds its place because cf its commercial relations, so widely spread throughout the world ; whereas America, which made a bid for similar relation after the war, has practically abandoned the competition ; and it may be true that until the United States can hold her own in world trade, they cannot seriously think of .supplanting the pound by the dollar. But a new prospect is opened up by the Dawes report. Germany is not only to be put upon a gold basis and strictly kept there, but she is to be stimulated to an enormous expansion cf exports, such as will put her in the first place among the nations engaged in world commerce. The possibiities of a combination between the dollar and the gold mark, between the credit resources cf the United States on the one hand and German enterprise on the other, form a prospect which cannot be regarded wit h anxiety, so long as the pc and is depreciated in the exchange markets of the worldTo put it plainly, the depreciated pound would be squeezed out of world finance between the two great cold currencies, the dollar and the mark. In self-deference, we should be forced cn to a geld basis for t-he pound, whether we wished it or net. Is it- not time that wo should face the situation soon, and take steps for restoring cur parity of exchange in our own time? “We have hitherto- been clinging tc a policy of ‘wait and sec,’ in the belief that the acoi.mulation of gold in America would inevitably bring about some inflation on the oilier side of the Atlantic; it was clear that a very little inflation, if not followed up on this side, would serve' at once tc 1 restore the parity. But the United States have so far citing rigidly to their policy of taking all th(' surplus gold of the world and ‘sterilising’ it, sr that it should have no effect in an expansion of currency. There is n<> sign at present of a reversal cf this attitude. Tin* report cf the Advisory Council assumes that there will be nr, reversal, and sieks an cutlet fer the use cf American gold reserves in Europe. It may wed he that we may carry’ our waiting policy too far.” Dr Leat made a suggestion which would, he believes, bring about tin- desired end with fairness to all and a minimum cf disturbance to commerce and industry’. This is an increase of the bank rate to 5 per cent, possibly supported, if thought necessary. bv an increase in tho interest allowed by the banks on foreign deposits to, say, 3A per cent.

’ The rise in the rate.’' he ”enjinues, “shcmld be accompanied by an explicit announcement that it expressed a definite policy on the parr of this country, and that it was our intention to return to a gold basis. There can be Ht-Ie doubt that these measures, Taken in connection with the fall <f the Federal reserve rate

now in progress in America, would bring about" parity by sure and corlain steps, possibly much sooner lhan most. }K*ople are at present willing ic, expect. Such a measure should have the support of those who believe in a ‘managed currency ‘ and stabilised prices, ior it would tend to correct the ternt-mey Ki hiirluT imlox nuvnhor, whitli has* made ilsef manifest since Augusi last- It should also have the support of these who believe that we have been over-lending to foreign nations, as it would evidently mak*. 1 lie London market less templing to ovei-ra horn overs. It would, of com se, lead to an outcry in ut the imlat leiiisls ; but it is highly proh able i lial ill the long inn it would have their approval, by lending to a gradual rise of prices. For a gold basis for Great Britain would mean that we should absorb a pari at least of the annua! surplus g Id pn duetion, the surplus which at present goes to the United States oniv to be sterilised, under the steady American policy of deflation. If it came to ns. we should, no doubt, utilise seme of it ior currency purposes, and so revert to the conditions of the hrst fifteen years of this century, when the steady influx of surplus gold produced a sfow but steady rise of prices a condition of tilings which was certainly good for trade, jand led to a general prosperity such as we have not known before or since. The present artificial position seems to leave us in comnweial si agnation, and if we 'wait- and see’ much longin’, we may find that, with the Dawes report, wo have handl'd over ic Germany the financial scopin' in Europe as well as the commercial.”