The Press Monday, September 1, 1930. The World's Gold.

Press, Volume LXVI, Issue 20021, 1 September 1930, Page 10

The Press Monday, September 1, 1930. The World's Gold.

There are reported by cable to-day some comments of the Vancouver Sun on the economic position of Australia, which it accounts for in very broad, general terms. " What is bankrupting "Australia ia also bankrupting and "paralysing all the big producing "nations of the world; that is, lack of "buying power"; and what explains the world's want of buying power is " unsound distribution of world credit." While this theory exculpates Australia too easily, since.it ignores the wilful errors and the delusions that have contributed to her misfortune and distinguish it from the depression common to many countries, it holds no small part of the truth. The world's shortage of gold, created both by a lag of gold-production behind the demand for new gold and by the immobilising of large quantities of the metal, has undoubtedly helped to bring about and deepen and lengthen the greatest world slump —so Mr J. M. Keynes described it a few months ago —for seventy years. A remarkable exposition of this fact, which has been stressed in New Zealand, so far as we are aware, only by Mr Downie Stewart, was given by Sir Henry Strakosch, G.8.E., in a recent supplement to the Economist, In this Memorandum on the Economic Consequences of Changes in the Value of Gold, under the general title Gold and the Price Level, Sir Henry developed an elaborate case, which it is not easy to summarise; but the central points in the argument were these. Over-production is more j apparent than real, the appear- | ance of it being due to the j impeded rate of exchange of goods. Consumers everywhere want them, but cannot get them, because money, the medium of exchange, is not plentiful enough; and money is scarce, because gold, the basis of both currency and credit, is not being produced fast enough and is being prevented from supporting the maximum of currency and credit. While the world's production of goods increases at an annual rate of 3 per cent., that of gold lags behind by at least one per cent.; and the United States and France, in particular, have acquired immense surplus stocks of gold which support no credit at all. These countries, according to Sir Henry Strakosch, have sterilised over £100,000,000 of gold, and so prevented the expansion of credit that would liberate the exchange of. commodities and revitalise industry and commerce. To this freezing of credit is largely due the heavy faUin commodity prices during the last twelve months. So far as the shortage of gold is due to international banking methods, of course, international bankers canovercome it by revising their methods; and the Bank of International Settlements was intended and is expected to work some improvement, by ending disastrous competition for gold and by harmonising international banking standards. Sir Henry mentions the enquiry now being conducted by a Delegation of the Financial Committee of the League of Nations, from which he hopes for the result that the Bank of England will "once more lead the " other principal central banks along "the path of intelligent co-operation " towards the common object—economy "in the use of gold."