OVERFLOWING WITH GOLD

Dominion, Volume 21, Issue 88, 12 January 1928, Page 13

OVERFLOWING WITH GOLD

INDIA’S UNPRODUCTIVE MILLIONS WOULD-MAKE HER POWERFUL NATION Five billion dollars’ worth of gold and silver treasure is sequestered in India in temple decorations, jewelled ornaments and bars of bullion, together with the bangles; anklets, necklaces and American “eagles” with which millions of women array themselves, according to a new study of the legendary “wealth of the Indies” submitted to the United States Department of Commerce. “Frozen wealth,” the. Government economists call this treasure, for it is distributed and used in such forms that it yields not a penny of return to its owners nor a dollar of credit to carryon the world’s commerce. With a lofty indifference to international money markets and the needs of trade, India sprinkles gold duit over the food served at extravagant banquets. Immense quantities of gold and silver are used to array brides for their marriage ceremonies, and in a multitude of other forms of decoration. Gold is bebeved, moreover, to have an occult power of healing the sick. “It is a popular remedy in the native pharmacopoeia,” says the Government study, "and medicines containing gold are favoured for many diseases.” The World’s Gold Supply. All this has more than a picturesque interest. It involves the problem of altering the distribution of the world’s gold "supply—a problem that took on' new importance when executives of the British, French and German central banks and the American Federal Reserve system recently foregathered in New York and Washington, and with the adjustment of Federal Reserve rediscount rates below the European level. As the world recovered from the financial chaos of the war most nations have struggled back to, or toward,- a gold standard for their currencies. To establish and maintain such standards they must have gold reserves. The currents of international trade and other influences have brought to America’s coffers about half of the world’s monetary stock of gold. But in the last quarter' of a century India has been quietly absorbing immense quantities of the yellow metal. With a store now estimated at about 2,500,000,000 dollars, she draws to herself a large part of the new gold produced from vear to vear. Meanwhile, the world’s gold production has declined sharply from the maximum for this century, reached between 1910 and 1915. Although there has been a recovery in part since 19-22, this increase has been vitiated, so far as monetary gold for the world is concerned, by-the increase of Indian absorption. Proposed Remedies. In an attempt to halt or at least retard this accumulation, far-reaching changes are projected in the Indian financial system. Adoption of a gold bullion basis for India’s currency; replacement of silver rupees in circulation by gold notes; establishment of a strong central bank ; and extension of savings bank facilities are now proposed. All are designed largely to wean the Indian population away from the habit of hoarding of gold and silver pieces and biillionjbars. If that is ever accomplished, India’s five billions and more of gold and silver in time will cease to be merely so much “frozen wealth.” What disturbs bankers and economists is not the size of India’s store of gold, great ns it is, so much as die way it is treated. The United States has more gold, our holdings being approximately 4,000.000,000 dollars. But this is working in an effective way. It serves as the foundation for the’ vast superstructure of credit' employed at home and lately extended, ‘ with unprecedented swiftness, to the rest of the world. Great Wealth Unused. India’s gold is idle. There is lacking even a pretence of making it add anything to the productive forces or the comfort of India’s 300,000,000 people or their fellow-beings in other lands. The exhaustive, report submitted to Washington was prepared by Don I C. Bliss Jr., Assistant Trade Commissioner at Bombav; under the prosaic title “The Bombay Bullion Market.” Mr. Bliss say? on this point: “Vast reserves have been accumulated in the course of many years—reserves estimated as amounting to more than five billion dollars. (I\Tr. Bliss here includes 2,500,000,000 dollars approximation of silver holdings), but they have been jealously hoarded in the form of unproductive precious metals. “Put to productive uses, or loaned out in the world’s money markets, they would suffice to make India one of the powerful nations of the world. 1 “The traditional ‘wealth of the Indies’ is there, but in such a form that it Yields nothing to its possessors in the way of improved standards of living or the power to command the services of others. ” Why Gold Is Hoarded. The wealth is scattered among millions of unorganised holders, and even the silver coins which constitute the metallic currency are snatched into private hoards by the ryots or peasant farmers. This problem of hoarding. Bliss’s report shows, is at the root of the pathetic plight of millions of these farmers. Hereditary custom, social organisation, seasonal harvests and the still primiitive financial system all influence* them to assemble any wealth thev have in a readily portable form and often to hide it. In old da vs of tvranny and oppression, manifest prosperity was an invitation to be stripped of one’s possessions. Hostileinvasions also forced great southward migrations of people who, to save their wealth, had to collect it in a hivhlv concentrated form. These conditions have left their influence to this very day. Other Causes of Saving. The Hindu family, moreover, oidinarily holds all real 'property and household goods in common The individual wishing to save for his own use can segregate■ his savings onlv in the form of’ gold and silver. Millions of the native i population, too, have 110 access to banks. Tn time of stress they must clraw on accumulated reserves or resort to the money-lender—at 75 per cent, interest. “Consequently,” Air. Bliss . writes “there is a strong tendency in tim s of prosperity to purchase small quantities of silver and gold in the form of coins, bullion or • ornaments as a reserve against want. “Millions' of people, particularly in South India and East India, never have ;• sufficient margin to do even this, as thev have no savings whatever; this is evidenced bv the necessity for famine relief measures in ninnv sections as soon as there is a crop failure.”