The Passing of the Gold Coins

Dominion, Volume 21, Issue 261, 4 August 1928, Page 17

The Passing of the Gold Coins

< i f" Bank Notes and Currency Bill which has just passed through 0 the House of Commons, .'technical and dry though its details I are, makes a landmark on our voyage, to trade .recovery, sbyo JL the Yorkshire Post. “For currency purposes we have now definitely parted with gold coins and permanently established paper, well based, on securities which may include 5J millions value of silver currency, and strictly limited as to quantity. ' “The new law will fix in the minds of foreign observers a confidence that might occasionally have wavered under the old conditions of possible Treasury manipulation. We have now a maximum of 200 millions, about last year's allowance. If the maximum is exceeded by the Bank ot England, into whose hands the issue passes, it must be with the consent of the Treasury, and therefore within the knowledge of Parliament. No. can any increase endure for more than two years without legislative sanction. “The securities backing the issue may include mercantile bills, and naturally the Bank, if it purchases such for the purpose, will see a they are of the first order. There are not. to-day, however, many of bills in existence. Both banks and traders seem now to prefer the open credit srstem; and the return of bills in quantity is at least open to (du ' • The Bank has also power to purchase every gold holding other than melal used for industry, of small value, or held for foreign account, the reason for the last exception being obvious. “The first question at once to be asked is, How will intliutiJ "- affected? Let us endeavopr to trace out the theory in practice. Probably to-day less than 1 per cent, of our payments and receipts are in notes and coin. For the rest we use cheques, and the cheques we may draw depent on the credit we have with, or are allowed by. bankers. “Increased trade would, of course, mean higher spending power flowing from a larger volume ■ ' wages; and if currency and coin were short

in supply spending might to some extent be curtailed and the horns trade thereby checked. But the only lasting improvement in industry must be by way of greater profits derived from increased exports and services. Spending power would necessarily increase gradually, and therefore the provisions for expansion of the currency could be applied, if and when required, in good time. “But in this respect an important, and some think steadily growing, alteration in our money habits'has been overlooked. Everyone is tending to use less cash. Where used it is confined mainly to immediate needs satisfied by shops and transport. Its greatest use is for the payment of weekly wages. The bulk of the transactions other than wage payments arc. in silver and copper. “The notes paid in wages, do not remain in the pockets of their recipients, but pass mainly, well within a week, to shops and centres o saving. From the shops the notes flow- to the banks automatically. u even'for weekly wage earners many payments (insurance, friendly society, savings, etc.) are made by deduction at the .works, the contra being met by a few cheques. "The bank in one form and another is rapidly replacing even small hoards. What increased needs there may be in the future are much more likely to be expressed by demands for silver and copper, the existing provision for n filch some critics already say is overdone. The fear for seasonal shortages may have some better foundation, but so far as holiday money is concerned the flow soon rights itself and is adjustable by the banks. “Seasonal shop spending is less to be feared since, as already pointed out. the speed with which notes circulate nowadays is very rapid. But what of the growing demand due to an increasing population? The answer is that the increasing tendency to restrict the use of notes will probably offset any growth of population demands.