BANKS’ FREE GOLD

Dominion, Volume 23, Issue 109, 1 February 1930, Page 11

BANKS’ FREE GOLD

PROPOSAL TO INVEST ABROAD AMERICAN RESERVE BOARD CONSIDERING PLAN STIMULUS TO BUSINESS (United Press Association.—By Electric Telegraph.—Copyright.) (Rec. January 31, 8.10 p.m.) New York, January 30. The “New York World’s’* Washington correspondent says the Federal Reserve Board is considering a plan for investing abroad at 3 to 5 per cent, interest free gold which is now held idle and unproductive in the system banks. This free gold, or gold in excess of the minimum legal requirements of the currency system, amounts approximately to 14,000,000 dollars. Proponents of the plan point out that the investment of such a sum abroad woul dstimulate the foreign purchasing power and stimulate the recovery of the present business depression here. Such investments, it is asserted, would have special benefit to countries such as Canada, Australia, and numerous other countries suffering from dearth of credit facilities, though their basic economic soundness is beyond dispute. What the decision of the Board will be is respect of the proposal remains to be seen. It is known that the plan has strong support in high quarters, but is understood that there also is opposition. A message from Rome to the “New York Times” dated December 30 said: “In discussing the question whether the recent large gold exports from America will continue, and with what results in Europe, it is pointed out here that European participation in the world’s, stock of gold during the inflation period, around 1924, was 31 per cent., against 59 per cent, in the year 1913. To-day European participation has risen to 39 per cent., with a decrease of American participation from 45 per cent, to 36;_ so that Europe is still very distant from its pre-war position. Outflow of gold from America would certainly be justified by the world situation; yet it seems to meet an unconquerable check both in balance of international payments of each country and in the cosj; of money. “In other respects, Europe’s reaction to the American situation is expected to take the shape of depression on the European Stock Exchanges, but not of economic depression; because money after the end of the year will be easier and credit more accessible. This means that productive activities will be accelerated. “The good situation of international politics favours that post-war economic reconstruction in Europe which is not yet completed, while the flow of gold from America to Europe will help to reconstruct gold reserves in the banks of issue," reinforcing the paper, circulation of minor countries. This movement -would ba aided by resumption of American loans to Europe, the extent of which will naturally be determined by the interest which can be offered. Whether such a movement would necessarily mean prolonged ’ export of gold from America to Europe is another matter.”