STERILE GOLD

Evening Post, Volume CXI, Issue 138, 13 June 1931, Page 22

STERILE GOLD

The world's monetary gold to-day is' valued at 11,000,000,000 dollars. The United States and France hold nearly two-thirds of this sum. Each has far more gold than it is actually ' using. From March, 1930, to March, 1931, a total of 280,000,000 dollars in gold came to the United States. In the history of the world, there has never been so much monetary gold in one country as there is in the United States to-day. The monetary stocks of the Federal Keserve Banks • to-day total 4,716,000,000 dollars. This is more than one dollar of gold for every dollar of money in circulation, says the '' Christian Scien.ce- Monitor.' 1 The law only requires a gold reserve of 40 ■ per cent, against federal reserve notes in circulation. The United States thus has some 2,000,000,000 dollars in gold over and above its legal requirements. In Franco there is a similar surplus of about 1,000,000,000 dollars. Meanwhile many other countries are short of the precious'metal. An.expert committee of the League of Nations, called the Gold Delegation, has -been studying this situation for a year and a half. It finds that if all countries had been content with the legal minimum of .gold for their monetary reserves, there ' would have been a world surplus at the end of 1928 of 1,800,000,000. dollars. Causes of the maldistribution of gold aro political as well as economic, the Gold Delegation finds. It declares that tariffs and embargoes tend to make some countries have too much gold and others too little by restricting the

IDLE IN WORLD'S VAULTS

■international exchange of goods and services. There is, to a great extent, free trade in capital to-day throughout the world. But in commodities there is not. If capital flows freely and the movement of goods is restricted, there is a constant strain on the gold reserves of debtor countries, because the latter have to use their gold reserve to pay their debts. Depletion of the gold reserve disturbs the credit system. This increases unemployment. Public confidence is shaken. An increase in tho stock .of monetary gold tends to bo followed by an increase in the money income of the country, the Gold Delegation declares. This means an increase in the demand for goods'. But it usually means an increase in prices as well. The more gold comes into a country the higher are prices likely to rise if that gold is used to increase the amount of money in circulation. If the gold is not required to back money in circulation, it is rendered sterile. While sterile it is not useful to tho country1 which has it. But it might be very helpful in some other country. The Gold Delegation urges creditor nations to lend abroad up to tho limit of "their net active balance on income account." Bankers should also see that a proper relationship is observed in interest rates at home and abroad. Gold, the Delegation says, should be to bring equilibrium when the balance of international commitments is, disturbed. How it can be best used ■ that way to-day puzzles even, bankers.