PURCHASE OF GOLD

Evening Post, Volume CXX, Issue 109, 4 November 1935, Page 4

PURCHASE OF GOLD

PROFITS T(T THE STATE

MR. COATESIS STATEMENT

(By Telegraph—Press Association.) HELENSVILLE, November 2.

The fiction of the Government in taking the gold from the trading banks' at par was defended by the Minister of Finance (the Eight Hon. J. G. Coates) in the course of several speeches in the Kaipara electorate today. The main point made by -Mr. Coates was that in "the final analysis the issue of currency, whether in the form of notes or' coin, was the prerogative, of the State.

The ; note-issuing authority was usually the Reserve Bank operating under''conditions defined by Statute. Prior to the war the note-issuing banks in Ne.w Zealand were required to redeem the notes on demand in gold, but under special war.legislation the notes were declared inconvertible and remained so right up to the time that the right of note issue was transferred to the Reserve Bank. That was an emergency measure, and the banks were required to hold an adequate gold coyer in case the Government decided to revert to the pre-war position. ,

The. export of gold was. prohibited except under licence, but if the notes had been declared legal tender, implying .convertibility, any note holder N or depositor' could have demanded gold, and with' the ■ licence requirements lifted could have exported it at a profit. The profits would not have accrued to the banks.

"It might,be argued," continued Mr. Coates, "that note-holders who had received notes in return for ■ previous deposits ofigold would have been 'entitled to receive gold for the notes with the accompanying profit. However, after a lapse of so many years it would have been impossible to trace those people.,

"The.rise in the price of gold was due to depreciation of sterling and New Zealand currency in terms of sterling and not to any action by the banks. When the New Zealand currency was-depreciated the banks expected to be indemnified against loss. They would hot reasonably expect to, receive "any windfall from profits on! gold. It is a recognised principle that when currency is devalued the profits on the devaluation, accrue-to the State and ,not to any; banks holding gold. "In March- this year gold was taken over,by : the Canadian Government at 20.67 dollars an ounce when the market^ price was 35.48 dollars. The profits amounting to £4,000,000 were transferred to the Reserve Bank of Canada to strengthen the'reserves."