The Evening Star WEDNESDAY, MARCH 16, 1932. A BANKER ON SILVER.

Evening Star, Issue 21053, 16 March 1932, Page 6

The Evening Star WEDNESDAY, MARCH 16, 1932. A BANKER ON SILVER.

The remonetisation of silver is a subject which continues to evoke keen discussion in English periodicals. Some time ago Canada proposed a world conference on the subject. Though that was not taken up it seems to be assumed that the Ottawa Conference is almost certain to consider this matter. It is one in which one important constituent of the Empire is very directly interested, and it cannot be seriously contended that the rest of the Empire has not very large indirect interests in the standing of the only coins of significance which occupy space in one of the pockets of one’s clothes. The word remonetisation conveys a going back to something which prevailed aforetime. It is therefore desirable to go back to the time when silver was more than a token coinage, and when in those countries where gold was seldom seen as currency silver was the standard. According to one authority, it is necessary to go back over sixty years to ascertain how first the surface was broken for what may be termed the undermining of silver. Curiously the culprit then was the same country which in recent years deliberately destroyed its currency, and in the process of rebuilding a stable one in its place has become the central point from which the world’s present currency and trade troubles radiate. Also another country which six decades ago was the other party to a mammoth financial transaction (for those days) has greatly aggravated present difficulties by participating in the cornering of the world’s gold supplies after having devalued her own currency by 80 per cent., to the spoliation of her unfortunate creditors. The immediate aftermath of the Franco-Prussian war of 1870-71 is the starting point referred to. The German victory set in motion economic forces to which are attributed the present crisis. Germany imposed on France a war indemnity of five thousand million francs (then the equivalent of £200,000,000). To rid herself of the hated German occupation pending payment, France borrowed the amount on onerous terms from the United States of America and handed it over to Germany. The sudden discharge of the indemnity flooded Germany with currency and caused so severe a dislocation of business that Bismarck is alleged to have said that after his next victorious war ho would pay an indemnity, not impose one. Germany reached the momentous and sinister decision to abandon the goldsilver standard, which had existed for centuries, and to become mono-metallic on the basis of gold. Germany’s decision was largely influenced by the fact that Great Britain had adopted gold mono-metallism fifty years earlier, and after a period of depression had prospered exceedingly and become the workshop of the world. Unfortunately it was not apparent at the time that gold mono-metallism had had no part in the success. With all the world outside Great Britain on a silver or bimetallic basis, her monetary system had played no role either for good or evil. If Great Britain did not want silver, there were plenty of nations who did, and who were glad to got it at a price which boro a fixed ratio to gold. However, Germany proceeded to sell silver in exchange for gold. To stop tho German flow Franco closed her mint to silver, Italy and Spain did the same, and eventually Holland, Denmark, Norway, Sweden, and the United States Look a like step. Tho rot had set in in earnest. Tho normal output of the mines jyas augmented by Jbe supplies

of discarded silver money, and the price fell heavily and persistently. The East meanwhile had remained true to silver. Neither India nor China, tho two great Eastern nations, had seen fit to change their ways, hallowed by the tradition of centuries. The world was thus divided into two camps, ouo silver, tho other gold, without any common medium of exchange. Barter between them became tho order of the day. This, in itself, was a serious handicap to trade, but the fall in silver produced effects so permanent and far-reaching that their full implication is difficult to realise.

In 1890 the world was on tho verge of readopting the silver-gold standard. But an accident supervened. Towards tho end of that period gold was discovered in South Africa in unprecedented volume, and the cyanide process for its extraction brought largo and increasing quantities of it upon tho market. The shortage of currency duo to the abandonment of silver was made good, prices rose, business again oecame profitable, entrepreneurs renewed their activities. Debts, which had been becoming heavier and heavier as gold appreciated, became lighter again, and tho silver problem was relegated to tho limbo of forgotten causes. But tho silver question was not dead, hut sleeping, and to-day there is a strong movement on foot to re-establish silver. One of its strongest champions in print is Mr J. F. Darling, director of tho Midland Bank, and advocate of an Imperial Currency and an Empire Bank. In his just published book, ‘ Monetary Leadership,’ he advocates imparting to silver a value one-twen-tieth of that of gold, weight for weight, this being well within the production ratio of the two metals and approximating to the sterling parity of tho Indian rupee. The sterling price of silver would be raised from 20d or less to 48d per ounce and stabilised at that. Silver production would become more profitable, and the purchasing power of those interested, particularly that of the vast population of the East, would be restored to them. The reaction on world values of commodities and securities would bo immediate and world wide, would render business profitable again, thus enabling buying arid soiling, borrowing and lending, to resume their normal course. These are the views, not of a mere theorist, but of a successful and experienced banker, “In the remonetisation of silver,” says Mr Darling, “ wo have available a dynamic power provided by Nature capable of restoring world values, which is a condition precedent to world recovery; and, so far as I can see, under existing conditions there is no other power capable of doing so.”

It is interesting to note that Mr Darling casts a sympathetic eye on the plight of Australia and New Zealand. Ho docs not mention New Zealand, probably because Australia’s disclosure of the full results of production at a loss ante-dated ours. Commenting on the expert advice that “ Australia must adjust herself to a world economic situation more disadvantageous to herself than in the last decade,” Mr Darling writes: “ But why should tho adjusting be all on the side of Australia, and tho world economic situation itself apparently be held incapable of adjustment? It is not wholly Australia’s internal position—however much it may require to be adjustedhut also the world economic situation that is responsible for Australia’s plight. ... As matters stand, tho

Empire is running considerable risk of being deflated to death.” At this moment this applies to New Zealand conditions most intimately and precisely. Heartfelt response to its truth and the sympathetic way in which it is conveyed should come from every producer, every trade unionist, every unemployed person, every politician. If bimetallism means restoration of world purchasing power, there would he no need to meddle with industrial arbitration or with the rate of exchange, or to devise fresh schemes and fresh taxation for unemployment relief. It comes as a ray of sunshino that a banker—a London banker at that—looks at us and our difficulties from so unaccustomed an angle. Possibly our creditors have more faith in us than we ourselves have. Towards this there seems to be corroboration in the visit of Major Gordon Homo, now in New Zealand, representing the Empire Development Association, with the message that English capital awaits investment in sound concerns in Now Zealand, whether these latter are Government or private projects.