PRESTIGE OF GOLD

Greymouth Evening Star, 15 November 1938, Page 10

PRESTIGE OF GOLD

INTERESTING PHENOMENON.

One of the most interesting phenomena of the times is the manner in which the prestige of gold remains unimpaired in public estimation in

■ spite of all the governments have done to it, writes H. B. Elleston, in the “Christian Science Monitor.” Beginning in 1931, governments one by one began to dethrone the precious metal as the standard of value. No longer, in other words, was your money based, upon gold and rendered interchangeable with gold at a fixed price. That was the beginning of a monetary revolution, the implications of which are not yet entirely understood, and the end of which is not yet in sight. We may see the outline of the revolution only as we understand the domestic role of gold in the old days.

Under the old gold standard the politicians were deterred from monkeying with the currency because the penality of such monkeying was that the people would claim the gold back of the distrusted money. As J. M. Keynes, the English economist, put it, the system “strapped down Ministers ci' Finance.” with this safeguard, peopl.e over many years were content •so completely to ignore the treasure lying in bank and government vaults as security for their money that conversion into the hoardings of gold ceased. In the classrooms it even b.e-

came the habit of economies professors to tell their students that this function of gold as a refuge for individual savings had atrophied. Money was convertible into gold, and this protection, coupled with the faith in [the promises of governments and banks, stopped any testing of convertibility: i.e,, hoarding. The professors had to go to the Orient, where governmeijts and banks were alike unstable, for a practical illustration of their textbook theory of gold hoarding. There the practice has never ceased. Among the Hindus, for example, wealth is apt to be measured by the amount of glittering ornaments they can load on to the person . of their wives!

MONETARY SCIENCE. Hoarding in the West, however, came back with the fears about govI'brnment and banks brought on by the Great Depression, and it tumbled the gold standard from its majestic perch. Convertibility, in other words, was stopped by Government edict. In most countries the people are still not allowed to turn their money into gold. Among'them is the United' States. The ban is a corollary of the new monetary science, whereby the money, supply is independent of the gold supply. Yet even governments, which have taken over the monetary sovereignty of gold; do not feel sufficiently authoritative yet to dispense with gold altogether. The metal is still acquired liy governments, and is even called “backing” for the money

I in circulation. So was the land “back” of the French assignats in the latter part of the eighteenth century, but no Frenchman could get any of.the territory back of his .money. Similarly the .modern dollai-holder is no longer able to redeem his money in gold, lie is dependent upon the good faith of the money managers in keeping his money stable just as if there were no gold at all out at Fort Knox to “strap down” hose money managers. Gold, in short, jas taken on meta-physieal properties hi place of its former physical properties, like Elijah; and money at bottom, has become fiduciary. It is either because, or in spite, of this metamorphosis that Western

peoples have recovered their own personal attachment to gold. They may love the money managers, but they love gold more. So thej r are indulging again in a habit of hoarding which in the old days before the Great Depression hud supposedly been cdst into the limbo of Oriental practices. People are able to get hold of gold in the great market for gold in the city of London, where individuals as well as governments can make their purchases. I know_ several international companies that put their surplus into bar gold. Not-so-rich individuals in Europe are buying gold coins, including old American eagles which no doubt did duty once upon a time when Christmas, graduations, and other felicitous ceremonies used to be on a golden standard. Judging from reports of gold buying in Zurich, I shouldn’t be at all surprised if even the Germans are managing to obtain metal for hoarding, for the crisis on the Berlin Bourse » seems to show liquidation for that purpose. Certainly, the practice is rife in Italy. There was the recent case of the Italian immigrant who, never having heard of the Gold Reverse Act, of 1934, brought over all her savings to America in the form of a gold brick, only to have it confiscated.

AMERICAN POLICY T his return in popular esteem for gold is fortunate for Uncle Sam. Since 1934 he has been trying internationally to valorise both gold and silver buying by paying a fancy price to ali sellers, foreign and domestic. The valorization of silver, like so many price-fixing experiments, fizzled out as an expensive tiagi-comcdy. When the United States stopped buying from all comers, the 81 cents price dropped and dropped, till now it is around 45 cents, though much of the Treasury’s silver was acquired at a much higher price.

There was lil.tie rejoicing when the pile touched the 13,000,1)00,000 dollar mark, for the manner in which the treasure was dis-hoarded out of Europe last year and sent, here on the rumour that Uncle Sam might drop his buying price gave iise to the fear among Americans that the. United Slates might one day tie landed with a Pile of metal which was gold to Aineileans, but; dross to other people, -f-ven the Wall Street Journal got alarmed. Now it would seem that, though governments refrain from ofiicjaiiy re-enthroning gold, individuals SHU regard the metal as king at least m time of trouble.