THE GOLD STANDARD

Hawera Star, Volume XLVIII, 15 January 1925, Page 4

THE GOLD STANDARD

The announcement made in our columns yesterday that the Union of South Africa wijl return to the gold standard not later than the end of June next, prompts the question how soon Britain herself can hope to return to the stability of a gold currency. The events of the past few weeks in the field of international finance have considerably strengthened the pound sterling in its relationship to the dollar, and the latest, quotation is almost par. That of itself pays a fine tribute to the brains of British financiers. For the greater part of the war period the dollar exchange was “pegged” by the British policy of borrowing from America, and when the flow of loan stock across the Atlantic was checked by the coming of peace, the pound sterling, plunged to the depths of the post-war slump. That it should have- won its way hack almost to parity in the face of disorganised markets abroad and consequent wide unemployment at Home must go- a long way towards restoring the confidence of those who despaired of seeing London once more the financial centre of the world. Some idea of the extent of the achievement may be obtained when it is known, that the total of gold held by the Bank of Kngland when war broke out was 39,929,000 .sovereigns. To-day, with the holdings of the Treasury against the currency note issue, the gold holding of Great Britain is 155,497,000 sovereigns. In the isame period gold has

simply poured into the United States, whose holding to-day is 4,553,646,000 dollars (approximately 910, fOO.OOO sovereigns). America has long parsed saturation poi nt in this respect and the Federal Reserve Board has had to face much the same problem as that which confronted the old woman who lived in a shoe; the United States has so much gold that she doesn’t know what to do. The idea of keeping most of the precious metal in the bank vaults, which would have been the one certain wa,y of preventing inflation of prices, did not appeal to the American imagination. All sorts of other safeguards were taken to prevent easy money, but in the long run these did not prove effective and about the middle of last year an upward trend of prices became noticeable in the States, since which sterling has gained rapidly on the dollar. For some time past hankers have agreed that the exchange could readily he brought back to par; the question would be to keep it there. Now that a- period of marked trade activity has set in for America the chances of the sovereign holding its latest position will be stronger, and there seems reason to hope that the lead which South Africa has given may followed before long by the rest of the Eimpire, and by those other- European countries who formerly used the gold standard. Economists generally admit that the war-weakened nations will not be once more firmly on their feet until they do return to a gold currency.