Gold Standard Failed

Manawatu Times, Volume LIV, Issue 7191, 24 June 1933, Page 8

Gold Standard Failed

Could Not do the Impossible A BANKER’S COMMENT Times .Special WELLINGTON, June 23. “The calamitous fall in commodity prices throughout the world, though undoubtedly due to a combination of many causes, is generally admitted to have been brought about in part by the failure of the gold standard system to function in recent years in the fairly satist factory and almost automatic manner which characterised it in pre- , war days.' ’ With these words, the Chairman of Directors; Mr B. W. Gibbs, prefaced a reference at the annual meeting of the Bank of New Zealand to-day to the monetary system. Continuing ho said: — “The monetary system has blamed for much of the trouble in the world, but would any other system have stood the strain placed upon it with greater efficiency? The system has failed in so far as it has been called upon to do the impossible. “Schemes innumerable in substitu-j tion have been proposed, but most of j them lack some fundamental which! . would make their proposals applicable - to our work-a-day life. j “The report of the Special Com-j ' mittee of the London Chamber of Commerce on “Monetary Policy" has . points to commend it to further consideration. We heard little of it from the Ottawa Conference, but shall, doubtless hear more of it from the World Economic Conference. “In the first place, the Committee set out the problems which industry and commerce are faced with:— , (1) To restore and expand the purchasing power of the peoples of the world, without which unemployment must remain, and defaults, national and individual, must increase. (2) When once a fair price level has been restored, to eliminate, so far as may bo practicable, fluctuations in j price level clue to monetary causes, j (3) To remove the causes which are inducing nations to strangle world trade by tariffs, quotas, exchange restrictions, etc. (-1) To eliminate the evil effects resulting, under the present monetary system, from an attempt to pay reparations and War Debts. (5) Should this involve cancellation or substantial remission of War Debts and reparations, to find a system which would avert the further crisis which would arise, owing to tiie ability of, e.g. Germany (witli debt in this way reduced to IS per head) to undersell Britain (with 1125 per head), France (with £SO per head) and the United States (with £27 per head). “Then follows their proposal for a new monetary system, one controlling financial as distinct from commercial .and industrial credit, by a system of ‘rc-discyounting and thus introducing ,nn “automatic currency." But herein, in my opinion, lies its weakness. It presupposes a general discount market, which may be feasible in the large mouetary centres, but inapplicable to the Dominions where there is ■neither a bill nor short-dated loan market.

“It is uniikely that the world’s monetary problems will be discussed without the status of silver being thoroughly examined. The Macmillan Committee laid down as an absolute requirement of prosperity .the raising of commodity prices, and to this end the efforts of the World Economic Conference will be directed. Plans for uniting silver, jyi-tli gold as a probable, or at least possible, solution of our difficulties are receiving tlio strong support of many leading men, among whom are Mr Winston Churchill, Sir Ttobert' Horne, Messrs Arnery and Darling, and many others.

‘"“TheYMaciniilan Committee arrived at the conclusion that by 1940 the gold in existence would bo inadequate to conduct the world’s exchange in commerce.' ■ K, therefore, a return to a metallic standard be contemplated by those nations now “off gold,” it is

argued that then will be the time to return to a regulated Bimetallic system on the lines of that which appeared to answer well the requirements of a large portion of the economic world till as late as 1873. It is further argued that this would open up improved trade with the East, where nearly one-half of the human race adhere to a silver currency. In dealing with this hotly-debated subject, it is, I think, generally admitted that any conclusion arrived at would have to be largely international in its application.

“What is known as the “Keynes Plan," by which it is proposed to issue certificates to be considered as equivalent to gold, to the extent of £1,000,000,000, for distribution among the nations “to foster international lending," has attracted considerable attention in the Old World, but its intricacies aro too debatable to be discussed here. However, from the interest it has created, it is probable more will be heard of It at the Economic Conference.

“The attention of the general public lias been focussed on currency problems more closely than at any previous period in history, and schemes of the most bewildering variety for improving our credit and currency machinery have been advocated in every civilised country. If any method can be propounded whereby the general level of ].rices may bo stabilised, and at the same time a reasonably steady rate of exchange may be maintained for intornnational commerce, it will no doubt be eagerly welcomed by all financiers and business people. But the extraordinary difficulty of the problem is sufficiently evidenced by the fact that not a single scheme has been advanced up to the present which lias secured the approval of any large body of expert opinion. “I will not weary you by attempting to dissect the other hundred-and-one schemes which have come more or less into prominence, but until we know what decisions are arrived at by the World Economic Conference now being held, which will naturally be international in its findings, it seems to be futile to further discuss the question meanwhile."