Nelson Evening Mail TUESDAY, FEBRUARY 4, 1930 TOO MUCH GOLD IN U.S.A.

Nelson Evening Mail, Volume LXIV, 4 February 1930, Page 4

Nelson Evening Mail TUESDAY, FEBRUARY 4, 1930 TOO MUCH GOLD IN U.S.A.

AT last the American financiers are acknowledging what British financiers have long contended, namely that the United States own too much gold. At the end of last week, a cablegram from New York stated that: The Federal Reserve Board is considering a plan for investing abroad free, gold which is now held idle and unproductive in the banks. This free gold, or gold in excess of the minimum legal requirements of the currency system amounts to approximately 14— query. 1400?)—million dollars. It will be remembered that the financial a slump, which set in at New York in September last, paralysed the Stock Exchanges of the United States and Canada, and seriously influenced industry throughout (lie whole of (lie United States. To show how serious was the decline in the values of securities on the New York Stock Exchange, it is enough to say that in September last they declined 600 million pounds sterling, in October 1900 millions sterling, and in November 1100 millions sterling—or 3600 millions sterling in three months! Such figures as those show to what an appalling extent the values of stocks and shares slumped in the financial centre of (he United Stales. It is not contended that the unfortunate holders of these securities actually lost 3600 million pounds sterling, because most of the values of such securities were inflated much above their true values, but it is contended that the .American public lost in the

New York slump at least, half of the amount last mentioned, that, is to say approximately 1800 million pounds sterling ! And then there are to be considered the losses on other Stock Ex-

changes in the United States, togethor with the losses caused by repercussions in industry and general trade. This is how an eminent London financial authority, the Editor of the Imperial Chemical Industries Bulletin, sums up the matter: There is no minimising the effect of the Wall Street debacle; in some quar- ■ ters it, is regarded as the _end of one of the most remarkable periods in the economic history of the world. At the present moment its probable resuits are of far greater consequence | than its causes. Its immediate effects

will in all likelihood be psychological and a brake will be put on industrial enterprise. While the immediate consequence may be. bad for trade, the long-period "result, when conditions have had an opportunity of steadying themselves, need not by any means be detrimental. Business men in the United States who have given close study to the trend of industrial enterprise in that country are confident that there will be no business depression, for the entire organisation of production is still intact and in a high state of efficiency. The immediate effect on industry, however, is anything but favourable. A certain slow-ing-down was only to be expected. The iron and steel industry is not as busy as it was a year ago, and building activity is on a reduced scale. . . . The motor car industry has been badly hit, and is not expected to recover its tone for six months at least. Other industries are similarly affected. Mr Ford, however, is so well entrenched

that he expects to make and market in ihe United States 2 million cars per annum, and in addition to establish his industry firmly in Europe. But nevertheless there is no hiding the fact that the recent slump on Wall Street reflected a general loss of faith in the indus-

trial situation in the United States generally. The fact is that there has been an inflation of industry beyond the requirements of the market. That inflation was due lo the desire to find use for all the gold which the United States received fiom the Allies during the Great War. That gold was made the basis of paper credit to the maximum amount which the market could absorb, and to more

than the amount which it could absorb advantageously. The consequence was that the industrial life of the country was over-capitalised, and the consequence now is that the Federal Reserve Board proposes to invest large sums of fiee gold abroad. The United States in fact have been suffering fr&m an embarrassment of riches. They have owned too much gold. If they had owned less gold they might have been better off than they are to-day. Owning all the gold they did, they sought to make it profitable by basing vast paper credits on it, until at last their industries were carrying more capital than they could use profitably. The result was the recent slump in shares, industrial and speculative alike, and infinite loss to those who had bought such shares at prices ruling while the boom lasted.