THE GOLD STANDARD.

New Zealand Herald, Volume LXVIII, Issue 20989, 28 September 1931, Page 11

THE GOLD STANDARD.

Sir,—l may be a bit, dull in understanding, but I am very interested and am seeking information on the gold standard. Most of the articles I have read are above me and are by professing experts. I have inquired from business and professional men what they know about it, and, finally, they display as much ignorance as I do. From my experience in speaking to people they quote bankers' reports, but, really they do not understand them. Would it be possible for some one to give the information in ordinary, common language right from the "primer" stage? Seeker of Knowledge. [The gold standard system provides a convenient means for adjusting »the balance of payments due from one country to another, remaining after account has been taken of all other transactions, in merchandise, services, loans, etc. Bv general, though not universal, acceptance, gold has been adopted as international currency, because it is intrinsically valuable, durable and easily transported Before the war gold was used for both internal and international currency, a gold value of the internal currency being fixed in each country by legal enactment, so that international transactions could bo readily conducted by conversion from ono currency to another with gold as the intermediary. • Since the war, many countries havo adopted the gold bullion standard (instead of the gold specie standard), domestic paper currency being convertible into bar gold with a minimum limit of the amount available to any purchaser. Thus modern practice can be- described in a single sentence:—"The gold standard consists essentially in an obligation on countries adhering to that standard to provide gold or its equivalent at certain fixed rates for payment to one another" (Sir Otto Niemeyer's report to the New Zealand Government). 'The equivalent mentioned is the gold exchange standard, the system by which a country makes its currency convertible not into gold, but into a foreign currency equivalent to gold, e.g., Sir Otto Niemever recommended adherence by New Zealand _to the sterling exchange standard, not anticipating the recent development. Britain's suspension of the gold standard implies, in the simplest terms, that the demands for payments abroad were greater than the available stocks of gold could satisfy. Foreign obligations must now be met from the proceeds of exports (goods or services) ; consequently, exports must bo increased or imports reduced until all transactions are brought to a balance.—Editor, IIEBALD.I