THE GOLD STANDARD.

New Zealand Herald, Volume LXVIII, Issue 20991, 30 September 1931, Page 13

THE GOLD STANDARD.

Sir.—ln response to the timely letter of "A Seeker of Knowledge" asking for information on this important subject I beg space to make a few observations in the light of which the whole question of the gold standard may seen in new perspective and approached accordingly. In the first place, an increasing number of modern thinkers are arriving at the conclusion that gold is not necessary and no longer serves any useful purpose as a monetary base. Some go so far as to say that the idea of gold being the onlv real mcney is an illusion, wholly pernicious in character because it gives the manipulators of the gold monetary base the power to regulate as they will all other currency issues. Money constitutes claims upon goods and services offering in very much the same way as a railway ticket constitutes a claim upon a travelling seat. Nothing intrinsically valuable is needed for that purpose—onlv a slip of paper bearing a printed statement of a certain claim. Why should it bo different in the case of money 1 Seen in that, lightj ail is real money, and its value depends not upon what gold reserves a country has, but upon the country's power to produce and deliver goods and services. It is the means of life that the people want in return for their money. Gold makes up only a small fraction of the nation's wealth and is in equally smail demand. The fact tliat the money system still works when claims upon gold are suspended surely proves this. Practically the whole of our currency is now made up of loan-created deposits (or cheque money) and banknotes. If w e were to abolish these as "unreal" money creations, trade would thereupon become quite impossible. Surely it is time we had a stable currencv based on real wealth, including productive power, instead of gold. Surely it is a waste of energy to continue digging up gold, only to have it securely buried again in Government treasuries and bank vaults. _ E. E. Hansen. Orini, September 28, 1931.