THE SUPREMACY OF GOLD

New Zealand Herald, Volume LXX, Issue 21392, 17 January 1933, Page 13

THE SUPREMACY OF GOLD

Mr. Beale asks "why your correspondent has selected gold as the one medium which affects the established practice of charging compound interest ?" As a matter of fact, 1 did not select gold at all. Gold is and has been the selected medium of exchange and is now being challenged for the position. I still maintain that the world will have to abandon the gold standard if it persists in trying to uphold the false theory of compounding interest. Money does not grow or earn interest It is only money that is invested in profitable industry that can do this. If there is no profit, then there can be no interest payment except out of capital. The debt load due to compound interest has grown to such a huge amount throughout the world that it is not possible for industry to make sufficient profit to meet the interest payments except out of capital and the position has been made considerably worse by the policy of deflation made necessary by the attempt to return to the pre-war gold standard. When interest is paid out of capital it is often the investor's capital that suffers. Huge companies, such as life insurance companies, have many millions of pounds of capital the interest from which is re-invested, so they are thus compounding a great deal of their interest. What will happen, and there are signs of it happening now, is that there will not be profitable investment for all the so-called capital. I say socalled because it exists on paper only and the attempt to translate the paper into Cold has forced such countries as Great Britain to leave the gold standard in the meantime. The same forces will eventually drive America and France off the gold standard, and then there will be chaos in international finance. Adopting silver or any other commodity as the medium of exchange will not alter the position. The world will eventually return to the gold standard or somo similar standard, but not until it has faced bankruptcy and the investor in gilt-edged securities has faced the same fate as investors in industry are facing to-day. Mr. Beale asks how I would alter the present position. I would givo, first, preference to the man who invests his labour in industry and, next, preference to the man who invests his capital and brains, and if there is any left over it would bo available to pay the gilt-edged investor who is too timid to take an industrial risk. I would make the strongest inducement for gilt-edged investment the security of the capital, but on the understanding that it takes third place on a profitsharing basis. The first call on industry is the welfare of the workers and the supply of future workers, for if there are no workers then there can be no industry. Logic.