THE MOVEMENT OF GOLD.

Otago Daily Times, Issue 21145, 1 October 1930, Page 8

THE MOVEMENT OF GOLD.

TO THE EDITOB. v£hZ'T ln you F ,a st Saturday's issue Dr intereTt Wh?i d *° be * of co °siderable luueieeu. WuiJe very few undersf-nnH the important subject of finance tSh w£\ gold involved e Jeri &o^°- Wa +^ at B° ld ' commercially conthH «:• 18 the , most valuable commodity that this world possesses. That W «T* '# ?u nly the obvioM or superfida side of the problem. The otTr an. much more obscure side is wranned ur^n Sid* i'n W^ Ch forms the S » of gold ins every commercial transaction linaace and gold are therefore seen to be not only inseparable, but also to form two distinctly different parts, each llf--^i 0 ?* a funqtion in injunction P Tu which it is seen that gold is the passive element, material nad inanimate, while finance forms the active, deriving ifa fiS ing a psychological description not so easily grasped. It is in the policy of finance .that the movement of gold takes its origin. Economically considered eofd can be correctly defined as 'international Sf ?^p be ? aUSe i 4 fa re ? dil y accepted at all times in payment for debt bv all nations, and therefore requires' no fur- £«\ explanation. That part of the ttf 1 i wh ',SV 8 ?H cure and "quiring further elucidation is found in Dr Fisher? IhnfK upon itß /Ptpibution, which should be very, carefully considered betore a conclusion is arrived at. n r JS r n a l tt . nbuted the current depression to the fail in commodity prices, but went further back than that, and found a cause of decreased prices in the uneaual distribution of the world's gold, wfiich obtains at present. He pointed out that the question of gold stocks was of Far greater importance than most people thought, and commented upon the actions ol the central banks of the Old World ana America in accumulating disproportionately large amounts of gold to the detriment of the world position. He suggested that stable prices depended to a large extent on the better distribution of gold." Now, this statement obviously contains a glaring contradiction. It is easy to see, and all can agree with Dr Fisher that the depression, arises from the unequal distribution of gold—international money—which is indispensable in all toreign commercial fransactions relating to export and import, and the raising of loans, from which, arise financial obligations in their individual countries which can only be liquidated through the'agencv of banks by means-of gold. But this by no manner of means proves that the actions of central banks are responsible tor the disproportionate accumulation," nor doea it prove that the gold is the property of the banks, since it is clearly Bcel L i° « av f b^ eu received from abroad on behalf of clients for whom the banks act as agents and custodians. It arises solely from financial transactions in which the banks only provide the money to be transferred from one country to another and when the stock of gold is exhausted •in one country that country must, of necessity, limit its imports in future bv balancing with export, which removes all necessity for the export of gold. The trouble, therefore, does not arise from Hie actions of the banks, but from the acti'vities of promoters who are financially interested in the banks, and over whom the banks have no power to refuse credit except by raising the rate of discount which tends to eliminate profit upon all commercial transactions, and thus reacts upon trade in the form of depression and unemployment. Further, when Dr Fisher declares that " the trouble was that the production of gold was not sufficient to meet the demand, and the world was faced with the problem of either increasing production or reducing demand." he is forced to admit that his imputations against the hunks fall to the ground because what have the banks to do With the production of Hold, which it is not in

the power of any human being to manufacture or produce except by extraction trom the mines? Where the banks are \ actually responsible lies in the fact that with the permission and assistance of successive Governments the banks have during time by excessive expansion of credit created a volume of money which Has no tangible foundation, and no longer rests upon a gold standard, which is the only determinant that correctly appraises value and price and prevents inflation. Banks without a gold reserve sufficient to cover their liabilities are obviously in a precarious condition when called upon to discharge obligations incurred bv their ctiente in transactions with foreign countries where gold is the essential and only payment acceptable. It cannot for that reason be said that Dr Fisher's remark is economically sound when he declares that New Zealand held about £7,000,000 worth of gold which was of no uee whatever to this country. It would be far better if.this were transferred to'the Bank of England or some other Old i World concern. It would not harm this Dominion." As I have already said, ; finance is not a simple subject to be ! touched upon lightly; it is, however, pleasant .that Dr Fisher has had the moral courage to introduce it to the public, whom it, deeply concerns, and I hope that he will correct any misunderstanding that may have arisen from the brief, report of his address in the press.— I am, etc., W. Siyertsen.