THE FUNCTION OF GOLD

Otago Daily Times, Issue 21358, 11 June 1931, Page 7

THE FUNCTION OF GOLD

TO THE EDITOR. . Sir, —In dealing with the natural and assigned action of the “ gold standard ” it is imperative to realise that the first essential of any currency in any country is to have a criterion op unit of value thrit is legal tender fori an unlimited amount and possess, when offered, the property of being able to' discharge any pecuniary obligation. Our standard unit of value is the pound, which represents the equivalent of a definite quantity of gold (123.27447 grains standard fineness). The growth and expansion, of commerce from the beginning ot the nineteenth century, owing to the application of mechanical power, has brought about a corresponding expansion of banks, which are institutions that exist for, the transfer of debts. When it is impossible for a bank to exchange a debt to a foreign country it becomes its indispensable responsibility to forward an equivalent that will be accepted in final discharge of the debt or in full payment of commodities. In 'countries that have a gold standard x gold' is accepted as this substitute. The monetary use of gold being shown, it is now necessary to consider its adaptability to its function as |;he foundation upon which currency is based and also the factors that upset its equilibrium. Let us imagine, for instance, that 123 rabbitskins represent a pound. : It is then clear to all that the value of commodities in regard to the standard of skins muse vacy inversely in proportion _to the scarcity or abundance of rabbits. It will be, seen from this that if .the available gold is riionopolised 1 by a few,,it, will, give the latter the power of increasing its price, thus inversely affecting the prices of commodities. ; The World War has left Britain and other nations with obligations to, America of such a magnitude that they are likely to be millstones round the necks Of generations that are yet unborn. That indebtedness has been greatly accentuated by the action of the United States in, imposing heavy duties on imported' goods and further decreasing the price of these goods by raising the price .of gold. . The function of the gold standard has now given the seven members of the ’U.S. Federal Reserve Board a control more powerful than any ever previously exercised by human beings. The accumulation of gold in one country has- culminated in a ruthless , centralisation of wealth, the extent of which has never before been conceived, and upon the caprices and whims of the few controlling the gold the destinies of a' large proportion of the' human race depend. Gold being the foundation of onr monetary system, its keepers automatically become the shepherds of au innumerable human flock that is contmii ally being shorn. ... To give a more comprehensive explanation of how gold becomes such a dominating factor in economic control it is necessary to elucidate more fully on , the system of credit that makes the power possible. and that is outside the scope of this letter, which’ is only .the mediocre attempt of a layman to explain the function of the “ gold standard.”-—I am, etc., . June 9. W, H. B,