CURRENCY

Otago Daily Times, Issue 21431, 4 September 1931, Page 6

CURRENCY

TO TlfK EDITOR

g IR —Your correspondent, Mr 'W. Sivertsen, in reply to “ Exchange, says; “ It is an historical fact that the British sovereign has never been known to depreciate in value since its adoption in 1816” Mr Sivertsen seems to consider him: elf an authority on finance, currency sterling, and several other matters in connection with the present worldwide depression. Although I do not think Exchange” completely sees the solution oi the present financial problem l am of the opinion that he has viewed the scene very accurately—much mere so than Mr Sivertsen. I mar be wrong, but I would like Mr Sivertsen to explain in simple language just exactly what he means by “ sterling ” and “ foreign exchanges.

As the British sovereign has always contained the same amount of gold since 1816, and an ounce of gold was standardised at £3 17a 6d, it may be correct to say the “ price ” has never changed, but its value has changed according to the supply and demand of this precious metal. Gold obeys this law just the same as any other class of wealth, and at the present time gold has appreciated considerably from a few years ago, and hence comparatively speaking all other classes of wealth, measured by gold standard, have dropped in “price.” Twenty odd years ago I wrote io the press very much in the same strain as “Exchange has done, pointing out that if we were legally bound own to only one class of wealth to be used as a price standard we would inevitably be landed in disaster alter every few successful years. If the harvesting or mining or transport requirements suggest the necessity for extra plant to cope with them, WS are allowed to construct the necessary machinery with any satisfactory material available —wood, iron, steel, and even the farmer’s friend, wire. But not so with our currency machinery. The foundation of that machine in civilised countries at present must be gold. If there is not sufficient gold, then exports and imnorts must’ be kept about even because the insignificant; amount of gold in the world is incapable of handling anything, except small amounts to effect '.the balance im trading. : . ' When "Exchange says that the value of imbney as imoasiiml in commodities is too high, I take it that he meant real money, i. 6., gold, and if gold lias approdated 50 per cent., then what was equal to One sovereign will now be equal to two thirds of a sovereign. If a sheep farmer will now have to give three bales it Wool to pay the rent which two bales of wool would have paid before the rise ■in value (riot price); of gold, I do not. see the absurdity in ‘'Exchanges letter, I think the “boot is on the other foot. I am, etc,, .Workman.