GOLD CURRENCY

Otago Daily Times, Issue 21627, 23 April 1932, Page 8

GOLD CURRENCY

TO THE EDITOR. Sir, —In your issue of the 18th inst. is a letter from the Welfare League, that mystical authority on all subjects from bootlegging to Bolshevism, in which the league throws its weight in favour of a currency issued against gold. Will the league state precisely just what percentage of gold it considers should be held as security for currency, and will it also state just what is the function of gold to-day apart from being acceptable .internationally? At the end of 1929 the proportion of gold to currency held by the leading nations of the world was as follows:—United States 111.1, France 72, Germany 63.7, Great Britain 41.8, Italy 35,9 per cent. Since then the percentages in the United States and France have probably increased, while those in the other three countries have decreased. Ihe percentage in Great Britain is now round about 30 per cent. It is quite apparent from these figures that the cunency sys tern of a country operates quite smoothly irrespective of the size of its gold reserves. When the league progresses bevoud its present stage of economics and realises the essential use of currency perhaps it will be given furiously to think whether the limitation of currency to gold is in the best interests of' commerce. Credit is the necessary partner of gold, and consists in promises to pay in go d on demand—promises that are impossible of fulfilment. Take the credits of Great Britain, estimated at from £8,000,000,000 to £10,000,000,000, while the legal tender in circulation is only about £120,000,000. These credits are redeemed with more credits and extensions. Suppose, however, that the public confidence becomes shaken and there is an immediate demand to have credits redeemed, not with more credits, but in legal tender. The result is only too well known, and is not, as eminent financiers would have us believe, caused by over-production or the abuse of credit or by extravagant * IVI PB> but simply because the gold basis is too narrow and too contracted to allow the world's industries to be built on it. I is apparent that the league gives to gold an intrinsic value mid thereby c ' aln \® L as a commodity and not as a standard of value. Gold in itself is valueless. Two quantities are necessary to express value, and, therefore,, the value of gold is equal to the value of that for which it exchanges. As other values fluctuate, however, according to supply and .demand, so does the value of gold. It is evident, therefore, that gold cannot serve as a standard of value because a standard cannot fluctuate. Perhaps tHe leaßiie wil.l explain the point whether gold should be recognised as a standard of value, which in the nature of things it cannot be, or whether it should be regarded as a commodity and' subject to the usual laws of nature. —I am, etc.. E. Roberts. , Shag Point, April 21.