THE VALUE OF GOLD

Otago Daily Times, Issue 21640, 10 May 1932, Page 9

THE VALUE OF GOLD

TO THE EDITOR.

Sir, —No one has so far demolished “Plato's” arguments explaining the function of the gold standard. Not even the famous author of “ The Truth > About the Slump ” has ventured to question the soundness of “ Plato’s ” logic, and upon sound logic depends the correct explanation. Here is where most critics go astray, and where the public flounders in a hopeless bog when dealing with finance. Finance is a subject that embraces much more tha tt money. Money has its function. Suppose gold had never existed., some other convenient substance would have been the medium of exchange. The function of money, considered apart from gold, may be illustrated by the function of the screw propeller of an ocean liner. The whole floating structure with its palatial fittings would not move an inch without the propelling screw. The function of the screw in propelling a ship is therefore of paramount importance. Parted from each other, the function of the ship is paralysed and the screw is an inanimate piece of metal. No useful function is performed by the screw until it is linked to the hull in which is stored the power that animates its circulating motions and drives the ship “ ahead.’ In business money performs exactly an analagous function in stimulating trade* Apart from the economic structure of bociety money can perform no function of value, but linked with the production ot wealth it is as necessary for progress as the propeller of an ocean liner is necessary for speed. A further analogy can be drawn from the same source. The speed of a liner depends upon the size and shape of the screw and upon the composition ot the metal employed. Any size or shape or metal will not suit the vessel. Neither will any size or shape or metal suit the purpose of a currency which must act as a standard of value when employed as a medium of exchange in foreign trade, and upon foreign trade our prosperity depends. For calm sailing on a placid ocean the ingenuity of human skill could without difficulty manufacture a perfect model of a screw for an ocean liner out ot hydrauhepressed papier mache, which would ring like metal when hit by a hammer, buch a screw could be produced at a cost greatly below that of one > constructed from manganese bronze, but in a gale at sea we should soon find which composition stood the test of “ sterling value.” . Shoddy is the baneful curse that invades every honest occupation by providing a cheap substitute which acts for a whi.e as a plausible deception practised upo a a

gullible public. In no sphere ot hie is more scope offered for deception than in the sphere of finance, where money performs the leading part. Genuine money always stands the acid test of value, fair Thomas Gresham, as far back as 15W, pointed out to Queen Elizabeth that inferior money would be driven out of circulation wherever it was substituted i°r a superior. This is exactly what we ar now realising. A cheap substitute o paper has supplanted gold,- which of all commodities is the only one that holds iW value by commanding a higher price in the open market where the pnce of every other necessary commodity is falling a curtailing trade. Ignorance caimot pleaded by financiers when Sir Thomas Gresham nearly 400 years ag o pointed out what would happen, and no financiers could have effected the substitution without the sanction and permission of a Government. It is not only a question of who in responsible; it is necessary to know how it is done. No financier explains how it is done, nor is able to explain how we are to restore trade. lhe Labour Party is the only party that claims to have the secret solution 1 would advise it to explain .its ?° lutlo V° K the electors may give it a maiority and put it in power to mt the depression. Have the Labour leaders Snecessary ability? That is what the community wants to Imow^am^c.^