OUR MONETARY SYSTEM

Otago Daily Times, Issue 22268, 22 May 1934, Page 12

OUR MONETARY SYSTEM

/ IO TUE ECITOB Bra —There is not the slightest indication that the average man will ever get a clear understanding of the function ot die' currency. In your last Wednesdays issue you published a brief, but most ufcid explanation by Dr J. B. Condhffe on the need £or stabilisation, wherein he pointed out in unmistakable language the Indispensable function of the gold standard and how it operated prior to its disestablishment. : In your last Saturdays issue you published, at the request of Mr James Taylor, a letter which appeared in The London Times signed by leading members 1 of the London Chambers of Commerce, " who. have come to the conclusion that gold is iiot essential as the basis for thtf issue of national money,'and that najtions should not be under obligation to mike payments internationally with gold. Hf»re we have conflicting and hopelessly irreconcilable opinions by experts. Who i« right? No one understands the practical working of finance better than the members 01 the London. Chamber of Commerce. 'Their, opinions are obtained from practical experience involving profit and loss. Their financial reputation is unchallenged, ' and they have arrived at the conclusion that gold as a basis is unnecessary for a national currency. But here we have to consider the fact that not a single statement made by Dr Condliffe has been refuted. His explanation as to how foreign payments previous to the disestablishment of gold were made shows that a much more flexible'condition prevailed than that which now prevails since disestablishment. The need for stabilisation is now urgent than ever, and is disputed by iy> one, but no one explains how stabilisation is to be brought about or what stabilisation consists of. We are only agreed; upon one thing, that something is wrong. When the members of the London Chamber of Commerce declare that a gold basis is unnecessary they state an absolute fact, which /TDr Condliffe's explanation All foreign trade consists of bartering commodities upon a fixed price. Hfmce it becomes quite simple to count »p the total price of ex-

?ort agair.st the total • priae ■of import, f exports and injports apprwximately.halance no geld is required. \ Thei need"fdF gold arises only when a'country has'~ini« ported goods to a. higher, monetary value than the ;-bods exported,'and this place when importers-embark upba.enterprise, stimulated by: a tpo liberal credit expansion, with the promotion of which gold has nothing to dp,-but in which gold becomes the only i commodity, that will liquidate the liability incurred. Hero we see the weakness in the reasoning m the London Chamber of/ Commerce. This body declares that nations should not be under obligation to maW payments internationally with gold.- , "Now that is exactly the first thing ,tbe London Chamhei? of Commerce will /insist upon -when a debt is due to London. No one in any part of th«>.world wjll accept payment in goods for money owing. It is not a ques-. tion of being either willing or unwilling; it is simply, a question of physical inability for anyone* to accept payment In: the form of commodities for a debt cause commodities have-no purchasing; power before they are converted . into money and that/ money must be. legal tender within the country in which' tha payment has to b'e made. , So unalterable is this condition-that a departure, from a gold basis at oiice: causes a depreciation in the value >oi money: such as we now experience between New Zealand and Great Britain fwherie the nominal currency is the same bat the value different—;a difference that /arises from the variation in the gold busfis. Dr Condliife points out the; difßcultjep that confront the attempt to stabilise tha foreign exchanges by international/agree; ment, but ijutte apart from that, the reestablishmqnt of an international! ;gold standard ■ hjas no influence in the direction of increasing the purchasing.. power of money in which the solution lies.-Henc« the futility to think that a return to gold can be stabilisation.—l am, etc;, •; W. SrVERTSEK.