THE BANKS' GOLD

Otago Daily Times, Issue 22721, 6 November 1935, Page 6

THE BANKS' GOLD

TO THE EDITOR. Sir, —Mr Coates's effort to justify the Government's action in seizing the trading banks' : gold reserve at less than its market .price is welcome even now. Mr Coates makes no attempt to justify the morality of the act. He does not say why he could not, with equal justice, have entered any business premises and taken what he wanted at less than its value. He sets up emergency expediency in extenuation. Was the sale of the gold like the loan conversions, voluntary? Drastic doings such as these need drastic remedies. To diagnose the disease as desperate and bleed the patient seems to be the policy of the Government. Mr Coates's admissions are interesting. He says that the rise in the price of gold is due to the depreciation of the currency and not to any action of the banks. The depreciation of the currency is merely another way of saying that the banks have issued credit beyond the point where it can be redeemed in gold at the pre-war gold standard of value. That the banks are not responsible for the depreciation of the currency by the irredeemable credit they grant is surely a bold statement for a responsible Minister of the Crown to make. If the banks do not, or will not, raise the price of gold to their own credit level and thus stabilise their credit-created prices, then the Government should do it. I submit it is the function of the State to fix the price of the measure of value as it does other weights and measures. If it did, labour would receive the gold it works for and the labour values of land and labour commodities would be regulated on the gold standard price of labour, which should be about £8 per ounce at present, and not the prewar price of £3 17s 6d or less.—l am, etc., ■ Measure of Value. November 5. [The above letter does not correctly represent Mr Coates's statement. Mr Coates took the ground that it was a recognised principle that, when a currency was devalued, the profits on devaluation accrued to the State and not to any of the* banks holding gold.—Ed. O.D.T.]