Poverty Bay Herald PUBLISHED EVERY EVENING GISBORNE, THURSDAY, APRIL 13, 1933. MOVEMENTS OF GOLD

Poverty Bay Herald, Volume LX, Issue 18063, 13 April 1933, Page 6

Poverty Bay Herald PUBLISHED EVERY EVENING GISBORNE, THURSDAY, APRIL 13, 1933. MOVEMENTS OF GOLD

The recent American banking crisis was not due to any shortage ot gold, and it is rather a remarkable fact that during the week in which it became most acute the amount of money in circulation in the 'United Utntcs increased by nearly three-quarters of a billion dollars, representing money that was being tuicen out of the banks for hoarding or for shipment abroad. A steady efflux of gold from the United States to European centres had been in progress for several weeks, and in one day as much us £7,500,000 worth was shipped. So large was the inflow olj funds into England that the Bank of England bought gold nearly every day for a month, bringing its holdings to a level slightly in excess of £150,000,000, the largest amount of gold the bank has held since July 17, 1931. “Gold is pouring into London —and London does not want it,” wrote a correspondent ou March 3. Loss than two years ago., he recalls, gold was pouring out of London —and London wanted it very badly. It was taking flight by aeroplane to the vaults of the Bank of Franco, or to bo transferred to the coffers of the United States Reserve Bank. London saw it go, powerless to prevent its departure, for all the world was scrambling for gold then. Statesmen in Britain were uttering warnings as to the economic and financial disasters that would follow its loss and Paris had begun to talk proudly of becoming the financial dictator of Europe. Everywhere there was apprehension that there was not enough gold to go round and no ono was cpiite certain of what the outcome of a famine in the precious metal would bo. Now, by the irony of events, gold has no longer become indispensable to the economic security of many countries. America’s financial panic was not due to a shortage of gold; there was still plenty in the Treasury vaults, but to the disappearance of a great deal of the money counters that should bo in active circulation. One estimate by a reliable authority of the amount withdrawn from the banks was 24 billion dollars. In a week before the crisis people withdrew more than 900 millions, a tenth of the total currency of the countlry and nearly a fifth of the money supposed to be in general circulation. If they had taken out their money and spent it there would not have been a panic—there might have been a boom instead, and perhaps the end of the depression. They did not spend it but took it home and put it iii old teapots or hid it under the bed, ’and many of them, with the wind up completely seat it abroad, much to the embarrassment of London. English bankers were not altogether pleased about it. They know that the gold flow represents movements of capital to London that may at any time disappear again, There is nothing permnneut about such balances; they constitute what “the City” knows as restless money. Worse still they convey an impression to other countries that the United Kingdom is growing wealthy enough to- pay a further instalment of her debt to tho United States. The fact that the Bank of England had succeeded in a month in' buying back £.19,836,000 of gold, a sum slightly in excess of the gold transferred in settlement of tho December 15 debt obligations, has led to a suggestion in tho States that

this affords evidence of England’* continued ability to pay. Few people understand the intricacies of exchange or the fact that the money which lias flown into London for safe keeping can bo taken out us quickly as it came, and involves a potential threat upon the sterling rate. Britain’s ability to pay depends upon the trade balance of exports over imports and that unfortunately is not on the favorable side. The purchase of tin accumulation of gold reserves, made possible by the exchange equalisation fund of £150,000,00(1 placed at the disposal of the Bauk by Parliament, was primarily to safeguard sterling against sudden withdrawal of the foreign deposits, but it is also understood that later in the year important exchange transactions will take place-between France, the United States and England with the object of stabilising currencies and improving tho general world situation.

Should help for tho dollar be required to tide over a bad period that may still be ahead, the Bank of England and France may lend pounds and francs, or even go the length of a stabilisation loan to rectify the position. “While the standard of gold values'is rocking as it is to-day,” says the Financial Times, “any estimate as to tho course of gold can be regarded only as guesswokk. ” But the London Stock Exchange considers that, standard or no standard, gold will always bo required as the one and only satisfactory medium for the settlement of international debts. Mr. Neville Chamberlain has said repeatedly that Britain has no intention of returning to gold until she has assurances that there will be no repetition of the circumstances which forced her to abandon it as a standard, these circumstances, of course, being the piling up and sterilising of a tremendously large part of the world’s gold reserve in France and the United States.