“A DEAD ASSET.”

Taranaki Herald, Volume LXVII, Issue 16501, 31 July 1919, Page 4

“A DEAD ASSET.”

GOLD AND HIGH FINANCE. PLETHORA OF MONEY MEANS BIG PRICES. A Times representative has discussed with a number of financial men and students of economics the suggestions made by a Correspondent with reieronco to tho gold industry and high finance. One and ail characterised as too absurd for serious consideration tho proposition time, the £30,000.000 worth of gold discovered iu the Dominion should have been retained in New Zealand by the Government, applied to banking purposes, ami made tho basis for establisliinf credits or paper-money, to the tunc of some £300.(XK),000.

“\Vho would hold all that gold, if wo had kept it in the country,” asked one well-known bank manager; “ami who would hold the 800 millions’ worth of paper-money The banks would not. As a. matter of fact, gold is the only dead asset that, we have. It is stored in our vaults, doing nothing, earning nothing, bringing us In no return whatever. Its only use is as a backing for our credit and ns a menus for settling international trade balances. Wo are required by law to keep a certain percentage of gold in reserve; but, beyond that necessary percentage, no bank lias any desire to hoard up a dead asset. As for tho £800,0(.‘0,000 of paper-money, the business of a country is like a. sponge; it can only absorb a certain amount of paper-money as the. medium of exchange. Once tho sponge is saturated, it can hold no more. If the banks put out more paper-money than the business of the country needs, it only comes back to ns again; and, tinder such conditions, it is of no use whatever to us nor to anybody else. If tho Government acted as banker, and flooded tho country with papermoney, or even with gold, tho currency would simply depreciate proportionately. That is only another way of saying that given a plethora of money, the money would buy less and the cost of living would go up still further. Russia is a standing, a classic, example of the groat depreciation duo to an over-issue of paper-money. So, only to a lesser degree, is Germany.

SOVEREIGNS OR TROUSERBUTTONS.

A student of economics substantially agreed with the practical man of affairs. “Except as a medium of exchange, an improvement on tho old method of barter, and for settling international balances, what use is gold to a country?” ho asked. “Granting, in deference to what is called ‘the gold superstition,’ that it is necessary for a bank to maintain a certain gold reserve to strengthen its credit, what, beyond that point, is tho use, or tho value, of gold to any country? Beyond that point, 80 millions of golden sovereigns would bo of no more value than so many trouser-buttons. You cannot eat gold, drink gold. You cannot wear gold, except a. comparatively small amount in tho shape of jewellery. You cannot build yourself a house of gold, nor pave the streets with it. Except for filling teeth and so on, and for use to a small extent in the arts, of what use is gold industrially? Over 90 per cent, of the world’s trade is t clone on paper—much of - it a more matter of book-keeping; and theoretically, given an .international Lcague-of-Nations currency and stable business conditions within each nation and between tho nations, there would seem to be no good reason why 100 per cent, of the world’s trade should not equally well be done on paper. Under such conditions —ideal and very far away at present, I admit—the great bulk of tho labour and capital now employed in gold-min-ing could bo employed, and, so far as the real needs of humanity are concerned, far bettor employed in growing golden grain, dairying, manufacturing, building more and better homes for the people, and so forth. Intrinsically, tho making of trouser-buttons is, I contend, a much more useful occupation than the minting of sovereigns. Our war experience has shown that pound notes can very well take tho place of sovereigns; but we have yet to find a satisfactory substitute for trouser-buttons. As a matter of fact, one rough and ready,_ but very effective method of preventing the escape of prisoners of war was found to bo tho cutting off of their brace-buttons.”