The Position Of Gold

Timaru Herald, Volume CL, Issue 22140, 8 December 1941, Page 4

The Position Of Gold

CASTING up accounts for the decade since Great Britain left the gold standard, the Economist concludes that the departure from gold marked a much more definite epoch than was apparent at the time. At first viewed as a bitter defeat for British economic statesmanship, the abandonment of the gold standard is now regarded by public opinion in England as a good thing. For Britain the departure from gold coincided with a great economic change. The chronic depression of the ’twenties gave way to seven years of almost uninterrupted and rapid progress. Fortunate coincidences may have played a part; but there have been definite advantages, the greatest being the fact that abandonment of gold released Britain from the long struggle to protect her reserves and thus made possible the policy of Cheap money. In the ensuing years the foundations of a new order of ideas have been laid in Britain, in America and in Germany. The world is showing an unmistakable tendency to argue that if a thing is physically possible, whether it be fighting a war or removing unemployment, it must not be stopped by considerations of “sound finance” alone.

The Economist asks whether this means that the long reign of the gold standard is over. Its own answer is that in one sense that reign is completely ended; that the old popular reverence for gold as the one satisfactory form of actually circulating money is dead in Europe and dying in America; that as an international standard of value also the day of gold is done. But there will still be use for gold. In any foreseeable time dollars will be sought after by the rest of the world. So long as gold remains a sure means of acquiring dollars, gold will be desired by the whole world. No currency, not even the dollar, is now on the gold standard, says the Economist but gold is on the dollar standard. As matters now stand, there is no refuting this argument. Gold at the moment owes its value to the dollar rather than the other way round. Yet this may not forever be the case. As the Economist also foresees, but thinks unlikely, it may be that in a few years’ time, war once more leads to inflation and inflation to a renewed search for stability, the present popular judgment on the gold standard will be reversed.