£200,000,000 IN GOLD LIES BARREN IN TWO COUNTRIES

Star (Christchurch), Issue 19241, 1 December 1930, Page 6

£200,000,000 IN GOLD LIES BARREN IN TWO COUNTRIES

Rt Hon Reginald M’Kenna Declares Agreement Is Needed To Adjust Levels

(United Press Association.—By Electric Telegraph.—Copyright.) (Received December 1, 11.5 a.m.)

LONDON, November 30. THE EFFECT of gold Oil world price levels was the subject of a broadcast address by the Rt Hon Reginald M’Kenna. Great interest was taken in the address in view of the increasing attention given to monetary policy. Mr M’Kenna explained that a falling price level means diminution of the profits of industrial trading and enterprise. The effect, if the fall comes when profits are not excessive, is to stifle trade. On the other hand, the rising of the price level imposes an invisible duty on all fixed money incomes, and all relatively inelastic incomes, such as wages, with a reaction on the standard of living. An increase in the quantity of money will not necessarily prevent a fall in the price level, since the whole increase may be absorbed by speculation.

Monetary policy cannot govern the price level unless the use of money as well as the quantity can be controlled. The maintenance of the stabilised price is a world problem necessitating that the real value of gold, namely, its purchasing power over goods and services shall remain constant wherever it is used as a standard. “ There was an ‘unprecedented drop last year of 17 per cent in the wholesale price level. We naturally seek to discover whether a contributory cause is the diminution of the supply of monetary gold. We find that, although newly mined gold to the extent, probably, of £100,000,000 has become avail-

able during that period for monetary and credit purposes, more than twice that amount has been absorbed by two countries, without a corresponding addition to the money in active circulation. That gold is as barren as when it lay in the mine.” Mr M’Kenna strongly advocated international discussion and an agreement to prevent such an uneconomic decline in the active stock of gold. There should be frank recognition by monetary authorities of the desirability of a stable vrorld level. Either more gold must be added to the quantity available as a basis of currency credit, or more effective use must, be made of the existing stock. Recourse must be had in an international agreement.