GOLD AND PRICES A STABILISED POUND.

Wanganui Chronicle, Volume 74, Issue 244, 15 October 1931, Page 9

GOLD AND PRICES

A STABILISED POUND.

One of the contributing •causes to the present exchange difficulties confronting importers is attributed by a Wellington mercantile authority to Mr. Winston Churchill’s re-establishment of the £1 on a gold basis in 1925. in course of conversation with a representative of the Wellington Post, the merchant said Mr. Churchill artificially increased the value of £1 to a sovereign’s weight in gold. Prior to the war tho price of the gold was such that the quantity and quality of gold in a sovereign was worth 20s in English, 25 francs in French, and 25 francs in Belgian currency.

“When deflation of national assets occurred after the war France and Belgium faced the facts of the position. They accepted the fact that in terms of gold all national assets, including their paper currency, had been unduly written-up during tho war boom, thus hiding from view the serious wastage of war. Now that the wastage stood exposed they adopted the only rational course of writing off their losses and revaluing their assets on their relative value to gold. In consequence the Belgians fixed the price of tho sovereign at 175 Belgian francs (35 bel gas) against the price of 25 francs pre-war, and the French fixed the price of tho sovereign, at 124 francs against the pre-war price of 25 francs. Those in control in Great Britain were too vain to face the facts. In their view twenty British shillings would buy a sovereign before the war, and it was beneath their dignity to pay a penny more now. The result has been as expected. The nations wililng to pay an increased price for gold got all they wanted, while Britain lost it. We, in short, were 1 too proud to pay.’ “Let us suppose the sovereign was stabilised at 30s British currency. The first result would be a writing down of every asset valued in British currency by one-third. If our assets are overvalued this is a prudent business course to adopt, one that would be commended in the case of a big trading company finding itself overburdened with debt and overvalued assets. If we visualise the Empire as a big trading company in financial deep water, but at bottom quite sound, we shall readily recognise the greatly increased strength we shall gain by adopting business methods and writing down our national capital to correspond with the value of our national assets.

“An incidental effect of interest to New Zealand is that gold at £6 per ounce would stimulate reef mining in New Zealand, and Waihi would again become a hive of industry.”