International Currency

Waikato Times, Volume 115, Issue 19272, 2 June 1934, Page 11 (Supplement)

International Currency

~ )LD STANDARD OR NOT?”—This a remains to-day as acute a quesS If lion in international relations as it lias been since Great Britain abandoned trio gold standard in 1931. It is slill, however, a question of which there :s generally hut imperfect understanding, and for this reason many people would welcome the , , Exposition of Britain’s Share in the past and future working of the gold slumlord which rh'r Charms Morgan M ebb contributes to the Rutarian “Service.” The gold standard, writes Sir Cliarlqs. c ,f comparatively recent- adoption. II was a British invention, evolved about, a century •iso in the efforts made It. re-establish British foreign trade after the Napoleonic wars. The instability of the foreign exchanges was found to he a great obstacle, and an attempt was made lo overcome this obstacle by linking the pound sterling to gold. The value of the sovereign was fixed in. terms of gold. This stabilisation of the value of the nound sterling acted like magic. It speedily made London the financial centre of the world, with the sterling bill of exchange as an International currency, A hill of exchange jj;* a post-dated cheque, Ihe date of payment being postponed with the consent of both parties to the transaction. The sterling 1)111 on London proved to be so stable and’efficient a system of International currency that it was speedily adopted by alt countries to finance their overseas trade'with each other, whether the goods in Ihe course "of liieir transport came lo Britain or not. It IVlado An Idoal Currency. t* was stable in value being .anchored by .-ml Of the gold standard to gold. It was exempt from the evils of inllatiun and dei al \llhoiigli Germany, France and Ihe boiled el ites adopted the Gold Standard during the • . j hir | v years of Ihe ninetecnlh century, remained'completely under Itrillsh control, •erniany and ihe United Stales were debtor • lions and Ihe international trade ol ivmre was not of suffieienl volume, nor was Paris monev market sufficiently organ--1 , |o i/ive France any inlhicnee in the working of Ihe gold standard. .By rigidly .o,fining fiiieliialious in Ihe value of gold ! Vi ...pen the narrow limits .of £3 • ,<'« 9d and , - jpi,,| range of less'than two points in' a 'thousand, Ihe Bank of England had

Gold Standard or Not?

subtly transformed the gold standard into a sterling standard. The sterling bill of exchange, not gold, was the international currency.

Such was the international currency standard, the control of which Britain was forced to,relinquish in 1914. In 1925 Britain returned to a gold standard transformed out of all knowledge during the len years’ control by the United Stales. The United States, and subsequently France, utilised their greatly strengthened creditor positions to operate the gold standard on principles Incompatible With British Policy, In particular, their policies of high protection restarted and stimulated the drain of gold from the debtor countries which Britain had successfully averted for sixty years. ■ 1 TBL»U* Prior o llie war, Britain had protected the debtor countries from financial exploitation by accepting goods in payment of their liabilities. But France andjhe United States as creditor nations after the war, by the operation of their high tariffs, refused to accept payment in goods. The debtor nations thereupon dumped their produce Into the only free market —Britain—knowing that the operation of the gold standard would thereby force Britain to settle their debts by transmitting gold to France- and the United States in payment for the dumped goods.

Britain endured until 1931 the degradation and humiliation of being forced to participate In live destruction of the splendid structure of international confidence and prosperity which she had so patiently constructed. almost unaided, during Ihe 80 years prior lo the war. Her own Invention, ihe gold standard, was being operated on principles ineompnlihle with its success. ||oiuclantly she withdrew, hoping against hope liuit the -conditions essential for its success would return. But Will Those Conditions Ever Return? The answer is In lie found in ihe replies lo a series of much easier queries. Will France and the United Stales abandon lheir policies ol high protection? Will -Britain rot urn to free trade? Is the Bank of International Settlements a possible inslilulion for (lie control of Ihe gold standard?

Until ali these qncMions are answered clearly, emphatically, and unambiguously in Ihe. affirmative. j| i.s futile lo regard a ro~ turn lo the gold slandnrd as being even remotely possible.