New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1917-04-01
The Effects Of
Gold Movements

Gold Movements
What have been the effects Of these
gold movements first, upon the bel
igerents, and, second, upon the neu-
trails?
The governments of all belligerent
countries have been alive to the fact
that the greatest amount OF service
can be had from their gold by post
poning parting with it as long as pos
sble Therefore they have permitted
exchange on their countries to decline
considerably before shipping gold. A
decline in the value of a currency al
ways has the effect of raising the
prices of imported commodities, as 1t
requires more Of the deprecated money
TO pay the foreigner for the same guam
tity of goods than it did before. A
high rate of foreign exchange q. e.
low rate of exchange on the Subject
country is an infallible sign of de-
probation in the value of a currency.
OF course. the main factors IN raising
price levels in the belligerent countries
are the increased demand for merchan-
disc and the reduced production Of
commodities. but this contributOry de-
feet Of declining exchange is not in
considerable. The extent of this up
ward movement of prices can be seen
from the index number of "The Lon
don Economist" which advanced from
1865 in July. 1914, to 4,9OS in Deem
Der, 1916-an increase Of almost 100
per cent.
The withdrawal of gold from circula-
ton for export to the neutral coun-
tries created a dearth of circulating
medium, which has been replaced by
the additional issues of banknotes by
the government banks. The movement
did not stop here, however; the
temptation to make money" by the
printing press process has been too
great in all countries, and we find
everywhere a tendency to issue cur
rency not only sufficient to replace the
gold, but far in excess Of that amount.
This seems TO be one Of the natural eff
fects of war; the policy of currency in
fiation has been followed by every bel
ligerent country of recent times, our
own government during the Civil War
being no exception. The increased is
sues Of paper money have. of course,
also contributed TO bring about higher
commodity price levels. The conditions
now existing in most belligcrent cOun-
tries will not be permitted TO continue
after the declaration OF peace. The
gold basis is now smaller than before
the war. and the credit structure rest
ing thereon is greater. A readjust-
mcnt must take place, and the first step
undoubtedly will be an effort 10
strengthen the gold basis by attracting
gold from abroad.
The effects upon neutral or supply
countries Of the influx Of gold have
been. first, the direct impulse to finance
and trade Of the increase in circulating
medium; second, the ultimate expan-
sion Of credit based upon the gold i'm
ported; third, the stimulus to trade
from the aforementioned factors;
fourth, higher price levels OF commodi-
ties as result of all three foregoing
factors.
The first mentioned result is sclf-sp-
parent; if $1OOOOO,OOO gold is shipped
to this country the circulating medium
is increased by S1OO,OOO,OOO An in
crease in the circulating medium al
ways results ultimately in an increase
in the prices Of commodities
The secondary eject is the expan-