Evening star., 1933-06-16
BY ARTHUR CRAWFORD.


world economic conference must con-
slider measures to utilize to the best ad-
vantage gold stocks and to bring about
a better distribution among the nations
These measures include lowering
Of the gold reserve ratios, which now
range between 80 and 40 per cent, a
ard, greater use of subsidiary coinage
and a system of cooperation by Gen.
tral banks in credit policies.
Settlement of the question OF inter-
governmental debts and lowering OF
tariffs and other trade barriers will
contribute toward more free move
ment of goods which will facilitate a
better distribution of gold by requiring
less extensive payment Of trade bal
ances in gold.
The best authorities are of the opin-
ion that the world stocks of monetary
gold are sufficient and that new pro-
duction will be ample to sustain the
normal increase in business. 1t has
been estimated that gold stocks and
the volume of business each increases
at a rate of about per cent year,
thus making possible sustaining OF
prices at about the same level.
Inadequate Gold Supply.
When the gold delegation Of the
Financial Committee of the League OF
Nations made its first interim report in
1880 the conclusion was reached that
If prices we're to be maintained at about
the level ruling at the end of 1928 there
was some danger of the supply OF new
gold proving inadequate unless meas
ureS were taken to econOmize the use
of gold for monetary purposes. This
conclusion was based on a belief that
production Of gold was declining, that
there was a slight increase in the de-
mand for non-monetary and more rapid
increase in the demand for monetary
purposes. At that time the gold dele
cations conclusion was challenged by
such experts as E. A. GoldenweiSer OF
the Federal Reserve Board. Since then
gold production has increased, one Of
the factors being the decline in COM
modify prices while gold prices re-
manned stationary, the effect being to
make gold mining much more profit
able.
In its final report issued in 1882 after
there had been many changes in the
situation, including the departure of
Great Britain and numerous other
nations from the gold standard, the
gold delegation altered its view. In
this report it was stated that the
worlds total stock of monetary gold,
apart from any considerations as to its
distribution among different countries,
has at all times in recent years been
adequate to support the credit struc-
ture legitimately required by world
trade and that the rapid decline in
prices which began in 1929 cannot be
attributed to any deficiency in the gold
supply when regarded in this sense.
The report pointed out that the worlds S
central gold reserves increased from
about $9,150,000,000 at the end Of 1925
to about $11, 1856, 100000 at the end OF
1881 or at an average rate Of 323 per
cent annually for the six-year period.
More recent figures show that gold
reserves of central banks and govern
ments totaled in February, 1888,
s11, ,733, 900 900. These totals do not
include gold coin in circulation,
amounting to about three-fourths Of a
billion dollars.
Faulty Distribution.
The difficulties Of some nations In
maintaining the gold standard have
been due to the faulty distribution Of
gold rather than to any world short
age.
Nearly 80 per cent Of the worlds
monetary gold stocks have been con-
centrated in five countries. OF the gold
reserves of central banks and govern
ments in February, 1888, totaling
S11,733, 900 900, about S3, ,808, ,000, 900 was
held by the United States, $3,176, ,000.-
900 by France, $692 ,000, 900 by England,
$488, 100000 by Switzerland, $436, ,000,-
900 by Spain. $410,000,0O0 by the
Netherlands, 1858, 100000 by Russia,
$3.50, 100000 by Belgium, 1925 ,000, 900
by Italy and $249,000,000 by Argen-
tina Germany had only $183,000, 900.
Both the preparatory commission OF
experts for the World Conference and
the gold delegation of the League
Financial Committee have recon-
mended a reduction in reserve ratios
from present high levels. The purpose
is not to encourage an increase in note
issues but to enlarge the free margin
of gold reserves which can be used for
international payments without en-
dangering the legal minimum ratio.
The minimum gold requirements of
the nations Of the world at the end
of 1880, when most of them were on
gold, totaled S7,760 ,000,0 exclusive of
Russia. This was about 35 per cent Of
the total of the notes and other sight
liabilities amounting to $22, ,450 900, 900.
With total gold reserves of these ma
tons amounting to $10,7S0, ,000, 900, it
meant free gold above legal minimum
requirements to an amount of more
than S3,000,000,000.
If the minimum gold requirements
had been lowered from an average ratio
of 35 per cent to Is per cent, the
amount of free gold available for in
ternational payments would have been
increased to about $5,170,0 900 900, and
if lowered to 20 per cent it would have
been increased to about $6,310,000 900.
The purpose of a gold reserve is to
give confidence in the soundness Of the