Evening star., 1949-07-03


tain the hegemony of the financi
under the international Monetar
and as a consequence a serious
disequilibrium in commerce and
trade is developing. This is the
crux of the immediate crisis and
the dispute which today RACES is
over the question of devaluation
of the overvalued British pound.
History eloquently testifles that
whenever a nations star is rising
gold freely flows into the Golfers
of that nation; and when it's sun
begins to set and its power and
glory wane this gold begins to
take fight until finally its treas
ury is empty. History also teaches
that when nations star has
risen that nation invariably estab-
fishes a gold standard so as to
provide a more or less self-regu-
lating mechanism through which
values may be established and
commerce and trade among the
nations of the civilized world car
ried on.
Coined Gold in 1916
A modern instance is Britain.
Britain rose to pre-eminence In
the late 18th and early 10th Cen
turies during the French Revolu-
ton and the Napoleonic Wars.
And when the final curtain was
rung down on that epoch at Wa
terloo in 1915. Britain had gath
cred in her treasury the major
part of the gold reserves Of the
Western world. One year later
1816) she established the gold
standard, coming gold and making
those coins the principal currency
of the nation.
At first, in 1916, the Bank of Eng
land. fearful lest large quantities
Of gold might be demanded, offered
to redeem only certain notes OF
small denomination which had
been issued prior to certain
specified dates. When only very
few OF these were presented. the
bank then offered Gin 1870 to
redeem in gold notes Of every
denomination which had been
issued prior to January l. 1911
that Is, it offered to redeem all
outstanding notes. But when
heavy demand for gold in ex-
change for these notes developed,
it gave rise to considerable con-
Germ as to whether or not gold
standard could be maintained, and
both houses of Parliament named
secret committees to study the
problem. These committees recon-
mended that the Bank of England
be required after February /, 1920.
to redeem its notes in gold bullion
at declining prices for gold until
mot later than May /. 1929
stabilization could be achieved and
full cash payments established.
Publication of this recommended
tion had the desired effect and the
premium for gold entirely dis
appeared before February, 1920
On May l, 1921. cash payments
at par were officially resumed.
Rose to Pre-eminence
Thereafter. for 90 years-from
May. 1921, until August. 1914
Britain maintained a gold stand
ard which functioned more or less
as an automatic mechanism which
established the price of every COM
modify and service that entered
the markets of the world. During
all this period her principal cur
rency consisted of gold coins and
the Bank of England was bound
to pay upon demand gold coins
for any and all of its notes that
might be presented.
By establishing and steadfastly
maintaining this gold standard
Britain rose to a position of pre-
eminence among world powers
virtually dominating the trade and
commerce of the world for nearly
a century. But unhappily, in 1914
under stress of mobilization for a
great war, she was forced to
abandon this gold standard. This
marked the beginning of Britain S
decline.
After August, 1914, when Britain
abandoned the gold standard, the
Bank Of England was no longer
bound ito pay upon demand gold
coin for its notes. This was the
law until 1925, when Parliament
enacted the Gold Standard Act of
1925. which provided for the re-
establishment of the gold standard
on limited basis-i.e., under this
act Britain did not return to the
gold coin standard which had pre-
vailed for SO years but established
a gold bullion standard" Al
though the bank, under this act,
was still relieved of the obligation
to pay out gold coin against its
notes, 1t was bound to sell gold
bullion in the form Of bars weigh
ing not less than 400 ounces (troy)
and worth approximately 1000
pounds sterling at the bank S
legally fixed price for gold. The
fixing Of this minimum weight
was for the purpose of making
gold available in quantities for
export, while at the same time
preventing it from flowing freely
into domestic circulation.
Devalued Currency in 1881
BY thus returning to a limited
gold standard in 1925 Britain was
struggling to recapture some
measure of her lost prestige in the
market places Of the world. Her
vital mistake was in confusing the
actual value of gold with the value
which the right to convert into
gold gave to sterling.
During the war and until the
fall Of 1919 sterling was pegged
and supported at par. more or less
with the aid Of the United States.
It's statutory gold content was
123.27447 grains of gold 11/12ths