Papers - Gold Supply Symposium - Gold Supply in Its Relation to Currencies and World Commerce (Summary)

In a gold standard world which possesses insufficient metal to meet the every-day needs of all, confidence becomes the vital factor, the very foundation upon which the machinery for the expansion of gold into currency, and credit, rests. The gold supply, affected by many influences, moves constantly from one point to another, but not always to that point where it is most needed. In the period 1928-1930, the combined gold holdings of the United States and France increased $1,370,936,-000, and this with new gold adding only $600,000,000 to the monetary gold stock.Theref ore, the gold stocks of other countries must have been depleted during the period by $770,936,000. This uncontrolled shifting throws the delicately adjusted instrumentalities of both credit and commerce out of equilibrium. If a given nation's gold stock shifts so as to bring it substantially below the legal reserve ratio set up against it for currency issues, the effect can easily extend to the currency issues and banking credit volume of one or more nations which may have based their gold exchange standards upon the gold stock of such nation. Thus the substitution of paper based on gold in place of the actual gold is an inflation of the currency, which carries through into an uncontrolled pyramiding upon the entire machinery of credit based on gold. In 1929 Europe, South America, Africa and Asia had overissued currency based on gold. America, Oceanica and Japan, which have not overissued their gold currencies, would in normal times require their entire present gold stocks and, as Continental Asia is largely upon a silver credit basis, from a domestic standpoint, it would appear that the gold problem is not so much one of maldistribution, as it is one of inadequate supply. It would appear that some method of increasing greatly the velocity of gold, within the safe reserve point, should be devised, or that silver, of which estimates indicate that 7,000,000,000 oz. are available for