World Price Levels

Daily Telegraph (Napier), Volume 59, Issue 256, 1 December 1930, Page 7

World Price Levels

United Press Assn. Electric Cable. Copyright

THE EFFECT 0F GOLD Mr McKenna's Broadcast Speech CONTROL OF FINANCE. '

(Received This Day. Noon).LONDON, Nov. 30. The effect of gold on world price i levels was the subject of a broadcast address by 31r Reginald 3IcKenua. i Great _ interest was taken in the address in view of the increasing attention to the monetarv poLicy.. 31r 3IcKenna explained that a ! falling price level means a diminution . of profits of industrial trading . 'and enterprise. The effect if the fall comea when the profits are not exeessive, is to stifle trade. On tlie other hand, a rising price level imposes an invisihl© duty on all fixed money ineomes and all relatively inelastic ineomes, such' as wages, with a re-action on the standard of living. "An increase In the quantity of money," he said, "will not necessarily prevent a fall in the price level since the wliole increase may be absorbed by speculation. The monetary policy cannot govern the price level unlefs the use of money as well as quantity can be controlled. "The maintenance oi a stabilised price is a world ^problem necessftating tbat the real valufe of gold, namely its piirchasing power oyer goods and services, sliall remain constant, wherever it is used as a standard. "There was an unpreeedented drop last year of 17 per cent. in the wholesale price level. "We naturally seek to discover -whether a contributory cause is diminution of the supply of monetary gold. We find tliat although newly-mined gold ±o the extent of probably £100,000,000 has become available during that period for monetaiy and eredit purposes, more than twice that amount has heen absorhed hy two coqntries without corresponding ncdition to the money in active circuJation. That gold is aS bai-ren as when it lay in the mine." Mr 3IcKenna strongly advocated an international discussion and agreenieflt) to prevent such an nneconomic decline in the active stock of gold. There should be a frank recognitbn by monetary authorities 'of the desir-. ability of a stable wor:d ievei. : Eitlier more gold must be added to the quantity available as a basis of currency credit or a more effective nse must be made of the existing stock. Recourse must be had in an international agreement.