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THE FUTURE OP GOLD

Hartley Withers

31st October 1934



THE ROYAL INSTI TUTE OF INTERNAT IONAL AFFAIRS

5»/>?n

NOT TO BE TAKEN AWAY

RECORD OF GENERAL MEETING HELD

AT

CHATHAM HOUSE

on

31st October 1934.

Subject- T H E FUTURE OP GOLD

Speaker: Mr Hartley Withers.

Members are reminded that in any use made of information receivedat any meeting of the. Institute the speaker's name shall not bequoted nor the fact mentioned that the information was obtainedat a. meeting of the Institute.

Th.ese conditions apply equally to information obtalned from written

records of meetings.

http://localhost/var/www/apps/conversion/tmp/scratch_1/Th.es





THS BOYJi ISSTITUIB 0? IITERHATIOHAI. AWAIRS. fits:

Report of a Meeting held atChatham House at 8.30 p.a. onWednesday, 31st October 1934.

Chairman:

MR. BAWTREY.

CHAIRMAN? I rery much regret that Sir Basil Blackett has

"been unavoidably prevented from coming to-night, so I have got

to do my best to take his place.I really do not think it is necessary for me to introduce

Mr. Hartley Withers. He is a person of many avocations. He

has been on the Stock Exchange, he has been a financial jour-

nalist and an eminent author; he has been in a/banking business

and in the Treasury; and every one of his many occupations

would qualify him to address you on an occasion like this on

this subject.

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MR. HARTLEY TgTHERS: The ap ol og y with which u n pr ac t i s ed

speakers like myself generally begin to give an address of

t h i s kind i s more than us ua ll y si nc er e on t hi s occasio n, he-

cau se I have been suf fe ri ng at home from a s e r i e s of d omes tic

disasters,. «««£^stttr4i!jgHM^

x'?di-ich"lj^^l^-"#feje- v#^^r.,.du»4a^«j«toi.©h'-w^ i^hAd.. t.3«»u4aars-ea....ia..^tJae

a J Gsxa&cqvi?9n<b'L#**&' have not had time to pr ep ar e t h i s sub-

j e c t as i t ough t to have been p repa red ; .-awe. I am a f r a i d you

wi ll have to l i s t e n to a very hal f-b ake d performance. I t

ma tt ers l e s s because th er e are pl en ty of people in t h i s ropm

who know a gr ea t d ea l more about g old and i t s f ut ur e t ha n I

do, so I hope the discussion will make up for any gaps in my

opening t a l k . Als o, when one t r i e s to peer in to the fu t ure

about an yt hi ng , t he utmost th a t one can do, whe the r with-

pr ep ar at io n or .without i t , i s to offe r a few ftAtrnmaxxv glimpses

i n t o th e £»£«*ej and a l l t h a t can be ex pe ct ed of me i s *frao% a

s e r i e s of p l a t i t u d es .

P l a t i t u d e Mo. 1, of o»*>goo, -that one hioaawa -o "g,ftrWflfrad--~-&^>

4pa»»»*^y^''#ii^^ i s t h a t geuld. is. a s u r v i v a l

of pr i m i t i v e b ar ba ri sm , in i lilmtt i t da t e s from th e time when t he

app eal of t h i s ni ce br i g ht met al to human va ni ty made i t in un i

versal demand for the adornment of the Chief, and h i s dr in ki ng

cups , his armour, his wife and the temples of his gods and so

on. ^ r « r i*ince the n i t ha s become a so rt of f e t i c h wi th th e

human ra c e , and th e worsh ip of go ld i s in gr a ine d now in hum an it y.

The id ea t h a t one shou ld have to have gold as a ba ck in g f or

curre ncy i s e imply a bar bar ous su rv i va l .

P l a t i t u d e H o . 2 i s t ha t i t i s very st up ia and was tef ul th at

we should spend so much t ime and energy and money in d igging

- 2 -



go ld out of t he "bowels of th e e a r t h in one- p a r t of t h e w or ld ,sme lti ng i t and re fi ni ng i t and br in gi ng i t over he re at gr e a t

exp ens e, and bur yin g i t a gai n in the bowels of th e e a rt h in t he

va ul ts of a e e n t r a l bani: . )f AA'' J ^&^^mJi^A»^ml^^m^s^^^&»m^'«"&^»&us

.j&oaetary mat t e r a . It* i s ' ba rba rous ; it-sis.....stupid,;,,.sfi^a4»Xt,„.„ii.fi

expensive.

As t o t h e expense,.-«#ifeiw««ie ?/e know t h a t t h a t do es no t

matter in / t.h"m"»"l>eiaigt. t h en pe op le want a t h i n g / *they w i l l pay

f o r i t . When S i r Merman Angel 1 demons tra ted, t h a t war di d n ot

pay ei t h e r t ho se who won i t or th os e who were de fe a te d, some

people seemed to think that he thought he had proved that war

would nev er happe n,-aga in. Si r Morman, of co ur se , knew b e t t e r .

I t was po in te d out at the ti me , long befo re t h i s l a s t war, by

Mr. Wells, that there were a great many things that we habitual

ly di d in t h i s l i f e which did not pa y. Mr. Wells in st an ce d

f a l l i n g in love as one of them, ,a**»%lf«,wH>r*""f*@. I f peop le

a re ang ry, t he y w i l l go to war and damn t h e expenses and i f th ey

want go ld, the y wi l l hav e go ld , whatovor itr may 000%.

Jjj^&mJ&stkft ques t ion of gal- a' bac> i. ag is-i-re-a-Hy unnecefc&sar-y-'A&r

We may gr a nt tb«^-i»«^4»i&> t h a t gold i s a ba rb ar ous s u r

vi va l, and th at i t i s a stu pid bus ine ss to have to have i t ,

to ta ke a l l t h i s tr ou bl e to produce a met al which i s ver y

l i t t l e u se fo r any o the r pu rpose except fo r de n t i s t s , p i c t u r e

frame makers and je we ll er s in th es e enormous qu a nt i t i e s^ j us t

in order to give mankind confidence in his currency and credit

f^^JX we gr an t th at gold i s a bar baro us (su rvi vai jan d a st up id )

raarafBttigeffle-a*, does it^mea n th a t (t he re f ore )go ld i s l i k e l y to be

- 3 -



dethroned at any period that one can foresee ? Moit 'I wa&4

*•& suggest -that the ••eQn&harsioa atmwhl'Qh one1 &ggivcs ie the, dii'&at

a^poeite. #b.at any article, the value of which is firmly

founded on human barbarism and human stupidity, is just as

impregnably founded as anything that you can conceive. I

think if we look round the world we have to acknowledge that

this is so.

As to barbarism, the leading article in "The Times'* a few

days ago pointed out that a fever of militarism, amounting

almost to mania/-was sweeping over Europe. According to

HThe Times" leading article writer and ***« Editor, people who

choose their words very carefully, Europe is not only bar

barous but very nearly a lunatic. We see Germany burning books

and harrying Jews^ 4jxurg«''al'i. tbw»<i)~4B*<&--e' We

see Signor Mussolini mobilizing boys of six years old.\

C'I f we look across the Atl an ti c to America.) QUO of *foe

amasfr iatogaetimg thinga that liom livm^ififiiainot • the ci'iaiB im>

Aao-gioa1 was tho faofr,—of' ml\i&to.c I am assured, th at the only

industr y in America which «;ra""iwb- ••ggmeiq^^ftfe^^A^'fehe de pr es

sion f was the beauty parlour intfcmafcry.

If these thi ng s are so , we need not be af ra id th a t any

tenaency towards ^jtAs^mjgm^-;strong enough to shake the st rength

of the gold fetich / is going to up&et the calculations of the

•Hand GoldfioIdo an4 o£foor gold organisers .yCw-T gg-* ? .

As -to s tup id i ty , we have to remember th a t i t re qui res

•quite a high and br i l l i a n t s-art o.g, in te ll ig en ce , l ik e Mr.

Keynes 's , t o evolve the idea of a paper currency which would

be based upon nothing more tangible than the credit of the

Government and th e confidence f e l t in the Government; and i t

requires, not, of course, the same order of genius but a fairly

high level of intelligence in the general population to ;aake

- 4. -



such a conception (even a, th in g that can)be conside red by the

general public, l e t alone actually adopted.

We have seen evidence of barbarism approaching manias do we

see much evidence of growing intelligence ? I want Ve suggest

•to- you tha t in te l l igence is in these days rather at a discount.

The highbrow i s a person who i s suspected and to a c e r t a in ex

tent despised. Of course, i t has always been so in th i s

country. Weiiavo niiTOya dampiacd1 iratclligonoe and- education.

If a fellow was L swot and did his lessons and that sor t of

thing, - he was l ike t hat , and i t could not be helped, you

wore ou'i'ij)! ' f ui' lrftm.

But in other countr ies inte l l igence and a reasonable exami

nation of di f f i cul t quest ions was thought to be ra ther a fine

occupation. That was so in places like Germany and I t a ly

antl. 88 on-, where they are now busy in repressing in te l l ig enc e,

r e s t r i c t i n g the freedom of speech and of thought and of l i t e r a

tu re , ana arguing by means of doses of c a s t e r oil or by linli»

ss*™---'- -*""a camp where #•»«.'are -boiiiow oa»*« "of aad not allowed

to be dangerous.

In France jir bellSvtj-^it i s otherwise, but in Prance the

reaction against intel l igence is in another form. I t takes

the form of fea r . The IPreneh fee l tha t they have been le t

down by us and by the Americans, and they have been af ra id

ever si nce . They are under the domination of t h i s t e r r i b l e

fear of thaiffg, which i s very natural from their point of

view.

These things oeing so, I Uiarniu i t %%• reasonable to expect

tha t the inte l l igence required for dethroning the golden calf,

«4rf oiTg laajf" nag1 fee gxpTCflMiw^ is not l i ke ly to maice i ts ap-

pearance very soon. <•!•-want a l ac tie point tut that, i t would

take son.e generations under the most favourable circumstances of

- 5 -



intelligent education and instruction before you could get theaverage man - and it is the average man's opinion that counts

finally in these matters about confidence ea** currency and go

^arth - to see that you im»m*n,,u&^^^]sh&jwl«><&ottQ sort of metallicA

hacking for yaar. money.

Very well then, if,as far as the question of barbarism and

stupidity is concerned, we need have no fear if we happen to

be bulls of gold mining shares, what about it when we look at the

real practical reasons which give gold *i value, apart from,

joarb aid om and oftupiaityfr

-Th4>« reasons -acre, in the, ffirot place that a gold backing to

a currency has been found desirable, or even necessary, in order

to restrain governments from using the printing press ad lib*

•a«£/4re we likely to see in the reasonably near future ,any

development in the direction of entirely trustworthy and en

tirely intelligent Governments, so eatisoly trustworthy and

intelligent that the human race can have complete confidence

in their management of the currency without Jseing fettered by

having to have gold behind it?

C

Mr. Menken, th a t very i n c i s i v e American w r i t e r , in a book

" T r e a t i s e jm£ Rig ht and Wrong,* obs erv es i no 14 an ta l ly

t ha t a l l governments are sc ou nd re ls . I thi nk t ha t i s a s l i gh t

ex ag ge ra ti on ! but .air this sa f l i g' t l mc l r. Baldwin, who ought to knov

b e t t e r t han any of us , ha s s a i d , rial ^wcV Wrat^-b^ t ,to »»fa»ft«M3lci&d,

iwd on t h i s su bj ec t of a gold -bac ked cu rr en cy , a few ye ar s ago :

"The gr ea t po in t about a gold st an da rd i s t h a t i t i s knave-

pr.oof.* He went on to add t h a t t h e r e was no Government on

e a r t h t h a t he would t r u s t to manage th e cur re nc y. TiiWl' l't1'

tWfffc.

i s s t i l l as hi gh as evej>*±1f was,'~l«*w&a£t r a t h e r h i g h e r , owing

- 6 -



- t t r ' a l l kMds'<QX^qu@«-3?-^^where, and, of c'otttwajgjÂ^Êlcountries there is some'kind of

a government .jtei^fi might hTaJr^n^ t o come in power, which a c e r -

That necessity for gold, or th§t argument in favour of gold,

i s as str on g as when Mr. Baldwin s a i d i t f i ve or si x ye ar s a go,

and i t does no t seem l i lcely to ge t any weaker when we se e a

thoroughly d i s i n t e re s t ed and ear nes t amateur l i ke Pre s i de nt

Roosevelt experimenting mm^ with h i s curr ency and ar ra ng in g

th in gs i n such a manner t h a t th e unf or tu na te American lousiness

man - who i s only too an xi ou s to ge t "busy and ge t go ing aga in

and push on th e reco ver y they a l l hope fo r - dimply does not

know where he s t and s about t he monetary po l i cy of th e a dm in is

t r a t i o n , an d Im i s in a s t a t e of the utmost "bewilderment.

£Harê?lso%.

Thogc -ic yot one soifre reaso n in fa vo ur of gold as i t us ed

to JM£, anti t h a t was the gr ea t importa nce th at i t had as e s t a b

li sh i ng a st ab le l i nk between the cur re nci es of the •-••* r .jntrnrp

,tTTETT!H?Aae aww>JUB woctei»pg.--safe^5^^ and f a c i l i t a t i n gin te rna t inna l t r ade and in te rna t iona l lend ing and f inance .

In my be li ef the abs olu te sh ut ti ng up of the i nt e rn a t i o na l

capital market is a thing which has not received nearly as much

a t t e n t i o n as i t ought to have as one of the cau se s of th e p re se nt

c r i s i s . Seeing th a t in old time s between t hr ee hundred and four

hundred million pounds worth of purchasing power used to be

spread a l l ov er the world every yea r by the cr ed it or co un t r i es ,

and that %»na«&Qa&. A-o -abpoluto3»y' tfeut .&ew», -$e need not lo<ric much

Ju^rthor i o r tho oauce of the pr e se nt e r i e i s i

Eefore th a t system could be rev ive d at a l l , I think, i t i s

f a i r l y obvious th a t we s h a l l have to have some appro ach to some-

- 7 -



(A&V CWW*^ , h^»Z^ fat /U^K^T^. %Â , k*^4t^ a.—Ûj'-iê^Û J

tiling like A stability in rates of exchange which was produced by

the working of the gold standard.,r

-Vtijy well then. 3r Ihlnk we have nljsuia out a vuxy f a i ^

•case for accepting that gold will be in demand, and will tee

in increasing demand, for some time to come as a basis of cur

rency and credit.

Then there i s the question of supp ly . As we a l l remem

ber, after the war there was a good deal of anxiety as to a

possible scarcity of gold* but owing to the depreciation of

the pound and the do l l a r , which has had the r e su l t of

putting up the price of gold to something like 140s. an ounce ir.

the London market, tha t si tu at io n has been en ti re ly al te re d,

and the a va il ab le supply of gold under pr es en t circumstances

is immensely increased and promises to be increased very much

fu rt he r if the pr ic e of gold i s maintained.

How as to t he fu tur e p r i ce of gold th er e are very vary

ing opinions. In a book by » gcMrftKimmt 'Wif&m. Harold iPisher,

entitled "England takes the Lead,* that I haa the- i>i»ae**re of PC-

vicwiiig net l w g -ago, he st at ed tha t gold was l i ke ly to go to

250s . an ounce ana perhaps higher . His ge ne ra l view was tha t

the price of everything was going to blaze very considerably,

and gold among other things.

On the cont ra ry Pr of essor Lione l Eddie, who used to be

pr of ess or of financ e in Chicago, -aa i n t e re s t i ng onfl though tfu l

Anaeyioan cconiwiletrv has lately written a booktSSSE^ôllars,' A

in which he says that anybody who is speculating in gold

shares and imagines that the price is going up to 160s. an

ounce and going to stay there, is reckoning on what is by no

means cer ta in , and in fa ct is improbab le. He th in ks the

pr ice i s much more l ike ly to go back to the old p r ice of

$20.- an ounce and perhaps even lower.

- 8 -



M B argument is that the natural forces of supply and de

mand are going to "bring a"bout this reaction.

•When I am told about the natural forces of supply and demand

I always want to know what these forces really are, because 1

find the learned economists who talk about them do not seem to

be quite sure and do not seem to agree.

The general idea seems to be that if the price of a thing

goes up, anyboay who has a bit of it is likely to se&l it, and

the people who have not got it are less likely to -want it.

But things ao not work like that in the City, ao they ? As

prices go up, people want them more; and the people who have

gotfthem are less inclined to sell. It aoespot aiyrirl follow

ft /"*'"~~"~-^-^,

that a rising market brings out tta*©- supply mece-ssarily) espe-

cially in a thing like gold which is not used for any practical

purpose.

Of course, if you are buying materials for building a

house and the price goes up very much against you, you are

forced to stop because at a point it does not pay you to use

them. But when it is a thing which you like to have tttcked.

away in a vault or hidden under the mattress just to make you

feel comfortable, there is no limit practically, except what

you have got in your pocket, to the price you are prepared,

to pay for it.

So I ao not feel at all s ure a bout this natural law of

supply and demand causing the reaction that Professor Lionel

E|die sees. He says, quite truly, that all kinds of people

think that because tfere Governments*£4*7a certain price for an

ounce of golu, that that/eunoe- off golci is fixed. But he

says there are an immense number of examples in history of

Governments being obliged to make alterations in these prices.

^*»©#4^-~«»«*igiwW^ but I should

- 9• -



like to ask the question whether there is any example in

history of a Government doing anything with its currency ex

cept debasing it, with the exception, of course, of our own

Government, which" for very honourable reasons screwed the pound

up to the old parity in 1925 and has been sorry for it ever

since. .J£a6«#p**w£#a$^^ •-itottmes^&T^:' "fmmrnm^v^m^m^iim^i^^

»»&q*ta e2 bia#**toy '©asft a&i&dit ^ r ^

that except, of course, thaj 'the old gold pound had been the

sort of basis of foreipf trade and the Government and the Bank

of England thoughtythat to get the pound back to the old

parity would he jp trade along.

/There wj s aore to be said for it, I think, than some of

the critical of the action ever admitted, but as far as I know

whenever/ Governments make any changes in their currency ar

rangements, it is in the direction of depreciation. I should

J^d>i*ti i4i»»imiilx%"i"W!!l!Biltr, \f the Governments of the world, kmoej

having\depreciated their currencies in terms of gold, were

going to reverse that process, •£* would surely lead to de-

flationayy efffsoftw, which would have a very bad effect on

business and industry? I do not think that io at all likely.

However, there -tesmmmv ffofrga are these widely differing

opinions. The only things certain about the future of gold

are, I think, that if the present price is maintained, there

will be an enormous increase in the output. All over the

Vworld any countries|that have got gold are/getting busy on turn

ing it out |naturallyj and there is going to be a very big in

crease in the output, whieh will have interesting results which

I will refer to in a moment.

But the thing I should like to be instructed about by this

meeting is, can anybody tell me whether this big increase in

the output of gold is going to have the effect of an enormous

- 10 -



expansion of credit, -which, will have the further effect of rais

ing commodity prices to such an extent that the cost of pro

duction of gold will go up ? Because that is a thing that

might possibly check the output of gold 4e. a point. I do

not think it is very likely to, because inthe two chief

gold producing countries I do not think the cost of produc

tion is going to be allowed to have much effect.

In South Africa it is a question of the cost of native

labour chiefly, and I do not think the South African Govern

ment will allow the cost of native labour to rise much because

it would offend the farmers of South Africa, on whose support

it depends so much. The Government of South Africa in the

first place wants to bleed the mining industry, gently of

course and to a point that will not weaken it too much, and to

succour, the farmers. For both those purposes it will want to

keep the cost of production down and the wages of the mine

workers low.

The second gold producing oountry is either now, or is

going to be next"year, Russia. Canada has hitherto held

that position; of course a very long way behind South Africa.

Russia has been coming up hand over fist, enormously increas-

ing its output, and it is expected^to beat Canada. There,

of course, the Soviet Government will turn out gold whatever the

cost of production may be.

In Australia, and Canada, and fioiMtfir AmotiAoa, all over

South America, '&£ OOIMWC, 4<]aegc-"'frgr,jarffl

*S£2dil~««sHk"' e-- » ASX^x-^mMs^ve "have

„sj3m »fee,r«K |£; feyasV~- Everywhere where there is gold people

are now beginning to turn it out in increasing quantities.

lhat is going to happen to all this gold ? Are the

central banks going- to refuse to take it, or are they just

- 11 -



going to take it and sit on it, and if necessary sterilize it ?

That is a question we have to consider, and^-^f course* there

is also the question of the people who are hoarding gold now in

enormous quantities and p utting it away in London banks. . T""waa'

been filling their vaults so fast with mu^gold, that whe£

they were asked whether they- had room for any more, they

said, ttWe have plenty of room,/but we shall have to ask the

•'' /

architect whether the floor/is strong enough to take/the weight/ /

• / \

private hoarders «*ic believe in gold more than anything else

•ugpoway, because they have utterly lost con-

fi da nc e i n Governments;—Hxey^ffii-cf er—to have a M t uf ggi d ^ ^ x

•s aaaewia%r e • p wt, rtway,

The c e n t r a l bank s, of co ur se , have always been en th us ia s

t i c g.;ld h o a r d e r s . When i t waw su gg es te dyd ur in g the pe ri od of

apprehension&cof sc ar ci t y af t er the wa r / t h a t the remedy for t h i s

was t o reduce th e ra t i o s th e ce n t r a l banks had to keep between

t h e i r gold and t h e i r d e po s i t s , i t was qu it e a good i de a . The/v

only objection to it was that it was no good talking about it,

because the central banks already had a very considerable

margin above their legal ratios and obviously meant to go on

having it. If we say that it is totally impossible that the

Central Banks should absorb this enormous increase in the

supply of gold which seems to be possible in the course of thenext few years, the answer to that is thaty- of oouro^ there

are no limits to what the central banks may 4o as far as one

can tell. Thirty years ago we should have thought it was

quite fantastic for the Bank of Bngland to have nearly two

hundred millions of gold in its vaults, b«t> then it -*»f and

- 12 -



fit

for t he JBank of P ra nc e t o have more t ha n «*#<**» th ou sa nd m i l l i o ns t e r l i n g worth of gol d. Those ar e aetronomioa lJfigureB)«wq r

obviously absurd (according to a l l old- fas hion ed id ea s. But

there they are, they are facts .

It seems to be quite possible that this kind, of(ar&rgantuan

gold hoarding may become a general fashion and that any country

which can affor d i t wi l l do l ik ew i se , and fu rt he r th e r e i s

always th e p o s s i b i l i t y of going back to gold c o i n s. The

JB'rench Government i s now coin ing hundred f ra nc gold p iecesf , <*Hr

has boguw t® aa"a%"""tfae»y"'-1 W^-^ay-ngetrisirat"''^^

And, of course, if this enor mous expan sion of gold produ ces at

the same time an expansion of credit#«i© e4 iM& *C..

<$t«>u ma y see such an expansion of wor ld trad e that thi sjgold ma y

not be too great a backing a ccordin g to the old princi ples.

The possibilities of expansion in production and demand and

credit are absolutely unlimited as long as you could get any

thing like political confidence and as long as there was any

real assurance of peace in the world.

fh e re i s •, which one h e a r s of oc ca -

si on a l l y in Throgmorton S t r e e t when th e Ka ff ir Market i s not

f e e l i n g ver y w e l l , wheu IJrergT'fflWP'froQ amuy -bwAifcf . that -what "Wi ll

j tcipKB'if . the go ld blocJ(f .A-SM 'orced off gold and a l l the co un-

tries in the world demonetizes and the price of gold &# simply

its^ p r i c e for commercial pur po se s, and a l l the monetary hoa rds

^ &*«e th rown on the marke t .

I cannot see any p o s s i b i l i t y of th at happ enin g. In the

f i r s t pl ac e we have seen our se lv es th a t one r e s u l t of our

going off go ld wasjthat we have had an immense in c r e a s e in our

- 13 -



holding of gold In the Bank of England. Then there is an un-

known amount which is believed to "be held by the Exchange

Equalization ]?un&. lor reasons that I have mentioned earliter it

this address, I cannot see any possibility that these Continental

countries can think of abandoning a gola backing to their

currency. That they may have to devalue is quite probable,

but that is quite another thing from demonetizing.

We must remember that the principal countries in the world

are all directly interested in maintaining M s gold fetich.

America holds an enormous amount of gold and is a substantial

producer. Prance holds an inordinate amount of gold and is

supposed to want it for the war chests at any rate she does not

want toisee the value of it reduced to nothing. We in the

British Empire are the principal producers of gold, and we also

are therefore interested in the maintaining of its value.

With these three very important countries all wliw* we nagr

MHti bulls of gold, I do not think we need have much fear

that international action will be taken to deprive gold of

its value.

So far I have spoken with dim glimpses into the obvious

about the ultimate future of gold, but there is one thing one

can say about the immediate future, and that is that the

present high price of gold is affording most -welcome relief

to many countries that are in serious need of it.

I have mentioned the very big increase in the Russian

output of go ld . Russ ia i s now produc ing gold worth more than

£20,000,000 a yea r at th e pr es en t p r i c e of go ld . That means

to say th at Russ ia i s in a very d i f f e ren t pos i t ion fuoiiB. *»hat

•ii> <mm^'^r g^vnm j><&m^"^e^' when i t comes to d is cu ss in g que st ions

of c r e d i t . When a man has got a ni ce sol id asse t behind him

li ke t h a t , he can ta lk to hi s banker in quite a di ff er en t tone

- 14 -



•aJanwr, and the banker i s go in g to t a l k t o him in a ve ry d i f f e r

en t fcone of vo ic e a l s o . „, •* .^__ ,

pais means 4 co ns id er ab le r e v i va l of Russian t r a d e .

is

J u s t co ns ide r what t h a t may mean to th e p o s i t i o n of Germany,

and th er ef or e to th e po si t i on of a l l Ce nt ra l Europe; you can

l e t your imag inat ion pa in t a very pl ea sa nt p ic t ur e of European

revival in the course of the next few years.

The same thi ng i s hap pen ing on a much sm al le r s c a l e a l l over

South America. ) T,1inp •ftmrhniii (jnlrl Trnrnti 1 rig TTT ^fTT"""! ! n muli

beye4«f*^56^''-t^ww^tk-eyifa*M»

*Jfeem--~i$&*-m*A£: <4b*fe~4&ey....a2S& ,gj3uUa#.->.rt**ad ±ri--' H VfaxieT'--- , plwifff&--WBmii'^

I t i s going to make a co ns id er ab le di ff er en ce to t he se

c o u n t r i e s which have been so ha rd h i t by th e f a l l in. commodity

p r i c e s . I t -will make qui te a di ff er en ce in t h e i r act ua l

bal anc e of tr a d e ; and • imom*t£ii^tfm»9aiXfr rTuiifeii Be<i&^%®&ullijLaa$'

<«£ c r e d i t * â* 11Ait«i^"-^4r^ê^l^%^jf '«^ yon'''±*r«WT£b' nw«êi3M

-*tSsk&*' >f *'That much I t h ink one can see c l e a r l y .

As to when, or on what terms, or whether ever we shall go

back to the gold st and ard , and ot he r i n t e r e s t i n g que st ion s

that arise out of this problem, I will leave them to be dis

cussed by the r e s t of th e mee ti ng. (App laus e.)

- 15 -



CHAIRMAN: We have all listened with the greatest interestto Mr. Withere* illuminating and challenging address, and the sub

ject is now open to discussion.

MR, WAI.T«N HEWBOUDt I am particularly interested in the

amount of attention which the lecturer to-night has given to

the long planned and calculated development of the production

of gold in Soviet Siberia. I have been -watching these develop

ments for many years, so far as it was possible to do so, through

the eyes of men like , who know mining conditions

in Siberia, and from mining friends of my own in the various

parts of Canada •who have some knowledge of the similar conditions

existing in Siberia.

I believe that this is going to- be increasingly the line of

Soviet diplomatic method. I believe that they intend to experi*-

ment with the effects of a great bear movement in the production

of the only remaining basis of confidence in the capitalist world.

You say certain things may happen granted a condition of

anything like political confidence, but, as I had the opportunity

to point out in America last September, this crisis has left uswithout any internal confidence in almost all countries, includ

ing this onet where it is determined by the duration of this

kind of ffovernment that we have got at the present time. It

is either limited in space, or it is limited in time.

Externally I understand that the degree of confidence exist

ing between the great countries of the world is almost shrink

ing to a negative quantity.

Therefore, if you are going to have a complete absence of

confidence within countries in the Governments, and you are

going to have a continuance of an absolute lack of confidence

between countries; if you are not going to be able to sell

- 16



your products abroad because nobody is willing to take them in,

or even where they are, someone else comes along and tries to

queer tke pitch, you have been reduced to the condition where

the only firm basis of confidence is that one in which the

Soviet Government are now placing their trust raore than in

anything else.

I am not arguing now whether they place it rightly or wrong

ly, but you have to remember the fact that it is a Marxian Govern

ment, and you have always to remember the importance that

was attached by Marx to gold as the one standard of value.

That means that, whether they are right or wrong, they are going

now - having assisted the rest of the world to destroy confi

dence - they are now going to see what will happen by flooding

the world with gold and destroying the value of gold. ffi think

that that is the line they are going to take.

It may seem to you a foolish line, as everything you do

seems to them either wicked or foolish. But you have to re

member that they look at the world from the exactly opposite

point of view from what you do. You will hear people get up

in this Institute too often and tell you that Russia is changing. The more it changes, the more it is Leninized; and the

more it is Leninized., the more it is Marxist.

I do not belieife they are going to continue very much

further with the activities of the Communist International.

1 believe that they are going to continue still more with the

method of precipitating economic crises. I have warned several

people in this country in high places in the last few weeks

against the danger of assisting Japan to develop a part of

Soviet; Siberia wxiich the Soviet Government knows it is not an

economic preposition to develop itself, with a view to attract

capital long term credits more even than short term credits into

- 17 -



Manchukuo and into Japan, in precisely the same way that they

attracted long term credits for their own purposes into three

countries with whichjfthey dealt very largely - Italy, Austria

and Germany.

I know how close were the relations

MR. WITHERSt Between them and Russia, or Japan ?

MR. KBWBQLDi And Russia. I know how close were the

relations of two hanks that went crash in 1931 and the Soviet

Government; very close indeed in their trading relations.

Now I believe that they are going to try to do the same thing

again in Manchukuo.

I do not "believe they ever desire to get creaits direct from

this country. Oh no, they are much too clever for that.

They wanted to ask for credits from this country and get them

from Germany, Italy and Austria, knowing that you would certainly

lend to Germany, Italy and Austria but not to them.

I was informed in Berlin in the autumn of 1951 that they

had something at that time like one thousand million Marks in

Germany., lent at anytning from two years upwards to Russia, which

they had been borrowing from you at three months. One indis

creet person hinted very broadly that that was what they intend

ed to do in Germany, to get you in that position: you had

lent for three months, and they had lent for from two years

upwards, and they desire naturally to throw the whole capitalist

world into this state of a lack of confidence. This is the

method of Leninism.

I know. If anybody in this Institute should know, I

suppose I ought, seeing that I was intimately associated with

the early days and the working out of the theory. that I

object to is the general moral depravity, saying one thing and

- 18 -



saaTjT snrfiai8n"iy t a tiara an m ta» .

I imagine that if yeu bulmi liie pieaeut) jjiu mil nation af gold

aad put it ' aaete iitfto gold prmini mi j tiiiot 25, increase of t&e pre

sent proauction of gold in ounces within the next six years

is all that you can hope for. I am not sure that I am not

optimistic. It takes at least four years to get a mine into

production.

MR. lEWBOLR; I could not give you the figures, but I am

dealing with the general Soviet theory, and I am certain that

having mastered other fields of production, they will make a

similar attempt in that direction, and probably wit|i considera

bly more success in gold mining - as in oil - than in certain

other fields. But the figures you could get from them are

rarely very valuable until you have subjected them to about

three sieves; in fact, sieving the rubbish out of the gold

ore is rather similar to sieving the rubbish out of Soviet

statistics.

MR. ECCLES: Unfortunately, God or Nature is the dominat

ing factor in the production of gold. You cannot get it out of

the earth unless it is there.

Is there any field in Russia where there exists a regular

formation of gold which can be mined on the same sort of scale

as we mine in South Africa ?

MR. WITHERS? Is not the Lena like that ?

MR. ECCLESt Thorp are mat the reserve funds there.

MR. WITHERS; People tell we tie Lena is as big as the

Rand. The Lena is an enormous proposition.

- 20 -



MR, ICGLESi Who knows about the Lena ? There are a few

engineers who were there before who would not hold with that view

There are some bond-holders now. who are somewhat optimistic

I would like to ask if there is any geological information ?

We would all be very glad to know from the purely scientific

point of view what sort of gold formations exist in Russia at

present.

3SCB> EBWBOUDt I think I could put you on to somebody. I

will give you the address.

/Hifi-tfl. LAW

MR. LQfiB; I would l i ke to ask the le c tu r e r i f he could

give us the source from which he derived the figure of twenty

million of gold from the Soviet.

I was reading a pamphlet the other day, /and the only

r e l i ab l e fi gu re s go down to 1926; af te r th at they are pr e t t y

vague, / f ee pamphlet w«*fceeyout tha t the output has been in - foU'

cre asing un t i l rece nt ly , «n*€L/the hi ghes t fi gu re they giv e i s%

k

£8, 000 ,000. They po int out tha t some of the best poss ib le

sources of supply are about 2,700 miles from the ne ar es t r a i lfa

il e ad, and/you cannot get the machinery to them except by a ero-plane, and "44; i s a b i t heavy for tfeat.

MR. HAROLD GOXt I was pa r t i c u l a r ly glad to hear our

lec tur er to-n ight say that in sp ite of a l l the d if fi cu lt ie s in

dealing with gold, you had also to think of the risks of dealing

with p o l i t i c i a n s . Per son all y I always f ee l ino lined... to thi nk

that though?gold/may 39«^e/proDlems, there are risks from the

tr ic ke ry of p o l i t i c i a n s which are much more s er io us .

As regards our own country, I do not knew what wuuld

jaappon if the Labour Party had a big majori ty/-and tfoaught thoy

could Claire a ni ?e T i t t l e pr of i t fo r tJaeMBolvoB/by depreci at in g

- 21 -



the currency, which they could not do if the currency were rigidly

based upon gold.

PROFESSOR MAHMI1G: As a complete layman, might I ask the

lecturer if he would mind amplifying his statement that he thought

the gold hloc}£ might at some time devalue gold. What are the

facts that enable ua. to form a guess on that subject, which way

the gold block are going ?

MR, COPE? I was very interested to hear Mr. Withers this

evening, because I have always been a very great reader of his

books.

fhere are two factors he mentioned as being important with

regard to gold. He suggests first of all that the popular

belief in a gold backing is an important factor which will induce

the Governments of the world to return to gold. He rather hinted

that the intelligence of the average man in the street was/suffi-

ciently developed to prevent a Government carrying on with/a

paper currency.

I should i1 allium1 like to suggest that, although I havo net sc

vevy high 14a» of the intolligotige of t,ta,g averago man> that is

rather a fact pointing in the opposite direction. #e-/does not

understand these questions at all, ana as soon as he sees the

price level fairly stable, he will not worry about the gold in

the vaults of the Bank of England.

The other point is with regara to the influence gold is said

to exert as a check on Government expenditure.

MR. WITHERS: No, sir, not expenditure.

MR. COPE; Perhaps I misunderstood Mr. Withers, but I *»a,*hei;

gathered that he hiafcoa/that if a country is on the gold standard,

- 22 -



there are definite barriers in the way of upsetting the budgetary

equilibrium. That is true, but I do not think that being on a

gold standard is an insuperable barrier to a Government if it

wants to spend money. The experience of the past ten years

teaches us that nothing can stop a Government if it really

wants to spend. I do not think gold is at allJimpQrtant in

that direction. (Applause.)

MR. BUHM? May 1 ask for my own personal use some" infor

mation on a point that has always troubled me ? I am one of

those who believe that sooner or later the world must return to

gold as a standard.

But when he refers to one of the functions of gold being

the regulation of prices, I cannot help feeling that we areup against a great difficulty here, because when we had the

catastrophic fall in prices, we used the bank rate to exer

cise its old function of reducing wages and prices; but we

found our economic system was much more rigid than it used to

be and much less responsive to the monetary corrective of the

bank rate, and we did not succeed in reducing prices and wages

owing to the fact of wage agreements and some monopolistic

institutions, which broke the impact of the monetary corrective.

Therefore I am in a great difficulty in understanding how

we can ever get back to those old days when we had this monetary

corrective in the shape of the bank rate based upon gold.

Some monetary corrective there must be, if we are to bring

our prices into harmony with world prices, or otherwise we shall

intensify the drift or tendency towards economic nationalism

which is now at work in the world.

MR. ffRAKKLIN: I mwt gay I was extremely interested in all

that Mr. Withers said/. There are a few things/that I think I

- 23 -



should like to stress a little moreiAM

He sa id he thought th at i t was not very l i ke ly t hat we

ourselves were close to coming back to the gold st anda r d . / I

fe el tha t th e- po si ti on of t h i s country i s g-ery/diff erent from

tha t of any oth er. We have ce r t a in ly a re se rv e of gold in the

Bank of England/not far oheyi of two hunured mil li on pounds^

I per fea tl y agree th at i t io qa it o i-noonoeivablo /t ha t we should

change from using gold as the bas is of in t er nat io na l c r ed i t ,

j»ut i b a l i n g wIl'Luollt duubU H> io aboolutioly cer ta in t hat toe

amount of fo re ign money/taat we have en tr us te d to us in t h i s couu

t ry p-reppâ hir m T( ry '• mini glerahl e aniiinnti tihm ininmji iinniiiil nf

goAd ye have*.

If wesfeoula/come to an agreement with for eign Governments £

that•• wo BhoulcL ret ur n to a f u l l gold standa rd , th a t is ,b uy in g and

sel li ng gold at p r i ce s approximating to each ot he r, we should be

in t h i s pos i ti on : ^cou ntr ies at t he pr es en t moment have so

l i t t l e confidence in th e ir own cu rr en ci es , that they keep la rg e

amounts of money in gold ana very cons iderab le ba la nc es /i n t h i sYûJjrJLJz, is Ikofr OVA. (AeJhtvrx *"

country. But what s t r i kes me as a/Ahing t hat ..might happen woiaJU

too that th&y might regain confidence in t he i r own a.»Mnt*y, and,

^g,.eo> i» our two hundred mil l ion pounds worth of gold k*>«* ^ " ^miffioicnt ? &~ J**^-' *•

sPhx^ H"" lAf^ *' ^ S ûJ **** ^ <wi^v«

£> U j^n^b^ ~ *AJ*JL e**, eovuL, ^ « p / < U f c < ^ ^ - «tf f ^ <****> <*^y*

MB• iiQaiTOUY; Even if it were worth more than that at the

market prices, it would certainly be less than the amount of

foreign balances held in this country. Supposing it might

occur to these people, MWe might employ this money ourselves,'1

and they were to attempt to withdraw any very considerable

amount of their money from here, we should not be in a position

to meet with ease and comfort their withdrawals.

You see, we have been off the gold standard twice. We

- 24 -



have altered our price of gold twice. It would be very injudici

ous for us to do it a third time. I tiiink le would run a very,

very great risk. I hope therefore that we shall remain as we

are for a very considerable time to come.

There is another thing which iB rather interesting, and

that is that after all, large as the amount of gold that is hoard

ed "by individuals, especially by foreigners, and kept in this

country is, it is really not as much as the amount of gold that

was in circulation before the war. The amount of gold in cir

culation in England, Prance, parts of America, amounted to a

larger sum than the amount of gold hoarded by a few indi

viduals. I think that should be borne in mind. Therefore

we should run a very, very great risk if we were to agree to

stabilise our gold and with America join the gold bloc, in

which theye are very many weak spots. I do not think the gold

bloc is really a very strong combination. (Applause.)

•affk/HORHSBYi Does l£r. Withers think there can be any

question whatever of stabilization and getting back to the

old gold standard until the question of our debt to America

has been finally and definitely settled ?

CHAIRMAHt As there seem* to be a pause, perhaps you will

forgive me if I intervene for a short time.

I have b«en tremendously tnterested in Mr. Withers' address,

but I must confess there seemed to me a good deal left out.

That is not an accusation against him. This is an Li cmenmyuuly

extensive subject, and it would be impossible to exhaust it in

one evening. He touched on a variety of possibilities affect

ing the future of gold currency policy, gold output and so on,

but it seemed to me that he did not really come to grips with

what I should regard as the salient pointy.

- 25 -



He spoke much more about the p r i ce of gold than about i t spurchasing power. I do not mean to say that he forgot th e

question of commodity value of gold, altogether, "but in connec-

tions w4tli what /i t seemed to me tha t tire pu rchasing power ^ ^

invo lved , he was r a the r apt to t a l k about p r i c e .

Clearly the price of gold in England or in any other coun

tr y depends on two d i s t i n c t f ac to r s , the commodity value of

gold and the commodity value of the currency/in which the

debt i s reckoned. I should an t ic ip a te a treaiefldous/fall in

the purchasing power of gold in the next two or three years.

the purchasing power of gold has, I should say, a good deal

more than doubled in the pa st f iv e or s ix years . That i s not

altogether borne out by index numbers perhaps, but if you take

into account the fact that index numbers include a considerable

amount of dtKfexx commodities in which the output has been

r e s t r i c t e d owing to the r i g i d i t y of ««* co st s, and also

th at p r ac t i ca l ly every index number i s an index number in

some country which has adoptedy/protection, I think it is no

exaggeration to say that the purchasing power of gold XJE has

much more than doubled.That is, i w^uuld laaj t due to the fact that the monetary

aemand for gold in a limited number of countries has been

in or di na te ly inc rea sed . Most coun tri es th at hold any con

siderable amount of gold at all are holding two or three

times as much as there is any good reason for them to hold. I t

is possible to say that their standard has been altered, and

they are always going to hold incomparably more than they did.

Even that does not by any means dis pose of the view that the

value of gold i s going to f a l l p r ec i p it a te l y .

Take the case of France. I t may be tha t Prance int ends

permanently to hold nat| I tilainli,—four tiiouoond million pounao,

- 26 -



lout ono t»liuuuauu m i l l i o n p6unSLg.

i m 06 Biili iapdiB , over IpOOO m i l l i o n poimd-».

.flHMIfflfflii fliB't lu • »miit»a1igwt/650 mi 11 ionar/g*waAa. That

gold holding has "been accumulated_under conditions in which

the commercial demand for credit has dwindled almost to nothing.

The holding of bills by the Bank of France is almost negligible.

A revival of business would mean a considerable increase of

bills. I'rance, like all other countries, is suffering from

extreme stagnation of money. Revival would mean a much bigger

superstructure<£ &^.i^Jr cuî \Mjc^^-ex <r>^ «- <û^ ip^^yJ^^ y ûo^m^

Even if these countries adhere to their exaggerated stan

dards of gold reserves, there is reason to suppose that the

price level in terms of gold might expand inordinately, and•Ce. Att* £j<a~~p&-.

might possibly /doubled even though France/ adheres t o t h i s eno r

mous gola reserve.

Take the case of the United States, the United States has

provisionally devalued the dollar to 59 1/16% of i t s old

p a r i t y . The r es u lt has been th at the gold hold ing of the

United States is 8 thousand million dollars against a monetary

circulat ion of 5,300 mi lli on d o l l a r s . At the time of America's

most he ct ic pr os pe ri ty , the currency was not gr ea te r but le ss

than i t is at pr es en t; again st which they regarded themselves

as very lavishly furnished with gold when they held 4,000million aollars aaa a little more.

So that, even assuming nothing in the way of economising

gola, there is reason to suppose that the world is normally

over-supplied with go ld .J^ I t i s/ po ss ib le th at , if the purchas

ing power of gold f a l l s , th at the United St at es wi l l re ve rt to

the old do ll ar p a r i t y . ——

That sounds quite fantastic, but in reality in the U.S.A.,

- 27 -



as in some othe r cou nt ri es , th er e i s a gr ea t dea l of l at en topposit ion to a r i s e in the p*ie-e/of l i v i n g . The Labour move

ment is on the whole a n t i - i n f l a t i o n i s t , so I thin k i t i s q ui te

reasonab le to suppose fchat a l ar ge f a l l in the purchasing power

of gold might lead to a big f a l l / in "the p r i ce of gold in the

United S t a t e s . I do not see why the same thin g should not

happen in this country.

When Mr. Withers tal ked of a gre at re vi va l of a c t iv i t y

on the basis of redundant gold, that would use up the re

dundant gol d, what was implied in what he said was that a l l

these characteristics of revival would mean an increase in

the prio-e/of "bill s and fraoility/ of c i rcu l a t i on , and a g ig an ti c

incr ease in the pr ic e lev el . j>" " tat of

<^—. What a££ that points to is an experience like/1919, when

the value of gold f e l l t o l e ss than ha lf of what i t had been

before the war. That was spread ove r/ th e war: i t only came

to a head af te r the war was over.

There, I think, is one of the fundamental questions to

answer, - How/these di ff er en t f ac ts I have re fe rr ed to a se

going to effect both the purchas ing pwir and the p r ice of gold?

There is very good reason to anticipate that the pur

chasing power of gold will fall to less than half and the

p r i ce of gold wi l l be adjust ed to an ex tent t hat may very wel l

re - es ta b li sh the old par it y of gold est abl ish ed by Si r Is aac

Hewton. J Of cour se , a l l that i s very uncertai n , <a-~- — -

-" * there i s one f urther-ltiicri iiment th a t I th ink ought to bedrawn, t hat so long as i t i s un ce rt ai n, a paper currency i s

incomparably more r e l i a b l e than a gold currency. You see

that a l l over the world a t the present t ime; -fe&afe th e r ea l

monetary troubles are occurring in the countries that are

attempting to retain the old gold parity in spite of the ap-

- 28 -



preciation of gold. All the countries that have abandoned gold

are in relatively £sxr/water.

In a limited number of cases/, countries which have been

subject to the strain have failed to survive it and the cur-

rency has collapsed. But in all cases where ike/country is

going through anything like normal conditions, you will find

both before the war and since, that paper currencies have on the

whole been more stable than metallic currencies. The existence

of paper currencies has not prevented International lending. Ar JoKZ^. QzfJJSS, pfatxt} i~tjf SinJk, Q~*J!A^C*K' Of O-TtwJ"- Uf*JS~ fc. tKXFzJr lu^o*Av~~Jlr (UXJNXVB .,. c yj^J^s

vigry jrecit /par t of the re s t of trie world th at was absorbing in

vestments was fo r a cons iderab le pa r t of the time on a s i l ve r

currency.

jfr-tthiak I hare aaid ovorything tha t I kav»' ^o oay im the

SHiH^J ft i * *

MR*. HOBSOU; Do you include the United States in the

countries which are in relatively calm waters at the present time,

CHAIRMAN: Oh yes, undoubtedly; compared to Germany or

France certainly.

2

MR. ESS 15*. We thought we were lending in terms and being

repaid in terras of a gold currency, but we were wrong.

GHAIRMAHt The lending occurred from a country scadc on the

not

gold standard to a countryman the gold standard. The insta

bility of the country did not prevent the South Americans from

assuming obligations in sterling because their own currencies

were unstable. A considerable part of the investments in

South America were not in any currency at all. They took the

form of ordinary shares.

Before the war there were far fewer countries

- 29 -



on the gold standard tlian there were supposed to have been.Prance and the countries forming the Latin aasraixxKX Union were

aot on a gold standard, but a b imetal l ic st anda rd . The Bank

of France had authority to make advances on gold bullion and

co in . The bime tal l ic standa rd of the La tin Union was the

r a t i o of 15-|- to 1, and u n t i l 1928, when Po incare s tab i l i zed the

gold fr an c, no gold franc ever ex is te d. Therefore ther e were

very, very few countries at all on the gold standard.

J . . . ..^fyf,. Talking about the hoa rding of gold, people

seem to thi nk th at i t i s only in times of i n s t a b i l i t y of cur

rency tha t they h-©ard. Surely tha t i s not the ca se . The

Jrench always hoarded, and in In di a they have hoarded for

ge ne ra ti on s. They hoard when they are making p r o f i t s .

Won*t that grow when the world returns to trade naturally ?

I should like to ask whether the gentleman

would express an opinion as to what would happen in South

Africa if the price of gold when back to 85/-.

I should look for another job.

Perhaps Mr. Hawtrey would enlighten us on

this. Would you give an opinion as to what would happen in

South Africa ?

CHAIBMAH; I think it is a great mistake to identify South

Africa with gold. You ask what would happen? South Africa

has already been in precisely that condition six years ago,

when not only was the price of gold 85/- but the purchasing

power of gold was less than half what it is now. I do not

suppose for a moment that would mean the end of the prosperity

of South Africa.

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The output of gold reckoned in ounces has

been falling off in South Africa for the past forty-two months.

CHAIRKAff: That is only because the present form of taxa

tion is deliberately devised to favour the low grade ores. The

South African Government thinks thatjhow is the opportunity to

prolong the life of the mines by concentrating work in low

grade ores, which under normal conditions would not be worked

at all.

Is it not possible that the high grade ores

are already exhausted ?

CHAIBMAHs So, I do not think so.

MRS. HETTLEFOLD: Am I in order in enquiring what is the

explanation of the really extraordinary increase in the price of

gold in the last nine months ?

MR. WITHERS: If this discussion has shown one thing more

clearly than another, it is how much better it would have been

if Mr. Hawtrey had opened instead of me and had this job of

answering the questions now. However, I will do my best.

I was asked as to statistics about gold production in

Russia. The figuresjthat were supplied to me - I hope Mr.

Franklin will have no objection to my saying I got the figures

from his office, which I regard as part of the Government in

these matters. They show that the output of Russia in Siberia

was just over

1,000,000 fine ounces in 19271,700,000 19311,990,000 19322,814,000 1933

I am to ld , not in Mr. If ra nk li n' s of fi ce but in pl aces where

they th in k they know-,- that the Russ ian output i s now increa sing

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very rapidly and will "be very well over that figure in this

present year.

As to Mr. iJewbold's very interesting suggestion that Russia

is out to break the price of gold by flooding the world with

gold, it looks as if it would take Russia a very long time to

do anything very serious in that way. At the rate of about

20 millions of gold or even 25 millions of gold -per annum, it

would take Russia a long time to make a very definite impression.

But if that is behind their MacchiaveHian intention, I am

sure we are very glad to be put wise on that subject.

I was asked why people were expecting that the gold bloc

would demonetise gold. I rather hoped that I had made it clear

that I do not think they would demonetize gold, but some of them

may have to devalue. The reason why the people in the Kaffir

market seem to have been scared the other day about the possibili

ty of the gold bloc diminishing was because the gold bloc had

held a little minor international conference ana had stated

that they none of them intended to make any alteration in their

parities - and they did protest too much.

There was an interesting point with regard to gold in the

Republic, I was tola that the Republic aid not bother its head

about gold. I think that is very true of this country. We

do not bother about it as long as our money will buy things when

we go into the shops. We do not mind in the least what its va

lue is in gala or foreign exchanges.

There was a very nice story at the time of the General

Election of the candidate who held up a Treasury note and said,

"This note is now worth fifteen shillings. tt JL working man

in the back row said, *l will give you 15/6 for it, Guv*nor.*

But I do want to suggest that on the Continent, and espe

cially in places like Prance, where this gold hoarding habit is

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ingrained, that it is not quite the same. I was trying to dis

cuss the matter from a world point of view, and not merely what

we think about it in this country.

As to the restriction upon Governments and spending and

Governments and using the printing press and so forth, I think

I expressed myself badly over that. But we know that if a

Government really wants money and is determined to have it,

it will get it from the central "bank or somehow, and though

it will not do the printing itself, it will get it aone indirect

ly.

But I do feel that the existence of a gold backing makes the

average business man feel that his currency is to some extent

protected. He may be all wrong about that, but that does not

matter. The gold backing gives him a feeling of more confi

dence, I think, rightly or wrongly.

As to gold regulating prices, I certainly did not mean to

imply tla&t when we had a gold standard prices were kept stable.

All I meant was that the international relation of prices was

kept stable. The exchanges were stable and prices went up and

down together more or less all over the world.

As to the settlement of the American debt being necessary

before we can return to the gold standard, I should certainly

imagine that that is a thing that must be dealt with, and

probably would be.

fhen Mr. Hawtrey, of course, was extremely interesting on this

subject of the price of commodities and laid M s finger on a very

big gap that there was in my attempt at an address to open the

discussion. But I do not feel that it by any means follows that

this heavy rise in the price of general commodities is going to

happen as he seems to eaepect owing to the expansion of credit

which may be possible from an increase in gold and the greater

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