is not a purely hypothetical assumption, however logical. Within the year 1921, in Australia, where the currency is a definite contract to pay in gold, citizens holding funds in London were able to obtain an undue premium for these funds as compared with their “redeemable” gold currency. The whole French nation is nursing a legitimate grievance against the government of Germany because much of the gold supply of the wealthy citizen has already been deposited in New York to escape government control: the German peasant, whose loyalty was really loyal, and who has taken paper marks for his eggs and chickens, has a grievance against his more powerful fellow-citizen who has shipped his gold to New York; and if he thinks seriously about it the lowly French citizen has the same grievance against his wealthy fellow-countryman. The better-informed creditors all have funds in New York, and as a final absurdity we, in the United States, think of these funds, which are subject to recall, as being part of the stock of gold available for the redemption of our paper.[1]
But, more than this, the supply of gold can not only be diminished by hoarding or exportation; it can be apparently increased by importation, or actually increased by production at a cost which is below its value;[2] and both these things have the effect of contracting its value by increasing the supply,[3] and of contracting all other values by expanding the volume of the swaying pyramid of credit and currency, which rests magnificently—even if somewhat insecurely—upon its gold apex.
- ↑ Compare the following: “During the last three years this inflation has brought great industrial activity to the German people. The wealth which they have accumulated has been stored as far as possible in other countries and, therefore, cannot be reached by the Reparations Commission” and “Once the total amount of the reparations obligation is fixed at a sum which the world believes Germany can pay, and the uncertainty of the future burden is removed, her people will be able to bring back the capital they have exported, without fear of its confiscation, to use it for the promotion of a greater industrial nation.”—The Guaranty Survey, July 31, 1922. Guaranty Trust Company of New York.
- ↑ See the Prospectus of any gold mining company.
- ↑ Compare the following: “In so far as the supply of gold presented any problem prior to the war, it was one of over-abundance with a tendency toward depreciation, instead of scarcity."—National City Bank Bulletin, April, 1922. The National City Bank, New York.
