The Case for Increasing the Price of Gold in Terms of All Currencies: A Contrary View

Abstract

In the past year there has developed a strong campaign for a devaluation of all currencies in terms of gold, a campaign in which the narrowly self-interested arguments of the gold producers have been augmented by the arguments of those who see a rise in the world price of gold as a painless way of solving the present international monetary disequilibrium. The obvious special pleading of the former, and the ignorance or naiveté of the monetary opinions of the latter, should have been sufficient to reveal the weaknesses of the case; but surprisingly enough the arguments for a higher price of gold have been allowed to pass practically unchallenged, with the consequent danger that by sheer reiteration the advocates of the scheme will secure an unthinking acceptance of their proposals.The writer does not deny that a rise in the world price of gold would be of some benefit not only to the gold producers, but also to the non-American world generally; obviously any measure which increases the price which America is willing to pay for imports will provide more dollars for the rest of the world economy. But it is his contention that the arguments which have so far been advanced in support of the measure are of a dubious or fallacious nature, in large part attributable to a lack of understanding of the problems involved; that the arguments over-estimate the gains and under-estimate the difficulties that would follow a rise in the price of gold; and that consequently it would be a major error of policy for the British and other European authorities to commit themselves to a request for a higher price of gold as a substitute for more fundamental international economic reforms. These contentions are substantiated by an examination of the case for increasing the world price of gold, to which the remainder of this article is devoted.