Any other commodity that earned this quality of universal acceptability could do the work of gold just as well. But until one has been found, gold, as long as it keeps that quality, holds the field. And bankers use it as the basis for money and credit, not because, as Mr Kitson says, they selected it owing to its scarcity, but because this quality of universal acceptability made it the thing in which all debts, both at home and abroad, could be paid. "Given," says Mr Kitson, "a self-contained trading community with a certain quantity of legal tender, just sufficient for its commercial needs, and it makes no difference either to the value or efficiency of the money or to the trade affected whether it be made of metal or paper." Quite so, but trading communities are not self-contained. Their currency has to be convertible into something acceptable abroad, and that something is, at present, gold. It is possible that the world may some day evolve an international paper currency that will be everywhere acceptable. But such an ideal requires a growth of honesty and mutual confidence among the nations that puts it a long way off. And how is its volume to be regulated?
This question is all-important, whether the currency be national or international. Mr Kitson speaks of a currency "just sufficient" for the community's commercial needs. Who is to decide when the currency is just sufficient? The Government? A sweet world we should live in, if among other party questions, Parliament had to consider multiplying or contracting the currency every year or every month, with all the interests that would be affected by the consequent rise or fall in prices, lobbying, speech-making, and pulling strings to work the oracle to suit their pockets. And, according to Mr Kitson's view, that the volume of trade is limited by the supply of currency, this volume would then depend on the whims of the House of Commons, half the members of which would probably be innocent of a glimmering of understanding of the enormously important question that they were deciding. The gold standard, which makes the course of prices depend, more or less, on the chances of digging up a capricious metal from the bowels of the earth, has its obvious drawbacks; but it is a clean and sensible business compared with making them depend on the caprices of Parliament, complicated by the political corruption that would be only too likely to follow the putting of such a question into the hands of our elected and hereditary representatives and rulers.
Such, however, seems to be the Promised Land to which Mr Kitson wants to lead us. Thus he propounds his remedy. "The remedy is surely obvious. Divorce our legal tender from its alliance with gold entirely, so that the supply of money and credit for our home trade is no longer dependent upon our foreign trade rivals. Base our currency upon the national credit … treat gold as a commodity only, for the settlement of foreign trade balances."
This passage in his article in the September Supplement tells us what to do. Keep gold, out of deference for foreign prejudice, for the settlement of foreign trade balances, but make as much paper money as you like for home use. As our legal tender money is to be "divorced entirely from its alliance with gold" it clearly cannot be convertible into gold. So that apparently we shall have a paper pound and a gold pound (the latter for foreign use) with no connection between them. This stage of economic barbarism has been left behind now even by some of the South American republics. The paper pound, based on the national credit, can be multiplied as fast as our legislators think fit. If they do not multiply it fast enough, Mr Kitson will tell them that they are strangling trade, because the volume of production is limited by the amount of money available. At the same time bank credits will be multiplied indefinitely because, as was shown in the November Supplement, Mr Kitson supports a view that the average business man holds (according to him) that he ought to have a legal right to as much credit as he wants. With the Government printing paper to please its supporters, with the banks obliged by law to give credit to every one who asks for it, and with prices soaring on every addition to currency and credit, what a country this will be to live in, and what a life will be led by those who have to compile and work out the index numbers of the prices of commodities! Some of us, perhaps, will prefer the jog-trot conservatism of Lord Cunliffe's Currency Committee, who in their recently issued report[1] (which every one ought to read) recommend that gold should not be used for circulation at present, but that endeavours should be made towards the cautious reduction of our swollen paper currency, and that its convertibility into gold should be maintained.
[Footnote 1: Cd. 9182, 2d.]
INDEX
Addis, Sir Charles, on banking,
Aërated Bread Co., and bonus issues,
Allies, loans to,
America, effect of war on,
War finance of,
Bank Act: its purpose,
Its suggested repeal,
Its working,
Bank Amalgamations, progress of,
Bechhofer, Mr, on Guild Socialism,
Bills of Exchange, as basis of issue,
Bonar Law, Mr, on after-war position,
On capital levy,
On sale of securities,
British Trade Corporation, formation of,
Brunner, Mond, and bonus shares,
Budget, in 1918,
Canadian Pacific, and bonus issues,
Capital, foreign,
Levy on,
Meaning of,
Supply of,
War's destruction of,
Capital Issues, Committee on,
Licence required for,
Need to restrict,
Stock Exchange and,
Cole, Mr, on Guild Socialism,
Cunliffe Committee, report of
Currency: inflation of,
International,
Metals as,
Origin of,
Quantity theory of,
Report on,
Daily News, on capital levy,