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THE RETURN TO GOLD

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tage. The first is financial—if the value of goldwould fall in the outside world, that wouldrender unnecessary any important change in thelevel of wages here. The second is industrial—if the cost of living would fall first , our con-sciences would be clear in asking Labour toaccept a lower money wage, since it would thenbe evident that the reduction was not part of aplot to reduce real wages.

When the return to the gold standard wasfirst announced, many authorities agreed thatwe were gambling on rising prices in the UnitedStates . The rise has not taken place, so far . 1Moreover, the policy of the Bank of England has been calculated to steady prices in theUnited States rather than to raise them. Thefact that American banks can lend their fundsin London at a high rate of interest tends tokeep money rates in New York higher thanthey would be otherwise, and to draw to London ,instead of to New York , the oddments of sur-plus gold in the world markets. Thus ourpolicy has been to relieve New York of thepressure of cheap money and additional goldwhich would tend otherwise to force their pricesupwards. The abnormal difference betweenmoney rates in London and New York is pre-venting the gold standard from working evenaccording to its own principles. According to

1 In my opinion, we need not yet abandon the hope that itwill take place. The tendency of American prices is upwards,rather than downwards, and it only requires a match to set alightthe dormant possibilities of inflation in the United States. Thispossibility is the one real ground for not being too pessimistic.