9. The Distribution of Gold in the World

Today, England and the United States, through the regulations of the International l\fonetary Fund, are committing the same error. They are doing everything to favor the accumulation of the newly extracted gold in N ew York, while the gold reserves of the American Treasury are already too plentiful. Why is that? The English economic policy rests entirely on the idea that in order to reverse the gold currents one must first secure a favorable commercial balance, whence the great and courageous efforts of our neighbors to increase their exports and reduce their imports. In my opinion, however, it is com pletely useless to try to reach the desired goal by these means. ' England has such an unfavorable balance of trade that it is out of the question to try to reverse it by a simple effort at restricting imports and forcing ex ports. The same impossibility exists for most of the European countries. The balances of trade of the more active countries among them were unfavorable long before the war, and these deficits were offset by all sorts of invisible exports, whose quantity at present is too low to be able to achieve the results of bygone days. It will remain insufficient as long as the capital movements have not been resumed, which assume a stable currency. However, in the universal system of paper money to which we are condemned 105 THE TRIUMPH OF GOLD for the moment, there exists another way of favoring the currents of gold, and by that the stabilization of currencies, completely independent of the balance of trade. We refer to a mechanism that was already used after the First World War, and by means of which the currents of gold are established without any link with the balance of trade.

Gold today has become a merchalldise whose price, save in New York, where it has a fixed value, is es tablished according to offer and demand of the precious metal on the free markets. Gold moves there where it is best paid in the currency of the country which imports it. At the present time (and notwithstanding the recent drop in the price of gold) the prices on the free markets, and particularly on the French market, are converted into an amount in dollars above that paid by the American Treasury to the importers of gold. We find here a principle of distribution which is different from, but still analo gous to, that which was in force when the Western countries were all under the gold standard and tied to the convertibility of bank notes, and when gold currents were established according to the purchasing power of said gold in the merchandise of said coun try. Thus, thanks to the free markets, a new distri bution of gold is being made, modifying the previous distribution which was too uniquely favorable to the Treasury of the United States. The latter can only rejoice in this.

Indeed, this new distribution of gold conforms to 104 THE. TRIUMPH OF GOLD the actual needs of the different markets,. that is to say, to the more or less intense desires of the popu lations to see the paper money replaced by a cur rency based on gold. It is thus in accord with the best economic reason ing and prepares opportunely for the return to an international gold standard. The first concern of the International Monetary Fund should not be to prevent the creation of free markets in gold, but to encourage them in every way. By a strange aber ration, its present policy consists, on the contrary, in reinforcing a too obvious maldistribution. Let us add still this. In order that the gold sold on the free markets shall remain there, and that its price in paper money not be exchanged immediately for dollars, it is necessary and sufficient that these markets offer opportunities for investments which are both sure and profitable. If one considers the rates of interest offered in a market such as Paris at the present time, one will notice without difficulty that they are far superior to those prevailing in New York. The seHersof gold iIi Paris enjoy, therefore, an advantage in investing the francs they receive for the metal in French stocks and securities.

Thus, little by little, the normal play of the prices of gold on the one hand, and the interest rates on the other, is gradually causing a redistribution of the precious metal more in conformity with the aims pursued by the United States itself in its effort to integrate the continent economically. 105 THE TRIUMPH OF GOLD The representatives of France at the International Monetary Fund should press with all their authority for the restoration of the free markets. They should give their unstinting cooperation to the efforts being made by the representatives of South Africa in the same direction. These representatives, while appear ing to defend primarily the interests of the gold mines of their countries, are really defending the interests of international commerce all over the world. It concerns the future of the gold standard which the International Monetary Fund was originally sup'" posed to prepare, which alone will restore to those countries ravaged by inflation the first and the most indispensable kind of security: monetary security.

106 10 Gold and a Return to the Ideas of John Law (Communication to the Academy of Political and Moral Sciences, April 24, 1950) My dear fellow members, do not worry. The gold I want to talk to you about is not the gold whose . hoarding was denounced, long before Lord Keynes and John Law, by our delightful La Fontaine and our stern and honest Labruyere. Like everyone else, I realize that neither gold nor greatness can make us happy. Like all my generation, I have listened to Richard Wagner proclaim in resounding music that gold should be buried in the Rhine in order that peace shall be restored to men. But I have also listened with no less attention to the words of his great adversary Nietzsche who, in his Zarathustra 107 THE TRIUMPH OF GOLD asks himself "How did gold acquire its high value?" His reply deserves reflection. "The value of gold comes from its being rare and useless and its sparkle brilliant and soft! Gold is offered as a gift." And he continues: "It is. like a symbol of the highest virtue that gold has acquired its high value. The highest virtue is rare and useless; its lustre is brilliant and the highest virtue is a virtue which gives itself."