Russian Gold Policy.
From time to time writers in financial journals speculate about the amount of gold produced in Russian mines and stored away in their equivalent of the American Fort Knox. They also wonder why the Russian Government sometimes appears as seller of gold in world bullion markets but for the most part seems reluctant to let it go. One suggestion has been that Russian costs of producing gold are very high and that they are holding it back in the hope (shared also by South African gold producers) that some day the American Government will raise its buying price for gold from the present 35 Dollars an ounce to perhaps 50 Dollars.
Mr. Paul Einzig in a letter to The Times (7/7/59) asked for more evidence about Russian high costs of production of gold, and pointed out that in any event gold used by the Russian Government to buy goods abroad is being used more profitably than when it is hidden away in Russian bank vaults. His conclusion was that the Russian Government “is determined to hoard a large gold stock for the sake of the economic and political power the possession of such a reserve entails.”
It is certainly true that if the Russian authorities have hopes of building up the Rouble to be a world currency, as universally acceptable as the Dollar, they will need gold on a scale comparable to the reserves in U.S.A. Gold is still the indispensable basis of Capitalist international trade, universally acceptable and of great importance in war to obtain materials from abroad.
As to the amount of gold produced in Russia, it is generally accepted that Russia is second only to South Africa. As long ago as 1937 an official Russian government publication (U.S.S.R. in Construction) claimed that output had increased four and a half times in the previous six years. It was, they said, needed “ to build up Socialism.”
In 1934 Stalin told the Communist Party Congress:
We shall use money for a long time to come, right up to the time when the first stage of Communism, i.e., the Socialist stage of development, has been completed.
Much earlier still, Stalin’s predecessor, Lenin, had improved on Sir Thomas More’s 16th Century notion of using gold to pave the streets, by saying that when they conquered power on a world scale they would use gold “for making public lavatories in the streets of the great cities of the world.” Such statements must seem very remote today to Russia’s army of gold miners.
And Russian Diamonds.
Russia also has a prosperous and expanding diamond industry. Not so long ago the great South African diamond group, De Beers Diamond Corporation, was reported to be worried over the prospect “That the mounting Soviet production would be sold abroad cheaper than the De Beers gems and industrial stones.” (Daily Mail, 19/1/60.)
As the Soviet News Agency Tass had reported that Russian diamond production was being enormously increased this threat was not one to be treated lightly, but in January came the news that Russia had linked up with De Beers and in future “All Russia’s diamonds sold to the West will be marketed through the London offices of the Diamond Corporation.” (Daily Mail, 19/1/60.) This was indeed good news for South African and other diamond interests.
De Beer’s already controlled nine-tenths of world sales of diamonds and the link up with Russia had the effect of sending up De Beer’s shares on the Stock Exchange.
Diamonds were firm with De Beers sparkling on the news that it has signed a marketing agreement with Russia. (Evening Standard, 19/1/60.)
Making the Pound Honest.
While the Russian Government may be preparing to make the Rouble into a world currency one problem of British capitalism is to prevent the paper pound from slipping any further than it has already. In 1925 it was equivalent to 4.86 dollars. Since then it has declined first to 4 and then to 2.8 dollars, and the Dollar itself has had its gold content reduced to about half.
Probably nobody expects the pound to recover lost ground, but certainly the Government and the Opposition are now united in holding that it should not be allowed to drop further: which is quite a change from the Labour Party’s attitude in the nineteen thirties. Then they welcomed it as a supposed release from the tyranny of the bankers.
The last time there was a risk of further devaluation, in 1957, Mr. Richard Crossman, Labour M.P., wrote:
Mr. Gaitskell and his Shadow Chancellor, Mr. Harold Wilson, are just as determined as Mr. Thomeycroft to save the pound. (Daily Mirror, 24/9/57.)
It would be a pity to forget that the British Communist Party was also worried about British capitalism’s pound. In a Daily Worker article, “The only way to Make an Honest Pound,” J. R. Campbell urged expanded production and wrote of this country:
It is being left behind in the race to increase productive capacity—a fact that is more likely to undermine the pound than any other thing. (Daily Worker, 16/10/57.)
Traps for the Small Investor.
The passage of time brings strange reversals of attitude in political parties concerned with running capitalism. At one time, when the Labour Party was planning wholesale nationalisation, it would not have occurred to a Labour newspaper to advise its readers to buy ordinary shares in companies. They might have been advised to put their savings into a Savings Bank, or to buy some Government security. But since then many small investors who had the misfortune to put their savings into 2½ per cent. Treasury Stock when Dalton was Labour Chancellor of the Exchequer have seen the price fall from £100 to £45; and the Government has again declined to do anything about it.
So now the belief is spreading that small investors would do better to buy company shares, either directly or through Unit Trusts, and Reynolds News (6/3/60) suggests that co-operative societies and trade unions should form their own unit trusts for investment in ordinary shares.
The writer in Reynolds News (“Scorpio”) thinks this would enable workers to share in the rising profits of industry. If he thinks that profits only rise and never fall he had better think again, but even if it were true, how will this remedy the problem he sets out to solve, that in this country “one-third of the population has no measurable property; one person in every 100 owns nearly as much as the other 99 ”?
Another echo of far off days comes in an article by W. J. Brown, who years ago was a Labour M.P. always in a hurry to get the Party’s programme put into operation. Then the Labour Party believed in “soaking the rich ” and supported a steeply rising tax on incomes. Now Mr. Brown, who long ago left the Labour Party, is campaigning for the abolition of Surtax, or, failing abolition, at least the raising of the level of which it is payable, from £2,000 a year to £8,000.
Edgar Hardcastle
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