F.—ECONOMIC SCIENCE AND STATISTICS 127 
with the operation of the gold standard, but frequent tariff manipulation 
to meet fluctuating trade balances is bound to render any international 
currency standard impossible. It is too much to hope that the world 
will abandon tariffs as a measure of protection, but it will be difficult 
to maintain the gold standard unless the countries of the world are pre- 
pared to abandon the system of ad hoc trade restrictions to overcome 
occasional deficits on current accounts. I do not believe, however, that 
I am too optimistic in stating that this difficulty would quickly disappear. 
The new practice of adjusting tariffs to failures to balance payments is 
largely the product of the failure of our credit system. If liquid capital 
had gone to the rescue of, instead of running away from, countries with 
adverse balances the need for dealing with the situation in another way 
would not have arisen. I therefore believe that if we could solve the 
problem of controlling the flow of credit, either through the creation of 
an international exchange stabilisation fund, or in some other way, the 
difficulties created by the new restrictions upon trade would also be 
solved. 
We are frequently told that a return to the gold standard is impossible 
so long as the world supply of gold is so largely concentrated in two 
countries. It is no doubt true that the present distribution of gold 
presents a serious difficulty, but I do not regard it as an insuperable 
_ difficulty. The present distribution of gold is the result of those post-war 
l(t 
influences to which I have already referred. If we could restore those 
conditions which are essential to the maintenance of the gold standard it 
is not unlikely that a redistribution of gold according to apparent need 
would be accepted. Gold is only preferred to an earning asset so long as 
_ the earnings of the latter do not exceed the money estimate of the risk 
involved. In the last resort, however, the international price level in 
_ terms of gold matters less than the domestic price levels expressed in local 
currencies, so that the difficulty created by an unequal distribution of 
_ gold could be overcome by giving an appropriate gold value to paper 
currency and maintaining a relatively low legal reserve. Moreover, if 
domestic price levels, expressed in local currencies, are sufficiently high, 
the burden of fixed debts necessitating a flow of payments from one 
country to another would not be so heavy as to endanger the gold standard. 
A recent judgment in this country, and still more recent pronouncements 
in the United States, have shown that debts contracted in gold are no 
longer payable in the gold value expressed in the bonds. A foreign debt 
payable ‘in sterling in gold’ in this country can be paid in sterling ; 
a gold bond payable in gold dollars can be paid in dollars. This decision 
has produced a profound effect upon the significance of the gold price 
level in the world and, therefore, upon the present distribution of gold 
supplies. For these reasons, while admitting the importance of a change 
in the distribution of gold, I do not believe that the present distribution, 
or the probable distribution in the near future, constitutes an insuperable 
obstacle to the return to the gold standard. 
I hope it will be evident that I neither contemplate nor desire an im- 
mediate return to the gold standard. Many changes must take place before 
such action can be taken with safety. When a new currency measure is 
