INFLATION POLICY.

Ashburton Guardian, Volume 53, Issue 273, 30 August 1933, Page 6

INFLATION POLICY.

RUMOUR REGARDING BRITAIN. EFFECT IN NEW ZEALAND. (Special to the " Guardian.") CHRISTCHURCH, This Day. Comments made in the city yesterday on the possibility of Britain adopting inflation showed that business men in Christchurch view the prospect with mixed feelings. On the one hand Jvew Zealand exporters would benefit through getting more English pounds tW/tiieir produce on account of the decreased Jimglish currency basis, while the English exporter would, receive more iNew Zealand pounds* for his goods, but on the other hand, the New Zealand importer, already burdened by the exchange rate, would receive still less for his money and would haye to reduce the volume of his transactions. It was felt that inflation hi Britain would be safe up to a point, through the confidence with which English people regarded their banking organisation. There was a confidence in Britain that was not to be found with the American public, for instance. If England made the move it would be to help her exporters in their struggle to hold their place in world trade. One merchant pointed out that such a course by \England might involve the New Zealand Government in serious difficulties as it would mean there was less prospect of- a decrease in the present exchange rate, and through exchange underselling outside the banks the Government might be forced to raise a special loan to meet its undertaking to indemnify the Associated Banks for exchange surpluses in London. That would mean yet another burden for the already, harassed taxpayers of this Dominion. The maintenance of a high rate of exchange.required the New Zealand Government to control any exchange market outside the banks, as transactions by importers in the outside market would increase the exchange balances of- the banks in London with a consequent increase of the Government's responsibility for indemnity: It had not yet been discovered what overseas interests were running the outside market, and it was time for the Government to make a statement as to the liability imposed under the Banks Indemnity Act and what steps it was taking to assume control of the independent market.

It was explained that inflation would mean the release of hoarded gold in Britain through the decrease in the value of money and the increased price of goods. The only way to avoid depreciation of assets would he the exchange 'of gold for goods of all sorts and thus the relief of frozen funds would add greatly to the currency in * circulation. A danger was pointed out by another man, who said that inflation by Britain might, and probably would, mean a general depreciation race among the leading nations of the world, as France was now about the only important country still on the gold standard-and it "appeared that even France would soon be compelled to go off gold. Such a race would lead to an a'bsurd situation and would have to end in a return to stabilised currency.