CHAOS OF THE CURRENCIES.

Auckland Star, Volume LXIII, Issue 98, 27 April 1932, Page 6

CHAOS OF THE CURRENCIES.

EMPIRE STABILISATION,

{By J. D. LECKIE.)

At the Ottawa Conference measures will be discussed for the stabilisation of the currencies of all British countries. The necessity for such a step is apparent, for in each of the British Dominions the pound has now a different value; more than that, the value is fluctuating and uncertain, all of which is a great impediment in the way of trade. The South African pound is worth something like 25 per cent more than the English—for in South Africa the currency is still on a complete gold basis. The Canadian dollar, normally at a parity with United States currency, is now about 20 per cent below it, although it is still above the English parity of 4.86 dollars to the pound. An English pound, according to the latest quotation, is now only worth 4.19 dollars Canadian. It is true Canada is still nominally on a gold basis, but the export of gold from that country is prohibited such an embargo to a great extent nullifies the operation of the gold standard. In the case of two countries, both of which are on a complete gold standard, there can be no appreciable fluctuation in their respective currencies, for if the exchange rose or fell beyond a certain level, gold could be shipped from one country to the other. As the cost of freight and insurance on a large gold shipment would in most cases be considerably under 1 per cent, this represents the maximum amount of fluctuation possible in such a case. As such a measure is impracticable in the case of Canada since the embargo on gold shipments, the depreciation in local currency (compared with U.S.) is explainable. In Australia, on the other hand, the English pound is at a premium of 30 per cent, and in New Zealand of 10 per cent, with an uncertainty as to future values. We are in the position of the countries of Spanish America. When under Spanish rule, there was a uniform currency, the dollar being worth about 4/. Sittce they have achieved independence, owing to the different methods of manipulating the currency, the dollar has to-day a different value in every one of them; in 'some cases it has fallen as low as a halfpenny. The American dollar was based on the old Spanish dollar; which also (in the form of the Mexican or Chilian dollar) became the basis of the Chinese tael, the Japanese yen, and the Straits dollar now current in the British possession in the Far East.

These facts indicate the necessity of adopting a uniform standard of currency throughout the Empire, and if possible, with other countries as well, for the ramifications of trade are worldwide. This reform finds general support, but the methods proposed arc vague. It would be possible for Great Britain and other British Dominions to return to a complete gold standard to-morrow if the pound were stabilised at something under its original value in gold, although the advisability of such a course is questionable. In the case of Great Britain, a parity of four dollars to the £1 has been proposed. More than thirty years ago Argentina reconverted the depreciated local dollar to a gold basis at the rate of 44 cents (a depreciation of 50 per cent), that being the relative market value at the time. Since then, under financial stress, she has again abandoned the gold basis. France, Italy and other countries have reconverted to gold at a lower parity. Germany has re-established the mark at its former gold parity, but only by complete repudiation of the paper currency issued during the inflation period, which is now quite worthless. Many wild schemes of currency reform have been proposed. This article deals with facts, which indicate that gold is the most satisfactory standard hitherto used. Countries forced by financial stress to abandon that standard have generally reverted to it as soon as circumstances permitted.