TRACTS FOR THE TIMES.

Auckland Star, Volume LXIII, Issue 116, 18 May 1932, Page 6

TRACTS FOR THE TIMES.

CURRENCY CONTROL,

(By PKO BONO PUBLIO0.)

I got a lift from a neighbour and went the other night to hear an address on currency reform —with special reference, of course, to farm prices. It was a disappointment. Extracts from text books and economic journals are useless to people who are not familiar with precise and technical arguments. And one couldn't expect a country audience to be interested in the mathematics of the subject or to follow a spoken explanation of loading in the compilation of price indexes. When I was hack at home I had the curiosity to look out one of the first statements of Irving Fisher's that I ever read. It was part of an address to the International Chambers of Commerce- at Boston, I think in IM2, on the stabilisation of the dollar. The argument for a fixed price measure was not so familiar then as it is now, and Professor Fisher had to explain in simple terms the necessity for having an unchanging standard by which to measure purchasing power. "I firmly believe," lie said, that tlio time must come when business men throughout the world will feel the need of a more stable unit of value." Hβ could change the tenses of that sentence truthfully now. , It was a comparatively simple plan that Irving Fisher outlined, simply that instead of charging nothing for minting gold the Government should charge a commission, called seigniorage, and that it should vary the seigniorage as prices in general went up or down. If the official price index number in any year showed an increase of one per cent the mints would have to add one per cent to the seigniorage.; The etfeet would be to preserve a uniform purchasing power of the monetary unit. As soon ae any depreciation of the purchasing power of the dollar occurred the increase in the seigniorage would operate to correct it. The proposal was that instead of always paying the. same nxed. money price Sov gold no matter whether it appreciated or depreciated in purchasing power over "oods, the State would pay exactly what the goK was worth. Mr. Fisher concluded that there wae no virtue in a fixed price for gold, but there was virtue in a fixed purchasing power of money. When I first read this statement the plan looked so simple that I thought there must be a catch in it, but so far I haven't found it. Ihe plan would not prevent minor variations in the purchasing power of money, and it would not prevent big changes caused by catastrophes, but the control would be virtually complete and it would be automatic. It is precisely ««».«*»s mints from year to year varied the weight ot "■old put into the pound or the dollar com to correspond with the variation in the prices ot gOC o£ce n yoTgraep this idea it does not matter •how the'price index number is worked out; you have rasped the essential idea of currency management. The working out of the price index is a matter for the statistical experts.