TRACTS FOR THE TIMES

Auckland Star, Volume LXIII, Issue 133, 7 June 1932, Page 6

TRACTS FOR THE TIMES

SWEDEN'S FINANCE

(By PRO BONO rUBLTCO.)

I wonder Low Sweden is getting- along with her experiment in currency management. It isn't actually a currency scheme, rather a credit control scheme, but it amounts to very much the same thing. This elans of news, unfortunately, is altogether neglected in the cable new,-, mainly, I suppose, because it never reaches the stage of a complete incident. When Sweden went oft' the gold standard that fact, of course, was in the cabled news, but we were not told why it happened, and nothing has been said since of the. efforts that have been made to maintain the internal price level. The natural result of the monetary policy should have been a pretty sharp rise, in internal prices, but Sweden has managed so far to get along without any violent change. It was not the Krcugei- collapse that forced Sweden oil' the gold basis. The position, as I understand it. was that many people who were looking- for a safe country in which to hold their liquid reserves chose Sweden, just as others chose the United States, others Switzerland, and other* France. And Sweden had too much foreign money for her comfort, because the .securities belonging to foreign countries were liable to be withdrawn at a moment's notice. That actually happened to an uncomfortable extent, and the banks could not stand up to the strain. But the position seems to have been handled with groat skill. Wholesale juices did, indeed, react to the change, though only to a limited extent, but. retail prices remained as they were, and I .shall be interested to discover .whether they have .continued stable. The main factor in keeping prices steady seems to have been the rather severe, rationing of -credit by the banks. This policy would not suit sonic of my country friends-in New Zealand, of course, because they imagine that their own safety and that of the country can be secured only uy inflation. They think that some lasting benefit can be gained by the depreciation of the currency. But if you watch countries likn Great Britain and Sweden you will seo. that while they protect themselves by going oil' the gold basis they are very careful to avoid (lie dangers that would follow the inflation of the internal currency. What they have done, in olfect, is to call a halt in the process of deflation. Sweden happens to be more interesting to us than thy other smaller Powers of Kurope. because it is very active in industry, commerce and iinance, ami, on the whole, its affairs are very wisely managed. It will be worth watching during the next six or eight months which, according to many economists, are likely to see a .more severe testing o? the European financial systems.