PRICE LEVEL.

Auckland Star, Volume LXIV, Issue 99, 29 April 1933, Page 12

PRICE LEVEL.

DIRECT METHODS IN U.S.A.

DUXEDIX. ECOXOMIST'S VIEWS,

"The American problem is clearly similar to the problems of other countries, in that the feeling is rapidly becoming much stronger that some device is necessary to raise the general price level, thereby relieving the burden on debtors and making possible the reemergence of profits," stated Dr. A. G. B. Fisher (professor of economics at the Otago University), to an "Evening Star" reporter.

Dr. .Fisher went on to say that ordinary methods of credit expansion had had disappointing results, and it seemed that the American Government was now prepared to adopt more direct methods. It was doubtful whether in a normal psychological situation mild inflation in America might not have been carried out without any formal breach of the links between currency and gold, but probably tlie state of mind in the business and financial world was such that the authorities doubted whether an attempt to inflate and at the same time maintain the gold reserves required by law could have been successful. In the long run, however, it was important to remember that willingness to interpret gold reserve regulations more liberally and, if necessary, to alter their content in the direction of diminishing the size of the gold reserve, was likely to prove a more effective instrument in raising the price level without incurring all the risks and dislocation associated with the disappearance of an international monetary standard.

While it was probably advantageous on general grounds that America should attempt to check the downward trend of prices, our own experience had already shown how unsatisfactory an exchange policy by itself was in restoring normal equilibrium, and there was a real danger that the decision of the American Government might further encourage the tendency towards competitive exchange depreciation. America, like other countries, was suffering from a failure to adjust her production to the improvements in methods of production which might be no longer necessary to maintain the old customary levels of employment and investment in primary produce. It would be unfortunate if a concentration of attention ou exchange problems were to encourage the tendency to overlook the necessity for a more fundamental readjustment in the relative importance of different types of production. It was impossible to predict confidently the further course of the dollar exchange, which would depend largely on the extent to which the American Government was willing to inflate and the degree to which it could control inflation. The present figures were] largely the result of speculative transactions, but if the mounted inflation which became effective was quite email the exchange might settle down at a figure nearer the rato quoted a week ago.