Mr. Langstone & the Banks

Dominion, Volume 23, Issue 301, 16 September 1930, Page 11

Mr. Langstone & the Banks

Sir, —I notice from your columns that a series of questions was recently addressed in Parliament to the Minister of Finance by Mr. F. Langstone, one of the Labour members,'who has been posing of late as a critic of our financial and banking institutions. Personally, I think that criticism of this kind is in the public interest if well informed, but I have been unable to avoid a growing suspicion , that this gentleman is very imperfectly acquainted with the principles of finance and the institutions which he has criticised. Among the questions there is the following:—“(3) Whether he (the Minister of Finance) is aware that since Britain returned to the gold standard the exchange rate has gone up to over £5 per centum.” The obvious inference from this question, in conjunction with the one which goes before it, is that the questioner implies that the present exchange rate of £5, as compared with the rate which he states stood at £l/10/- in , 1923 (when England was not on the gold standard), is duo to the fact that England has now returned to the gold standard. ’ . . If this is Mr. Langstone’s view of the matter, and it seems pretty plain that it is, it shows to my mind a remarkable misapprehension of the whole situation, and indicates that the questioner does not understand the factors that affect the exchange rate. As I understand the matter (and I speak with deference as a layman) our present excessive exchange is due to our adverse balance of accounts with London, coupled with the fact that New Zealand is not on the gold standard. If we were on the gold standard it seems to me that exchange on London could not exceed the cost of remitting gold to that centre, and this cost, I am informed, at the present time is somewhat under 30/- per centum. It is because we -are not on the gold standard here, and because gold, is consequently not available for export, that the New Zealand exchange on London has gone up. beyond the cost of remitting gold to its present figure. ’ j The trouble, in other words, as I see it, is caused not through England having returned to the gold standard, as Mr. Langstone implies, but through our having failed to do so. This seems to me an elementary proposition, and Mr. Langstone’s view seems to indicate such a complete lack,of appreciation and understanding of the elements of foreign exchange as to shake one’s confidence, in the value of any of his financial criticisms whatever. It is quite proper that politicians and others should criticse finance, but it seems desirable that they should thoroughly understand what they are talking about, and one may quite fairly draw the inference that . other criticisms by the same person are on a par with his understanding of the foreign exchanges as disclosed by these questions. Incidentally, the fact that we have not returned to the gold standard, if it is a fault, is the fault of the Government, and not of the banks. —I am, etc., STUDENT. Wellington, September 15.