WORLD RECOVERY

Dominion, Volume 24, Issue 287, 31 August 1931, Page 9

WORLD RECOVERY

Prices Must Rise and Capital Move Freely LONDON CITY BELIEF By Telegraph—Frew AssocUtioa —Copyright (Rec. August 80, SA pjn.) London, August 20. Although the Stock Exchange la nervous, actual selling out has not been heavy, the bulk of the marking down being precautionary. It may be predicted that if the Government’s proposals are well received there will be »i considerable revival of all giltedged and sound Industrial stocks. An extraordinary example of the sensitivity of the markets to the suggestion of a tariff occurred at Liverpool, where industrials rose by several points on the mere rumour that Mr. Philip Snowden was resigning from the Government. Australian securities have remained firm throughout the crisis, as a result of advices of the successful progress of the Conversion Loan. Opinion is hardening in the city that no permanent world recovery is possible until prices rise and confidence is re-established,- enabling the resumption of the normal investment of fresh capital. It is . pointed out that, while Britain’s immediate task is to deflate costs, international co-opera-tion with a view to adjusting the values of manufactures with those of raw materials is necessary to avert the international catastrophe foreshadowed in the MacMillan report. The Macmillan Committee bases its recommendations on the assumption that the next phase of monetary policy must consist of a whole-hearted attempt to make the existing International standard work more satisfactorily. “It would be unwise for us, who have so much to gain by it, to ;ive up the attempt to secure a sound nternational currency,” it says in its report. ' , . The committee are also opposed to devolution of currency. Discussing the international price level, i.e., the composite price at wholesale of the principal foodstuffs and raw materials entering into international trade as measured by toe best-known wholesale index numbers, the committee’s emphatic opinion is that even if a further fall of wholesale prices be avoided, their stabilisation at approximately the present level would be a senous disaster for all countries of the world alike; and that the avoidance of such an event should be a prime object of international statesmanship. “A failure by the central banks of the world to attempt to redress the fall of prices, in our judgment, would endanger the. principles on which modern economic society is founded • —namely, the dependence of the productive process on the expectation Of normal profit to individual concerns, and the sanctity of contract. For to allow prices to fall, while social forces maintain wagecosts, obliterates profit; and the attempt to reduce non-contractual incomes, without the power- to abate contractual incomes immediately, jeopardises, both nationally and internationally, the sanctity of contract.” The committee reommends that this objective—first to raise and then to stabilise the international price level—be accepted as- the guiding aim of the monetary policy of Britain.