OTTAWA CONFERENCE

Dominion, Volume 25, Issue 248, 15 July 1932, Page 8

OTTAWA CONFERENCE

Higher Price Level RECONSTRUCTION POLICY Creation of Confidence EMPIRE EXCHANGE RATES (By Our Parliamentary Representative). VI. The fallacy of believing that the price level can be raised by some magical formula which will put more money into circulation of its own accord, was proved recently in tne United States when an made to bring this about by legislation. It would be wrong to believe tiiat prices will rise merely b «« a “?« the Empire statesmen at «« awa say they should, but resu ts may be attained by a careful overhaul of the existing Empire monetary system. Mr Gainsborough’s Bill, whlca was passed by the United States House of Representatives by a huge majority, aimed “to restore and maintain the purchasing power of the dollar.” The Bill set out to raise the price of goods and commodities and so make the dollar easier to obtain, as well as to get rid of. Prosperity was to come back with a rush, as one writer said in criticising the measure. The Federal Reserve Board was instructed to exercise control of the volume of credit and currency so as to restore the ave J" age purchasing power of the dollar to where it was between 1921 and 1929. This meant that the average price ot commodities had to be raised by 49 per t<? But the Reserve Board has been doing everything possible to bring about an increase in prices by making money easier to borrow with little or no effect. The great desire is to inject more currency ..into the market, but it will not go into the market unless people are willing to borrow. They cannot be made to borrow unless confidence is restored, so that there would appear to. be no short’ cut by these means in the bringing about of an increase in the price level. Empire Currency Idea.

The idea of an Empire currency has not found very much favour with financial authorities at Home. It is considered that although this might be the ultimate aim to be worked for, the time has not yet come for the setting up of elaborate machinery for the control of an Empire currency through a Central Bank, or even a chain of banks. "The basic, idea of our present Imperial policy should be to give effective expression to the common desire to cooperate without surrender of political and economic autonomy,” wrote Mr. Roy Glenday in “The Times” recently. "Just as in the fiscal sphere we do not contemplate the immediate establishment of a formal customs union with complete Internal free trade, so we should approach the problems of Empire monetary reconstruction from the point of view of strengthening the links of the existing underlying financial unity, leaving it to time and experience to deepen the intimacy of the relationship thus established.” It has been pointed out that in approaching .the problem of the future price level Great Britain would prob ably be wise to undertake that such questions as the future value of sterling measured in terms of gold would not be decided without consultation with the Dominions and colonies, and a detailed examination of its effects on their domestic prices and debts. As Mr. Glenday says, while a level equivalent to 3.80 dollars to the pound might be acceptable at present to investors and debtors in England, this level might prove too high for some of the Dominions. Exchange and Debts. The question of inter-imperial debts is wrapped up with the price level, and this implies that It will be necessary to consider the level of exchanges between Empire countries. The abolition in inter-imperial exchange fluctuations has been advocated as a necessity, and it is argued that discussions upon this question could be undertaken without in any way interfering with the rights of the Dominions to manage their own banking affairs and currency. The general benefits of some solution of the currency problem and exchange fluctuations were strikingly outlined recently by Mr. Harry Dawson, ex-presi-dent of the British Wool Federation in an article in “The Times."

“Is it too much to hope that the great question of Empire currency will be considered at Ottawa?" he wrote. "Uniform coinage is not essential, but a uniform banking system and general clear-ing-house co-operation could Ire established as a first step. Although the question bristles with difficulties, the opportunity for settling it was never so real and the mood for conciliatory efforts seldom so encouraging as now. Effects of a Plan. "It is fascinating to imagine what such a currency might accomplish in th e English-speaking communities alone: it might solve South African commercial and'financial problems; it might conceivably help to deliver Canada from any threatening economic stranglehold or undue Americanisation of her industries: it would indirectly do much to stabilise the pound sterling. Many countries, too, especially South American and Scandinavian, who prefer to cling to the gold Standard, would probably look favourabl on such a scheme if it could be made feasible. Further, the Empire countries dominated by a silver currency and indeed the world would benefit indirectly by the strengthening of the pound sterling. “The consideration of this ideal would surely make the Ottawa Conference historic. Some effort in this direction would lift it above all the petty bargainings on preferences which might easily result in irritations and suspicions. Moreover, if somethin- definite, even a limited scale at first, were accomplished, the greatest boon now possible would be conferred on Imperial trade, and the bonds of Empire would be more strongly cemented than by any legislative agreements on the statute book.” (Concluded.)