CURRENCY REPORT

Dominion, Volume 25, Issue 274, 15 August 1932, Page 9

CURRENCY REPORT

British Policy Approved HIGHER PRICE LEVEL International Action Ottawa, August 13. The heads of the delegations at Ottawa have adopted the Currency Committee’s report and authorised its publication. The report says: “(1) A world-wide rise in the general levels of wholesale prices is in the highest degree desirable. The evil of failing prices must be attacked by Government and individual action in all its causes, whether political, economic, financial, or monetary. “(2) Governments represented at Ottawa record their conviction that international action is urgently necessary, and announce their desire to cooperate with other nations in any practicable measures raising wholesale prices. “(3) In investigating the question of how to help to raise prices, the Conference recognises that Britain’s central position not only among Empire countries but in the world of trade and finance makes Britain a main factor in anything that can be done. The Conference therefore welcomes the following statement made by Mr. Neville Chamberlain: — “His Majesty’s Government desires to see wholesale sterling prices rise. The best condition for this would be a rise in gold prices. The absence of a rise in gold prices inevitably imposes limitations on what can be done for sterling. A rise in ‘prices cannot be effected by monetary action alone, since various other factors which, have combined to bring' about depression must also be jpodified or removed before a remedy is assured. “The British Government nevertheless recognises that an ample supplv of short-term money at low rates may have a valuable influence. The Government is confident that the efforts which have successfully brought about the present favourable monetary conditions can and will, unless unforeseen difficulties arise, be continued.” Primary Line‘of Action. “(4) The Conference recommends that the British Commonwealth should act in conformity with the line of policy indicated by Mr. Chamberlain’s statement as far £fs lies in their power. The primary line of action in the monetary sphere toward a rise of prices, should be the creation and maintenance—within the limits of sound finance —of such conditions as will assist the revival of enterprise and trade. These conditions include low rates. of interest and abundance of short-term money. The rate of interest on all the various types of loans should be kept as low as financial conditions permit. It is necessary at the same time that these favouarble monetary conditions should be achieved, not by the inflationary creation of additional means of payment to finance public expenditure, but by an orderly monetary policy, safeguarded, if necessity should arise, by such steps as will restrain and circumscribe the scope of violent speculative movements in commodities or securities. . “It must be remembered that the success of such a policy will be hampered and might be nullified by the failure to modify or remove the important non-monetary obstacles, of which many of an international character require an international remedy. The British Commonwealth should, nevertheless, take all steps in its power to increase public confidence, especially in the field of business enterprise, and to facilitate trade. “(5) The Conference recognises the great importance to traders of exchange stability over as wide an area as possible. A complete solution of this problem must await restoration for satisfactory working of an international standard. Meanwhile, pending such solution, the Conference has considered the possibility of achieving valuable results in two directions (1) creating an area of stability among the countries regulating currencies in relation to sterling. (2) Avoiding wide fluctuations between sterling and gold. . Sterling and Gold. “Regarding the fluctuations between sterling and gold the Conference notes withi satisfaction that Britain has already established Machinery aimed at preventing wide fluctuations in sterling and gold value caused by speculative movements. “Regarding the area of stability, the Conference recognises the value of countries within the British Commonwealth whose currencies are linked with sterling maintaining stability between their exchange rates, and the conference looks to a rise in the general level of whosesale prices as the most desirable means of facilitating this result.

“(6) The Conference recognises that monetary policy’s ultimate aim should be the restoration of a satisfactory international monetary standard. Such

standard should function so as not merely to maintain stable exchange rates between all countries but also to ensure the smooth and efficient working of the machinery of international trade and finance. This postulates an international agreement among the world’s great trading nations. t j * “While certain States represented at Ottawa bold very different views on the question of the most desirable standard, the Conference refrains from making any recommendations on the subject in view of the fact that the question will shortly be discussed at an international conference. However, there are several conditions precedent to the re-establishment of any international monetary standard, the most important being:— (1) The rise of the general level of commodity prices to a height more In keeping with the level of costs, including the burden of debt and other fixed or semi-fixed charges. (2) The adjustment of the poll- . tlcal, economic, financial and monetary factors which have caused the breakdown of the gold standard in many countries, which, if not adjusted, would inevitably lead to another breakdown of whatever| international standard may be ' adopted. “The Conference emphasises the utmost Importance .to the future working of any international standard that international co-operation should be secured and maintained with a view to avoiding as far as practicable wide fluctuations in the purchasing power of the standard of value;”

REVIVAL OF PRICES Mr. Coates is Confident BRITAIN’S OBJECTIVE (Rec. August 14, 5.5 p.m.) Ottawa, August 13. Commenting on the currency report, Mr. J. G. Coates (New Zealand) stated :— “It is a valuable contribution, embodying a pronouncement by Mr. Neville Chamberlain, which is of even greater significance than at first appears. Cautiously guarded in expression, it definitely accepts the raising of prices as the object of Britain’s monetary policy. Nothing can be more valuable to New Zealand producers. “The discussions leading to this report have convinced me that action will be taken to ensure a revival of prices. There is nothing in the report prejudicing New Zealand’s power to regulate her own monetary affairs. I welcome Mr. Chamberlain’s declaration as marking a milestone in Imperial cooperation, turning away from -the disastrous deflationary policy or drift of the past two years.” Mr. Bruce Also Approves. Mr. S. W. Bruce (Australia) sees importance in the currency report dealing with the British Government’s declaration on the rise of price levels as being essential. “Britain, in effect, says that existing conditions regarding cheap money are the best contribution she can make towards increasing prices, and her policy during the past three months has been deliberately designed in this direction,” Mr. Bruce says. He instances the 4 per cent, bank rate reduction, the conversion loan, and the Bank of England’s policy of expansion by buying securities, thus getting more money available. “It is a pretty satisfactory declaration,” said Mr. Bruce. “It can be interpreted that Britain will continue her present policy. It Is a good starting contribution and means much to Australia, which is faced with the position that she practically cannot pay her debts, and only the recent good seasons have pulled her through. Low Interest rates have a special significance for Australia, because it gives her a chance of converting her securities shortly falling due.” Mr. Bruce considers that Mr. Neville Chamberlain has gone a step further than during his May speech In the House of Commons. The report also removes any apprehension that Britain is likely to plunge back to the gold standard before the conditions which necessitated her departure therefrom are remedied.