FRANK CRITICISM

Dominion, Volume 30, Issue 10, 7 October 1936, Page 12

FRANK CRITICISM

Currency Depreciation In Dominion

“NEFARIOUS PROCESS’*

Stabilisation of Dollar, Franc and Pound

A frank tilt at depression policies of currency depreciation in Australia and New Zealand by a prominent visiting British delegate, Mr. J. Arthur Aiton (Derby), and a reply to the soft impeachment by representatives of chambers of commerce of the two Diminions referred to, were features of a debate on monetary policy at the fourteenth congress of tjie Federation of Chambers of Commerce of the British Empire in Wellington yesterday. The following remit was submitted for consideration: — “This congress views with satis faction the attempt which is now being made to stabilise the franc, the dollar and the found sterling in relation to each other; and urges His Majesty’s Governments to do everything it> their power to promote its speedy success. The congress is convinced that complete success cannot be ensured until all nations stabilise their respective currencies in agreement with the franc, the dollar and the pound. The congress further desires to emphasise the importance of the statement by the British Government that the requirements ■of the internal prosperity of Empire countries must be taken fully into account in its policy toward international monetary relations. - “The congress lays stress on the necessity of the withdrawal, as far as possible, of restrictions on financial payments, exchanges, and trade, if money is to follow its natural course of furthering to the best advantage the development of commerce generally.”

Moving the motion, Mr. J. Arthur Alton, C.B.E. (Derby), said the happenings in the financial world in the last 10 days had rather put the original resolution out of date, and this had been substituted. He quoted from the Macmillan Report of five years ago, which he said had made a great stir in the world. Thej' were glad to see now that after five years the nations of the world were coming to see that they must stabilise if they wished their commerce to proceed as it had done in the past Three years ago, before the thirteenth congress, the federation appointed a very able committee to report on the monetary position. That committee was presided over by the late Sir Basil Blackett. The committee made some very pungent statements. Was it to be wondered, in view of the statements from highly-influential men, that they had seen chaos getting worse and worse? Mr. Alton asked. Anything which would tend to stabilise the exchanges of the world must be to the advantage of commerce. The president of the International Chambers of Commerce had said :

“National committees should impress upon their Governments H’ e absolute necessity of establishing close co-operation between the principal world monetary systems with a view to restoring that stability in currency relations which we most urgently desire.”

Referring to balanced budgets, Mr. Aiton said there was where the difficulty would come in. Why had this taken three years? Why had it now come and not three years ago? Why was it Great Britain stood about the most financial nation in the world at the present moment? Because, he continued, Great Britain saw this plain truth three years ago when it was brought to the verge of financial collapse. She saw that she must stabilise he r internal currency and that with it -he must balance her Budget. Prosperity Notes In Alberta. Great Britain resolutely set herself to do both those things. Now the nations of the world after three years were beginning to ask themselves why it was Great Britain was in this position. They were seeing that they must balance their exchanges. But balancing of the exchanges wpuld not do the whole thing. That was where be was afraid France and the United States would find themselves in difficulties. They had not balanced their Budgets. It was a strange thing, Mr. Alton '■outinued. how the people of the world could be led away by the belief that l hey could pul their hands out into the air and grasp the substantial. They had seen prosperity notes in Alberta,

That idea was as old as the hills. They still had only that little bit of paper. “I am surprised to hear in Ih' s country that the Douglas Credit bug has bitten some of the people ’’ Mr. Aiton proceeded. Means of trying to get something for nothing had been tried and tried again. Men could only get by sacrifice themselves something of real and lasting good. Borrowing was a pleasant process while it lasted. But sooner or later came the day when one could not borrow more. Unless one carried out one’s obligations under one’s borrowing that only hastened on the day when no more money could be borrowed. Strange Phases. The world had passed through many strange phases. He was sorry to see that even out here, far removed as New Zealand was from the turmoil and temptation of Europe, the somewhat nefarious process of gaining an advantage in commerce by depreciating the currency was taking place. It was one of those mistakes that politicians were susceptible to. “I think it would be a great mistake if we who come to see these things should hesitate to say what we see because we think we might offend the feelings of certain people,” Mr. Aiton concluded. ”We are only out to put the fact as we see them.” (Applause.) Mr. R. L. Barclay, C.B.E. (London), seconding the remit, said that he had lived long enough in the financial world to see nearly, if not every, prophet of economic affairs and currency proved wrong. He was quite sure that in the Congress of Empire Chambers, with its 150 or so members, they would find that not one of them could say he had been right in his prophecy about money and currency during that period. "We have all made our mistakes.” said Mr. Barclay, “and I think it is. just as well to-day that in giving out to the world resolutions which will be read and discussed we do not say anything about the gold standard or Douglas Credit or any other of the remedies that have been suggested to provide stabilisation, several of which have certainly already failed and all of which are open for discussion.

“The fact remains,” said Mr. Barclay, “that what we are concerned with is the provision of money for the development of trade and that it should be stabilised as between the various countries of the Empire, as far as possible, in its value. , Cart Before the Horse. "What the Dominions and the Colonies are crying out for is money. What London in particular, and the world in general, can supply is money, provided it goes to credit-worthy people, and we are concerned to make that supply flow in the easiest possible channel. I therefore think we can support these resolutions entirely. "There has been far too much of putting the cart before the horse in some of our economic theories,” continued Mr. Barclay. "It isn’t credit that will create wealth; it is wealth that is the basis’of credit. You cannot by merely issuing credit create wealth. You only inflate the normal value of your wealth, but you don’t create any more. The supply of money is governed by ita opportunities for finding profitable employment in trade or finance, and. in the case of credits and advances the certainty of the payment of interest and maturities. Hie maintenance of locally-untrammelled payments ami transfers is a necessary complement to the present international financial policy of the British Government. We all welcome the latest steps which have been taken for Britain, France, and the United States hand in Im nd to try and keep the tanks level, and we'l rust that the pipes between the tanks of money will be kept perfectly clear of encumbrances.”

Keystone to the Arch of Commerce.

Mr. C. J. B. Norwood (Wellington) said he did not think there was any doubt at all that had the international economic conference succeeded it would have paved the way to meet many of the major problems in Europe. They had seen, he thought, the result of the conditions of inflation. throughout the world caused by I he lack of financial stability and uniformity. The monetary system was merely a keystone to the arch that bound commerce together. So far as the Du millions, ami particularly Australia and New Zealand, were concerned. Mr. Norwood said, he took the view that their Governments, faced with great emergencies, did just what other Governments all over the world did. To adjust that was going to create some little sacrifice. He did not think it could be done with a stroke of the pen. Some typo of readjustment had to be brought about to save what would be the repercussions. If the British Empire could not sit round a table and decide on some true and definite measure of value, how was it possible that foreign nations could come together ami do that? He hoped that with the opportunities that would exi“t at the lime when the whole of their political chiefs could meet in London, and with the aid that the commercial community would give, they

would show a willingness to make the sacrifices for the common objective. Mr. A. Wigglesworth (London) said that the Bank of England, together with a balanced budget, had played a most important part in the magnificent reconstruction which had taken place in Great Britain. The new principle of central banking should be carefully studied and applied in every part of the Dominions. Australia in the Depression. Professor Torliev Hytten (Sydney.l said that if the delegates from the 01(1 Country had been out here and had seen what Australia bad to face during the depression lie was sure they would agree with the policy which circumstances forced upon that country. It was rather difficult to define exactly what stabilisation meant. He thought that on the whole what they were after rather than currency stabilisation, which was only a means to an end, was stabilisation of economic life in general. They wanted stabilisation of trade and trade conditions. “We must discourage this idea that you can do mystic things with money,” said Professor Hytten. “What wo are after is. what a delegate from New Zealand said, a reasonably stable measuring rod for money. What I think, then, is most important is that we should be allowed to develop as stable and economic life <as possible, and that we should look upon the stabilisation of the monetary unit as a means to that end, and a means only.” Professor Hytten said he would like to see added to the sentence, “The congress is convinced that complete success cannot be ensured until all nations stabilise their respective currencies in agreement with the franc, the dollar and the pound,” the following words: “As far as their internal conditions will allow.” He thought that the majority considered that the policy the British Government and the Bank of England pursued was an excellent policy. That was shown by the fact that for the past five years, at any rate, they had followed sterling absolutely. “It might be necessary for us in the Dominions,” added the professor, “to varv our rates with sterling one way or the other, just a little. Britain may be facing a boom and want to contract a little; we may not have the same boom, and vice versa. There may be conditions under which we would like to get nearer to parity with sterling than we are now. Both those conditions can be visualised, and I would feel happier about the resolution if those few words which I have suggested were added to it.” The mover said he was not prepared to alter the remit. Professor Hytten then moved an amendment embodying his suggestion. Objection to Term “Nefarious.” Mr. W. Machin (Canterbury), said that some of the New Zealand delegates were rather stunned when they heard the term nefarious applied to their scheme of operations over the last year or two. Some of them would not be at all inclined to defend the actions of New Zealand if it was suggested that it had made a mistake in depreciating its currency, but they were strongly inclined to defend the honour of their country when such a term as nefarious was applied to its operations. “What is the mover of this remit congratulating himself and the conference on?” asked Mr. Machin. “He is expressing satisfaction that America, Britain and France have apparently determined they will indulge in depreciation of their currencies, altogether—and it Is nice to do these things in company, we feel safer sometimes. (Laughter.) We in New Zealand are unrepentant, as we always are when we follow the example of the Mother Country. When the Macmillan Report was issued in .1931 it was ridiculed that Britain could depart from the gold standard, but three months later Britain went off the gold standard and depreciated her currency to the great relief of those of us engaged in trading in Britain. Followed Britain’s Example. “We in this country, getting on an average for three trying years £7/10/a bale for our wool, as against an average of £2l for the three years preceding the depression, refusing to carry deflation to a further point, followed Britain’s example and brought our currency a little more in line with our prices,” said Mr. Machin. "We paid our debts in Britain in sterling. We have arrived at this position: we are expressing satisfaction, and calling each other names about it, because the long fight between gold and goods . is ending in an armistice. The coming into line of the currencies of these three great countries, we are certain, is going to make trade more fluent. New Zealand. I repeat, is unrepentant. She followed in the footsteps of Britain. We believe she was pre-eminently wise in what she did. and we believe rhe conclusion of the whole matter has amply justified her action. The world entered upon a new era when Britain decided she would no longer pit goods against gold.” Supporting Professor Hytten's amendment. Mr. A. Spencer Watts (Sydney), said that in Australia’s case wlpit was called currency depreciation was not currency depreciation at all. “It was not so much currency depreciation as the removal of disadvantages beenuse of the over-valuation of our currency.” he said. “Our position prior t 0.1930 was precisely Hie same as that of Great Britain at the pegging <if Ihe exchange during the war. The fact is I hat the. British Government pegged the dollar exchange for a long period.” The currency in Australia, he said, had never been the equivalent of sterling in purchasing power. Mr. .J. T. Martin ( Wellington i said he was heartily in accord with the amendment moved by Professor Hytten. Representatives of Great Britain had for years taken up the attitude that New Zealand’s depreciated currency seriously affected Hie importation of British goods into (his country. But. if they concerned themselves with the other side of the picture they would probably alter their opinion. New Zealand raised the exchange rate to enable its workers and industrials to if the A 5 |)rr cent, was taken oil. they could not carry on successfully even with Ihe prices they were re Tilling ibr'their primary products •" England to-day. and they would be obliged iq reduce, (heir imports to a very serious extent. The standard of living in New Zealand would fall. "We couldn't carry o>i." added Mr. Martin. i "1 am sorry the statement I made has offended Hie susceptibilities of anybody. but I am absolutely unrepentant,” Mr. Aiton said in reply. "I repeat 1 am unrepentant because, of all that I have heard stated, the same result could have been attained in another way. The word nefarious referred to the way it was done." Mr. Aiton said he could not accept the amendment. It would torpedo the whole thing. When the shoe pinched they would all say that their conditions would not allow it to be done. The whole question had been to get away from an elastic standard. He would say lobi.s friends from Australia that he iitiil letirul a 101. Iml what lie li.-id learnl wa- opp.' Io Hie great authorities lie had quoted.

The amendment was lost, and the motion carried by a large majority.