CURRENT MONETARY POLICY

Dominion, Volume 30, Issue 260, 30 July 1937, Page 14

CURRENT MONETARY POLICY

Professor Gregory’s View

A memorandum prepared by Professor T E Gregory for the Berlin Congress of the International Chamber of Commerce examines the provisional character or monetary thought since 1929. For a time, he points out, there was an exaggerated belief in the virtues of exchange depreciation, and a consequent intensification of protectionism ,and autarchy. Practice, howevere, outran confused theory, and a . move to stabilise the chief exchanges began. The dollar price of gold was fixed in 1934, and in September, 1936, the Tripartite Agreement embodied the intention of Great Britain, the United States, and France to maintain the greatest possible equilibrium of the international exchanges. Professor Gregory suggests, however, that a number of theoretical and practical difficulties still remain in this provisional period of flexible parities. Some people wish to preserve purely provisional currency parities indefinitely because they believe that the equilibrium of the balance of payments is always liable to be upset by “economic weaknesses”; cash reserves are low, borrowed reserves are at dangerously short-term, and export surpluses are hard to establish and maintain. Moreover, some countries have fixed a rigid price and production structure by autarchic planning, and their currency policies must be subordinated to their political preoccupations. Consequently, all we can say is that “until the limits to which selfsufficiency and planning will be carried can be determined, the task of deciding what form of currency organisation can be finally adopted cannot be undertaken.” We must wait and see: and meanwhile w’e are encouraged by the fact that the cessation of competitive exchange depreciation has modified the urge toward protectionism and autarchy. Having lucidly stated the implications and difficulties of the present situation, Professor Gregory goes on to discuss the special problems of gold, exchange equalisation and exchange control. The world has not in any sense “abandoned” gold, and the special task of adjusting price levels to the increase in the value and volume of gold supplies since devaluation still remains. He argues that the ruling flexible parities impose a special obligation on Governments to conduct their gold policy to cause the minimum of disturbance. The United States, in his view, should preferably pursue a policy of sterilisation, tariff reduction and increased foreign lending. Professor Gregory deprecates the division of function between exchange equalisation accounts and central banks: and suggests that the problem of exchange controls which threaten to destroy the elasticity of international trade can only be solved by currency devaluation—since they owe their origin to an unsuitable relationship between local, and world price levels. The outlook is uncertain, and this survey is is excellent, says the “Economist,” but Professor Gregory secs rays of hope. There is a common interest in the expansion of world trade; and cooperation between central banks is more active now than it has ever been before. [Professor Gregory accompanied Sir Otto Niemeyer on his visit to New Zealand some years ago.] Rexmann Mines, Ltd. The mine manager of Rexmann Mines, Limited, reports that during the week ended July 23 the Diesel eugine was placed in position and the Taymer mill foundation was constructed in concrete. Tl.v stamper battery platforms were built and the outer foundation walls of the lower half of the building were laid in concrete. The company’s prospector is still getting rich quartz at the head of Lanigan’s Gully; the face of the prospecting drive contains exceptionally rich stone. 1