FLUCTUATING EXCHANGE AND PRICES

Evening Post, Volume XCIX, Issue 125, 27 May 1920, Page 6

FLUCTUATING EXCHANGE AND PRICES

The eternal conflict between the haves and the have-nots is based on the assumption that property is an asset. There are^ however, occasions when property becomes a liability, and a losing liability, even a ruinous one; of which fact the ordinary operations of the sharemarket afford abundant proof. Apart from " gambling lines," the owner or holder of commodities has his innings on a rising market, and his loss on a falling market, which in normal conditions may be set off one against the other; but when rise and fall of prices become sudden and precipitous, any commodity so affected is liable to take on gambling characteristics, and legitimate traders may find themselves in queer positions. Especially is this the case when to the fluctuation of prices is added the fluctuation of exchange rates. While the consumer holds the heavy end in a, rising market, he is not called on to share the perplexities and losses of the trader on a falling market, when it frequently happens that the have-nots are luckier than the haves. And it is only fair tha.t trading gains made " on the rise " should not be regarded without some allowance for losses made " on the fall," when the exploiter is .liable to become the exploited, and when earlier profits may be rapidly cancelled.

Although, so far, the turn of the tide of prices may be deemed to be only tentative, a few facts concerning it will show that the foregoing is no figure of speech. Ordinarily, if a man's land, or business, or other asset depreciates by 25 or 30 per cent., his equity—his interest in the asset— may disappear; probably he would be prepared to meet such a reverse in a share gamble, but in legitimate investment it would mean ruin to many. Now, the Eastern exchanges, which during the last few weeks 'have been moving downward, already show a fall of approximately 25 per cent., which means a depreciation of imports from the East by that percentage; or-;?a- fall in value of one-quarter, through .exchange, apart altogether from any movement of the price itself. In 1914 the conversion rate of the rupee was Is 4d. A few months ago it reached 2s IOAd. The latest quotation is 23 2id. Consider what this fall —an exchange fall, not a price fall—may mean to an importer of tea if his-sole or main business is tea. If he is not lucky enough to hold light stocks—that is, if he is not lucky enough to be a have-not —he has to get rid of his high-priced tea before- the 25 per cent, less expensive tea reaches tho market, which it may do within a few weeks. Thus the exchange factor has introduced into business a new speculative element from whici no legitimate trader is protected. Almost it compels traders to enter into gambling situations, and to exploit or be exploited.

If the exchanges continue to rapidly fluctuate, no doubt some traders will be broken by them. If other traders try 'to " hold up " the market till aft unlucky brother quits his high-priced stocks they will be accused of profiteering on. their more cheaply-acquired goods. On the other hand, if everybody who is "caught" by the falling market is allowed to go down, financial complications and loss of confidence may result. Throughout the rising market and the "profiteering," etc., traders making extra profits have had their eye on the turn of the tide. Tumbling exchange rates and prices have been the skeleton in their cupboard. And now the cupboard door has opened just a little.