FOREIGN EXCHANGES

Evening Post, Volume CVIII, Issue 64, 12 September 1924, Page 11

FOREIGN EXCHANGES

SOME ASPECTS CONSIDERED

At a meeting of the Accountant Students' Society last evening, Mr. D. O. Williams delivered an interesting address on the much-discussed question of "Foreign Exchangee." The fundamental cause, ■he said, of the varying rates of exchange was j international trade, or ■ the volume of international indebtedness. The explanation rested upon the relative purchasing power that money had '■ in' different countries. In pre-war days gold was so internationally distributed that it had everywhere the same purchasing _ power over commodities entering into. international : trade. . An illustration was given of what was meant by "purchasing power." The lecturer supposed that a country through excessive exports (for some reason qr other) greatly increased its supply of gold. The result would he a rise in the general level of prices (or a fall in the purchasing power of. money). That rise iv prices would make the country a bad one to buy from but a. good one to sell to; hence exports would decline and imports increase. That increase in imports would be attended by an outflow of gold and. a consequent lowering of the general price bill (or raising of purchasing power). In brief, should the purchasing power of a country' change, that would set in national forces tending to alter the balance of trade, which would readjust,-the relative purchasing power of the countries concerned. Dealing with ' a scheme for a fixed exchange^between different parts of the Empire, Mr. Williams stated it was no doubt desirable that there should be closer co-operation between the banking systems of the different parts of the Empire, but fixed exchange between the various parts only required a gold exchange: standard like the Indian one. Ihe present breakdown in exchanges was simply due to local inflation. ' lo keep international paper money' at par was not a practical expedient. It would involve abandonment of virtually all existing units, and consequently monetary ' reconstruction of nearly every State in the world. .'it would involve also great confusion in of coinage, prices,, wages, So long gs. the.problem of inflation was unsolved, the .lecturer concluded exchanges would not bo righted alH %• -ould improve V some Zl., , There.was no guarantee that ei*'mous as to be impossible"