MANAGED MONEY

Evening Post, Volume CXV, Issue 26, 1 February 1933, Page 14

MANAGED MONEY

-FREEDOM AND^ONTROL

DESTINY OF STERLING

DEPENDABLE JEEDITBI

The-Bank; of NewfSouth Wales in its latest circular deals"with the search for sound money, .'

The scramblS" for gold, incidental to an unregulated return/to the-gold stanr dard but,"exaggerated since 1928 by Trance's-.new Currency Law, it is stated, has shattered into fragments the' monetary * system "built up in. the first post-war iec6v.ery,; The rising value, of gold ha? i.obbed.' many countries of the old'link between their .currencies* and driven "them, willy-nilly, to manage their now inSependentinoneyß with the direct aim of steadiness in local goods .'Value. Tie brightest, hope. 1 of a revival of -trade :-is that. London, as the world's central market and bank, should join these managed moneys together by making-of. sterling the. money'the world needs—a, medium of international ■ standing that .is .dependable as a stable standard, in lcontracts between debtors and-creditors and thereby the means to confident trading; Reference is'-made to discussions on currency jsuojects at the Ottawa and Geneva Conferences and to the position, of France; as a.- creditor nation and then it is r ; remarked- that ■'" The demand for gold ha>' reached a-point at which the very 'men _ who should ■ see most clearly;'the folly of playing the miser are mistaking the- means of international exchange for'the end. In plain words, ' this infection of panic has robbed the countries still clinging to gold of the reasonably stable measure of value that is essential to free enters prise. "...'.; HOAEDING AND \ "Judging by- their price-levels the. hoarding still-goes on-in the gold-faith-ful countries. With -it.goes paralysis. If; individualism .is to survive it must preserve the flexible production in response to the free choice of. consumers that a collectivist ■ reconstruction would dimK nish if not utterly deny. To regain this freedom-the countries now off gold;must:provide their internal and their international.trade with an alternative- money that is stable enough in goods value, to maintain both ednsumptipn and-production. " This freedom is" an end in itself. Tor the moment ■ popular; thought may turn impatiently • to- - dictatorships and legal compulsions backed by mob imBulse or.-by a .minority-in. arms.. Yet freedom'is • still the eternal aim and charter Of the human spirit. . . .. The charm of individualism is that, with all it's defects, it strives to keep open to the greatest number the opportunity to translate thought' into venture. When .deprived :of • it, the w.orld . has come to realise that^a stable price-level is.the basis;of-free activity A falling price-level, wiping out the livelihood'of all'but'the'luckiest venturers. and lessening it -even- to these, damps down every activity and saps the mutual confidence of trade. ... PRICE-STABILITY. "Stability in the general level does not, imply fixation of prices nor preclude price-changes, for particular goods. On thfe contrary, free venturing must take its cue from.the.ups, and downs of particular markets. A higher price in one market signals, to a group of producers that more of their wares are wanted;*k lower, one.tells others to ease off. From- .these signals the new men and the quicker:witted learn where to --.'get .in*.-and where to,go gentlyi The idea .of a stable, general level is that the: ups and downs, taking the whole gamut of goods _and: services into account, should roughly cancel out. The problem is .to achieve ' this ■ happy result." : Believers in freedom scout the possibility of. reaching stability by fixing first one and' then another price by some, legal compulsion over the supply or the'demand ;for it. The freest possible play1; of; prices in response to «very change' in supply or demand .isasked for; /"To this end there is need of! a provision of credit that will keep consumers' outlay in a running balance with producers' out-turn. . Hitherto, relying on the assumed steadihessof gold in purchasing power, central banks have aimed-at a steady price for" gold .in -terms' of credit-cur-rency, :a/ balance- between, the supply of;and the demand for■ gold. . regulated' credit. ' . '.. . "The" Bank of England, the model and pioneer for .all -central reserve or bankers';banks,-has:-for. .nearly a century • habitually V regulated • the • credit available : in- London—the potential demand . for the monetary gold most freely found there—by. raising or lowering the price or discount-rate at which itwould supply cr.edit through discounting bills.--Sometimes, ..it has also bought securities -and .so. created more credit:":at other times.it has sold securities and 60 contracted credit, .By this regulation of the money market it has .kept the British pound convertible into 'gold and thus held the British price-level at par with those of others on. the gold standard. ':-■ .■ "SineeT1928 the increase in the value of gold in; terms-of goods has brought something like paralysis into the trade and finaaee_ of those continuing to interpret tEeir debts as due in gold. The internatioifal "run' on- -London for gold in September/1931, deprived the Bank of England'of power 1:o meet her debts in the conventional ■ way; ■ London was forced to; give /up the regulation of credit .with; ' the ■ aim r' 6f preserving 'special'payment.- 1.- - '-'--• • BBITAIN'SiFBEEpOM. "But ihe expedient of\keeping at par with other gold currencies-had by this become'plainly.. at. war with the more fundamental aim .of., credit regulation, a.'- reasonable stability in pur-chasing-power.: :Thus Britiin's lapse ■from gold in September,. 1931, restored her. freedom to .manage her credit-cur-rency^ so. as to regain, and keep a pricelevel consistent with the' health of her own body 'economic.'' This "kirn; in a world "where the BritJsh market iß:more.than ever the citadel of international trade, it is held, has become far more vital than the retention of air indicator that is now a snare and a delusion/ : "Can London: .use her .technique of ' central-bank control of credit to keep a steady ..price; not for the one commodity _of "gold, 'but for a parcel of goods" mixed rin: proportion to their importance-in the: life of the British community? If she can she will offer the world.a provisional solution of its problem, a' stable monetary standard. And it may be that a policy ostensibly of salvage may, as often before, prove a rational reform bringing greater scope for progress than the system displaced." -■- '" ■■■ -