COMPETITIVE DEPRECIATION

Evening Post, Volume CXV, Issue 62, 15 March 1933, Page 8

COMPETITIVE DEPRECIATION

Denmark's depreciation of her currency, as the London comments printed, yesterday show, is directly connected with the New Zealand high exchange movement. A writer in the "Statist" points out that

this relationship affords one more proof of the extremely dangorous'character which the devaluation of currencies can assume. . . . This development will, of course, enable Danish produce to vault the iew tariff barrier in Great Britain, without any apparent difficulty.'

Whatever New Zealand may have hoped to gain by depreciation has already been partly discounted by this intensification of competition. The country as a whole has lost. The farmer has not gained the whole of the 25 per cent., because the new price-fall'has taken part of the gilt. Sterling prices are actually lower. What the farmer has gained has been at the expense of the rest of the community, and while sterling receipts are lower sterling charges (for interest and imports) must carry the full 25 per cent, addition. -We do not suggest that our own currency depreciation is responsible wholly for the recent price-fall, but it cannot be lightly brushed aside by ascribing everything to world causes. Our depreciation is a factor of no light weight in <the markets which we supply. It is not to be assumed that buyers will continue to pay former prices when they know that exporters are subsidised through exchange. The , buyers use their common sense, which tells them that the exporter who can count on 25 per cent, addition to his receipts will accept a lower sterling price. If demand greatly exceeded supply the exporter might hope to retain the whole of the exchange premium; but this is not the position today. Buyers are on the box seat, and they can force down prices without actual combination for this purpose. Currency depreciation cannot, always be stopped at the point and in the country where it starts. Denmark has followed New Zealand. South Africa has not been able to maintain her gold policy, and the example of her competitors in overseas markets has caused Canada to weaken. This spreading movement seriously weakens markets. In the end the gain made by the produce exporter may vanish completely. But the' country will still have to pay the price—with 25 per cent, on interest and imports'