NO TIME TO EXPERIMENT

Evening Post, Volume CXVI, Issue 107, 2 November 1933, Page 10

NO TIME TO EXPERIMENT

An amendment moved by Mr. Mason to the Reserve Bank Bill proposed1 that'the primary object of the bank should be to. establish a system of monetary control based on commodities and services, and that the bank should maintain currency stability on this basis. Even some of the supporters of the amendment were not certain of it, and spoke of "making the experiment." This is, however, no time for experiments which have not been preceded by the most thorough investigation. Currency, particularly, should be tampered with as little as possible, for it needs only the suggestion of an impending drastic change to produce consequences wholly unlooked for by the experimenters. A stable internal price-level is' greatly to be desired. A stable world pricelevel is even more desirable. Internal stability would cure some part of our present malady, but not all of ' it, since we are so greatly dependent upon other countries for supplies of goods and services, and the sale of our own surplus products. We might give bur pound a constant purchasing power in terms of commodities and services wholly supplied within the country, and yet find ourselves in great difficulties because the value in terms of overseas purchases (both new purchases and old, represented by debts) refused to stay where we wished it. America is making a big experiment in this way now, but America's dependence on external markets is small compared with our own. And unless such experiments are conducted with a clear understanding and some co-ordination between nations they must lead to external exchange uncertainty' and chaos. Without reasonable stability in external exchange there is no solid basis for trade. That has been proved beyond question in the past three years. A solid basis for trade, leading to the removal of exchange and tariff'barriers, would be better for New Zealand than the half-measure of internal stability to be' secured by manipulation of our own currency. In any case the clause which Mr. Mason proposed to amend gives the Reserve Bank power to control currency and credit "to the end that the economic welfare of the Dominion may be promoted and maintained." If the bank is persuaded that a commodity basis is consistent with this aim it can take sleps to attain it; but it would be the gravest mistake,to direct the bank to enter upon airexperiment or series of experiments; ■ '