TRADE AND FINANCE FOREIGN EXCHANGE LONDON SALES. MOSGIEL'S TRADING

Evening Post, Volume CXX, Issue 117, 13 November 1935, Page 14

TRADE AND FINANCE

FOREIGN EXCHANGE

LONDON SALES.

MOSGIEL'S TRADING

PRODUCE &. MARKET REPORTS FROM DAY TO DAY

j TOWARD STABILITY

PROBLEM DISCUSSED

\ "Evening Post," November 13. Me, J. M. Keynes, writing in Lloyd's Bank Review, discusses the problem of the .foreign exchanges—a topic, as he points, out, that has been thoroughly discussed'over the last ten years. The main issues' involved, he states, are therefore more familiar than they were. He admits that is far from unanimous today, although there is a greater measure'- of general agreement than existed in 1925; and there is a body of tentative' conclusions which can be fairly described as the British point of view. ■ , • ■ ' The first condition which must be satisfied should be reasonable equilibrium. "We have to consider (Mr. Keynes continues) on the one hand, a country's balance of payments on income account on the basis of the existing natural .resources, equipment, technique, and costs (especially wage costs) at horfie and abroad, a normal level of employment, and those tariffs, etc., which are a permanent feature of national policies; and, on the other hand, the probable readiness and ability of the cotsntry in question to borrow or lend abroad on long term (or, perhaps, xepay or accept repayment of old loans), on the average of the next few years. A ,set of rates of exchange, which can be established without undue strain on either side and without large movements of gold." ACCEPTABLE RATES. It would be sufficient if a set of rates could be fdund which the various Central Banks could accept without serious anxiety f<pr the time being, provided that thefce was no substantial change in the1 underlying conditions. "Not only must svrch a set of .rates be discoverable by impartial persons, but they must be acceptable to the Central Banks. If each Ceptral Bank insists on being on the saf*? side, no accommodation is possible; ,for what is the safe side for one baitik is the unsafe side for all the others.i "It is improbable that the initial set of rates could be settled, right off, at a conference. ... vJt will have to be reached, in the first\ instance, by a process of trial and eipror, conducted in good faith but withortit prior undertakings. "The test of success wSU be found in the voluntary removal <pi' all those exchange restrictions, import quotas, exceptional tariffs, etc., which are not desired for their own sake as a permanent feature of national policy, but are acts of desperation a;od an expression of the extreme anxiety of the authorities, either to make both ends meet, or to alleviate the unemployment ii^Ucted by deflation." GOLD BLOC IN THE <JVAY. •/he policy of the gold bloc in conjunction with the policy of the United States, however, delays the' beginning of this experimental period.' . Existing rates of exchange over-value tfhe gold bloc currencies in relation to \the dollar, with the result that "therte. is no conceivable policy on the part of the sterling bloc which will establish equilibrium with both. The experimental period cannot even begirt until the gold bloc have either changed the gold value of their currencies or have successfully remedied the disequilibrium by other methods." Mr. Keynes describes the gold ibloc countries as "scourging themselves" until their situation has become so obviously intolerable that, when Ihe common-sense remedy of altering the gold value of their currencies is finally adopted, no one can be blamed. Assuming that the remedy has been adopted and exchange rates are down to levels that can be maintained for the time being without excessive strain on anyone, then two problems will still; require solution: (1) How best to avoid shflri-term fluctuations; (2) how to handle a' persistent disequilibrium if and when it occurs. "Short-term fluctuations" are defined as such as are due to seasonal fluctuations, foreign lending not synchronous, precisely with the balance of trade, or temporary movements of short-term" funds under the influence of divergent discount rates. GOLD HOLDING BY CENTRAL BANKS. Central banks should possess a sufficiency of free gold in relation to their economic importance and which they can release without anxiety. Aggregate stocks of gold today are much more than is required for this purpose, but their distribution is more unequal than ever before. Assuming every central bank is supplied with a suitable initial fund Mr. Keynes suggests the following technical devices to complete the armoury of control for dealing with fluctuations:— A moderately wide gap between gold points. Dealings by central banks in forward as well as spot exchanges. Holding stocks of gold to be the monopoly of the central banks. Strict, "though not pedantic," control of the rate of new foreign lending. The above technique could furnish a de facto stability of exchanges with a sufficiently narrow margin (Mr. Keynes believes) which could be maintained in all ordinary circumstances and perhaps for many years together. But the crux of the problem is:— "Would it be wise and prudent to enter into a permanent undertaking never to allow the gold value of our money to move outside the narrow range which we have so far contemplated?" Mr. Keynes contemplates times when a disequilibrium of exchanges might be too violent or; too deep-seated to be handled by the techniaue as outlined above, and this might occur for va,r.ious internal or external reasons which he suggests. He holds, however, that "we can, and should, commit ourselves—(i) to maintain short-term stability within a certain range; (ii) not to resort to devaluation merely to obtain competitive advantages in foreign trade in conditions where we are under no special strain; and (iii) to submit to some test as to the severity of the strain we were suffering before departing outside the agreed short-term range. . . . But we must retain an ultimate discretion to do whatever is required to relieve either a sudden and severe or a gradual and continuing strain, without laying ourselves open to any kind of reproach." Referring to the British Exchange Equalisation Fund. Mr. Keynes remarks that by common consent it has been extremely successful, but Jie regards the secrecy maintained as to the nature and magnitude of the transactions of that fund as "a grave mistake," resulting in misunderstandings in foreign countries leading to "a worldwide suspicion of our methods and motives, which is, I believe, quite unfounded and would be quickly dispelled by publicity. ... No sound international exchange policy can be built up on secrecy and the concealment of matters which are of common coricern."

WOOL MARKET

GOOD CLEARANCE IN SYDNEY

BRADFORD PRICES HARDENING

(By Telegraph.—Press Assn.—Copyright.) SYDNEY, November 12. At the wool saies 12,194 bales were offered, 11,606 being sold at auction and 1786 privately. Competition was again animated and excellent clearances were effected. The market was very firm. Greasy merino made a fresh record to 26Jd. '

WOOL AVAILABLE (By Telegraph.—Press 'Assn.—Copyright.) (Received November 13, 11 a.m.) LONDON, November 12. The quantity of wool available for the sales to be held on November 19 is 140,500 bales, including new arrivals and 48.600 bales of Australian and 2500 bales of New Zealand. It is expected that 124,600 bales will be catalogued. : Wright, Stephenson, and Co., Ltd., and Abraham and Williams, Ltd., have received cabled advice from London in regard to London wool sales, reading as follows:—Catalogued, 124,600 bales of wool for next sales commencing on November 19 and continuing until December 5; Wright, Stephenson, and Co., Ltd., and Abraham" and Williams, Ltd., report having received cable advice from their Bradfordagent regarding the tops market reading; as ' follows:—Merino tops are up while fine crossbred tops are very firm. Other crossbred tops are. hardening. There is a fair amount of business passing. Dalgety. and Company, Limited, report:—At the November series opening on November 19 we expert good demand, probably merinos 5 per cent, higher, medium and fine crossbreds 7i per cent, to 10 per ; cent, higher, coarse crossbreds 10 per cent, to 15 per cent, higher. List of arrivals closed November 11. The following vessels in which we are interested have arrived in time for the sales:—Port Hobart, Rangitane, Surrey, Wairanga, and New Zealand Star. Our selling dates are November 19, 21, December 2, 4, and 5. Sales close December 5. The New Zealand Loan and Mercantile Agency Company, Limited, have received the following advice from their London house dated November 12:—Wool sales: List closed. Rangitane, Surrey, and New Zealand Star available.

IMPORTS AFFECT SALES (Special to the "Evening Post.") DUNEDIN, This Day. "As was the case in the 1933 and 1934 periods the past year has been a most difficult one in trading conditions and has caused the directorj and management a good deal of thought," declared Mr. J. S. Hislop, chairman of directors of the Mosgiel Woollen Company, at the annual meeting. He said that imports from abroad of large quantities of medium and low-class goods, some of the latter wrongly described as "all wool" or "woollen," had had a serious effect on the sale of their higher class goods, and unless drastic steps were taken to have those importations correctly described the trouble would continue. While it had never been considered by the directors advisable to speculate in wool it was thought, in view of the low range of values ruling last season and the very much .reduced rate of interest on deposits, it would be a sound investment to purchase more than their annual requirements. That decision he.d been fully justified. ' i The prospects for those engaged in primary industries was much brighter than at this time last year and with the higher values ruling the purchasing power of the public should be considerably improved. With the larger stocks at the company's disposal and the already decided increase in orders the directors were hopeful that the coming year would shov: an improvement in trading.