MONETARY POLICY

Evening Post, Volume CXXXIV, Issue 75, 25 September 1942, Page 5

MONETARY POLICY

POST-WAR CONTROL

QUESTION

LONDON, September 23. The role of gold after the war was discussed by Mr. Per Jacobsson, well known Swedish economist, at a recent conference of Swiss bankers. He stated that during a visit to America he had found widespread doubt about the usefulness of the monetary policy which had so far been pursued, and that the question was openly asked whether it would be wise to reintroduce a currency system which had proved to be unsuitable, and whether it was worth while to unearth gold when Germany had shown that it was quite possible to solve her unemployment problem and re-arm without it.

Germany had expanded her credit .without producing the inflationary effects which had been regarded as inevitable, while devaluation of the Reichsmark had been avoided by expanding purchasing power and adjusting costs and prices. The German "economic miracle" did not consist of an expansion of credit, but was an achievement of saving and the maintenance of equilibrium and also new and unorthodox exchange restrictions and trade control.

Mr. Jacobsson emphasised that it was a mistake to believe that credit expansion alone would be sufficient to achieve the desired results. During the war most countries had adopted price control and other measures used in Germany. Would the system practised during the war be continued in peace, seeing that it would involve Government control over the entire economic system? Mr. Jacobsson said he thought it was premature to answer this, or to estimate the part which gold would play after the war. While there was now no full gold standard in any country, gold retained its role as a standard value.

He declared that after" the war more importance would be attached to costs, prices, and adjustments than to monetary measures proper. The money authorities would be unable to carry out adjustment of costs themselves, and would require the support of other factors in economic life, including the workmen's unions. No currency or economic system could function without a high degree of discipline. Only a wisely constructed and managed economic system could assure orderly currency conditions. The "Financial News" expresses the opinion that Mr. Jacobsson's warning that an expansionary credit policy does not in itself make for prosperity should be noted. It adds that he has not taken into account the obvious deterioration in the German system m the current year. His reminder that gold, even amid war, has retained a part of its function, is timely.