CURRENCY AND PRICES

Evening Star, Issue 18698, 29 July 1924, Page 7

CURRENCY AND PRICES

DEFLATION DANGEROUS. LONDON, July 13. Discussing the possibility of a return to gold currency, the ‘Financial Times’ says that apart from an extension of the system of licensing gold exports, which would load to abuse and unfair advantages in bullion transactions, tho only road open for a restoration to gold or dollar-sterling parity is that involving a reduction of the general level cf prices in Great Britain, relative to that in tho United States.

This approximation in values might occur through a rise in American prices, unaccompanied by a riso in Britislfj or, secondly, a fall in British prices without any reductions in American. Tho first is by no means improbable in the near future, and tho second is receiving marked attention; but, if adopted, it must bo implemented by deflation in Great Britain.

“Past experience has shown,” tho ‘Financial Times’ states, “that deflation travels with a horde of pestilential offspring—trade depression, unemployment, social ' disorganisation, and industrial disputes. It is impossible to say what degree of deflation would bo required to bring about dollar-sterling parity, but it would bn necessary to effect a 30 per cent reduction in British prices, and it it doubtful whether an advance in the bank rate of discount to 5 per cent, would accomplish this. “ Britain’s choico lies between a rapid enforced return to tho gold standard, with its unavoidable concomitants, and a more gradual return as conditions permit, with tho probability of a steady trade revival unhampered by restrictions imposed for purely monetary reasons.

“It would appear that the more expedient course for Great Britain is not to take panicky measures to press for a rapid return to the gold standard, but, while sedulously avoiding anything savouring of monetary inflation, to await more general progress unattended by the evils deflation^