EXCHANGE PROBLEMS

Evening Star, Issue 18729, 3 September 1924, Page 5

EXCHANGE PROBLEMS

CENTRAL BANK OP ISSUE. [Pkh United Peess Association.] WELLINGTON, September 2. Replying to Mr Lysnar, who asked the Prime Minister whether he would communicate with the Imperial Government with a view to inducing it to introduce legislation on the subject of exchange, Mr Massey said the exchange position had been receiving serious attention, and at the present lime communications were passing between the Government and the dominion representative in London with the object of effecting an improvement. A return to the gold standard would no doubt result in the disappearance of most of the difficulties, but that was not practicable immediately. The question of issuing currency bills w T as carefully considered by the Imperial Economic Conference in 1923, when it was derided that it was neither necessary nor desirable to adopt complicated plans for a. new instrument of credit such as Empire currency hills, which involve difficult and disputable constitutional and financial questions. It was. however, concluded that the position will bo ameliorated by_ the establishment of a central bank of issue in this or any other country, with ample power to effect and control exchange operations as between its own country and the country or countries with which it principally traded. This bank could undertake to issue its notes against sterling, or recognised securities such as British Treasury bills, and convert bade to sterling at fixed rates —a method known as the exchange standard. Besides buying and selling sterling for notes, the bank would have the power of rediscounting for other banks, whereby the latter could replenish their cash. The central bank would also require to control expansion and contraction of credit, as compelled by the trend of exchangee. The whole subject was full of difficulties, but it was not being lost sight of, either in this country or in any of the countries of the Empire; and any system tending to an improvement would be availed of. Replying to Dir Wilford, Mr Massey said ho could not tell him what rate of profit banks were making out of exchange. Mr Wilford said he understood it was a very high rate.