The Evening Star. TUESDAY, JANUARY 30. 1934. POUND AND DOLLAR.

Evening Star, Issue 21632, 30 January 1934, Page 8

The Evening Star. TUESDAY, JANUARY 30. 1934. POUND AND DOLLAR.

President Roosevelt is certainly a trier. He is also open-minded. In scientific circles he would bo .called an empiricist. His process is one of trial and error, and if he finds •something does not give the desired result he experiments on other lines. As he himself said: “ If we cannot do it one way we will do it another; but do it we will.” Nor is he, like some Americans, too prejudiced to learn from England. He sees Britain laboriously toiling along tho road to recovery, but making progress so steadily and continuously that he is persuaded there must be something in her methods. Whereas previously lie almost committed himself to a “ commodity dollar,” the theoretical gold ingredient of which would vary with a commodity price-index figure (an impracticable sounding project), he is now prepared to confer with England on currency stabilisation. England strongly urged him to do this long ago, and he seemed so earnest and sympathetic that the World Economic Conference was summoned and met in London. But currency discussions were practically shelved, because Mr Roosevelt said that America was not ready; she had urgent internal readjustments to make first- These have been attempted in a variety of ways. We do not know whether Mr Roosevelt regards his programme as a success and that stabilisation of dollar and pound is to be the coping stone; or whether he is dissatisfied and now believes that stabilisation must be the foundation stone. One thing is pretty certain, and that is that ho will find Britain more than ready to negotiate, and there should be little difficulty to reach a workable arrangement sp long as Mr Roosevelt is reasonable about the basis —i.e.. the gold content of the dollar relative to the gold content of the pound. It is assumed, of course, that both will

contain less of the precious metal than they used to do. It has recently been stated that many as the advantages that would accrue from a uniform Empire currcney, particularly in the promotion of Empire trade, it woud be impracticable under existing conditions. Still less is a uniform world currency practicable. Monetary policy is essentially a matter belonging to the national domain. Each country is, in principle, the sol • judge of the qualities its currency shquld possess, of the values that national circumstances and necessities assign to it, and of the system best able to ensure its stability. This may not be ideal, but it is a necessary compromise. And if in the world’s currencies there is one in particular to which, because of its solidity, good management, and trustworthiness, other countries can attach or link their currencies it becomes a good working currency. There is such a unit, and it is England’s pound, and London, the capital of England, is the world’s clearing-house. No greater compliment has been paid to our Homeland than that when some years ago (in 1931) she ‘ ‘ went off gold ’ ’ a number of Continental countries linked their currencies to hers and formed what is known as the “ sterling bloc.” France did not, for after a memorable experience with inflation she stabilised the franc at a fifth of its old value, and her reluctance to leave gold again is shown by her present struggle to cling to it. And it is quite certain that France would genuinely welcome stabilisation of pound and dollar on a gold basis, though with not so radical a devaluation as in her .own case. For months past, like a nightmare to French financiers and business men, has been the dread that, through Mr , Roosevelt’s capriciousness in experiment and Britain’s retaliation, there would on either side of the Atlantic be a managed paper currency, degenerating rapidly ' into an AngloAmerican currency war, a race in de-. preciation between pound and dollar. That would be disastrous all round. Inflation (pace the New Zealand Government) is a panic measure; and (unless rigidly controlled, as in England’s case) it fails in its aim because of the panic conditions which induce it and which in turn it induces further. In England’s case it would destroy the remarkable results that have followed her monetary policy since September, 1931.

The forces and interests seeking to impel Mr Roosevelt to dollar inflation have worked hard, but apparently unsuccessfully. The President has had the habit of changing the personnel of what has been termed the “ BrainStorm Trust ” with lightning rapidity. When Mr Sprague, formerly associated with the Bank of England in an advisory capacity, left tho United States Presidential councils a Boston paper depicted a sack labelled “ Sprague ” falling in mid-air front a balloon labelled “ Administration monetary policies,” the caption being “ Dropping the ballast.” The expectation evidently was that the inflationists would thereafter be dominant. But this has not happened. Mr Roosevelt’s present advisers are opposed to a currency war. The fojjms of retaliation which other countries might adopt are set forth plainly. The initial “ peaceful ” step which tho President has already taken is the legislative provision for the establishment of a United States Exchange Equalisation account, in imitation of Britain’s existing precautionary part-stabilisa-tion fund. This latter disposes of a credit from the Treasury of £350,000,000. Its function is to combat speculation and counteract international movements of capital by a kind of official counter-speculation. It is not without drawbacks when prolonged. In an acute crisis its operations might create fresh germs of instability and compromise the future. President Roosevelt proposes to try out his walking powers first with the assistance of this crutch, and if the trial is satisfactory he will then discard it and get back to gold, in company with England. This is, something devoutly to bo desired; and if it goes hand in hand with a lowering of America’s tariff walls the prospects of a rejuvenation of world trade will surely be greatly enhanced.