Percentage Devaluation: What Is It?

Greymouth Evening Star, 22 September 1949, Page 3

Percentage Devaluation: What Is It?

Sir—lt is regretted that the term “percentage devaluation” is used too loosely and without thought of definition. I am going to attempt to show that sterling has been devalued 44 per cent.-s-jiot 30' per cent, as is commonly stated. ■' - .i ■ At one time in the history of this country our currency was depreciated prom parity to £125 CN.Z.) equals £lOO (Sterling). We said that the devaluation was 25 per cent., for example £2O in every £lOO. We did not say it was £25 in £l2s—or 20 .per cent. We regarded the percentage devaluation as tne amount of the varying currency changes with regard to a fixed Quantity of the stable currency. Applying this principle, and taking a fixed quantity of the stable currency (the dollar), we see that the amount that sterling has changed is from 5s to 7s 2d per dollar. This increase is 2s 2d in ss, or 44 per cent. , •. ' One of the most powerful arguments which was used against devaluation was that Britain would necessarily need to export a greater volume of goods to receive the same number of, dollars. Last week, £250 would have purchased 1000 dollars. Now, £357 is required. This is an increase of £lO7 in £2so—or 44 per cent., and not 30 per cent, as has been repeatedly stated not only in the cable news in the Evening Star, but all over the world. I am not suggesting that anyone will make a financial blunder fcfr this common mis-statement. People who handle foreign transactions have the actual rates of exchange to guide them. I do suggest, however, that the amount’ of the devaluation has been grossly understated to the general public, and that the extra hardships imposed upon the British people have not been fully appreciated— Yours ~dtc. STUDENT OF ECONOMICS Greymouth, September 21.