Grey River Argus TUESDAY, May 3rd, 1932. CURRENCY PROBLEM.

Grey River Argus, 3 May 1932, Page 4

Grey River Argus TUESDAY, May 3rd, 1932. CURRENCY PROBLEM.

The latest statement of an official nature as to the currency policy in Britain, just made by the lit. Hon. W. C. Runciman, President of the Board of Trade, is of interest overseas not only because the Dominions are mostly tied to sterling, but because it may indicate some change in the fortunes of gold as the basis of currency. The essence of Mr Runciman’s remarks is contained in the conjecture that “it may be that gold will be the fluctuating element, and not sterling. ’ ’ If that notion should be realised hi regular practice, then a managed currency would have replaced the gold standard to a great extent, and a monopoly of the precious metal might cease to be such a trade barrier as it now is. Mr Runciman rightly bases his conjecture upon the evident fact that the sterling area, as distinct from the area of the gold standard, has I been and is still extending in the world. Of the British Dominions, Canada and South Africa alone remain more or less on gold, while countries trading extensively with Britain, such as the Scandanavian countries, are off gold, and Japan also. But when such countries as Greece go off gold, it is to be noted that their action is not so I significant, because of the fact that it is involuntary. It is a question whether the world at large would accept sterling as the standard instead of gold, because a convention is always apt to be broken, while the fixing of currency value in any arbitrary fashion is apt to lead to loss and error. It is undeniable that the value of sterling is still determined by gold, that is by its relation to the dollar and the franc, both gold-based, and so long as America and France treat sterling upon such a plane, the fluctuation of gold values below a certain line is at least doubtful. That the price may rise and fall between £5 and £6 per ounce is likely enough in countries whose currency is “managed,” but Its purchasing power must always retain a certain relation to sterling or any other currency. If sterling stabilisation is attempted independently of gold, it will be at the dictate of British industrialists, who aim in the absence of a gold supply adequate for the former volume of British commerce to secure a stability that is lacking to-day by artificial means. Thus

Mr Kunciman remarks that the end in view is to enable nvanufacturers, shipowners and merchants to be assured as to their costs at home and abroad. The exchange, fund to be raised by way of loan is designed to ensure sterling sta • bility, but when it comes to a case of expecting foreign traders to regard a more or less arbitrary currency adjustment in Britain from time to time as a world standard, the thing can be tested only by experiment, and that not at the present time of depression so much as when conditions shall have returned nearer to normality after, say, a more permanent arrangement about the war debts. The British Government spokesman proclaims the failure of all attempts to replace London as the world’s financial centre, and he is in a good position to judge, but his may be no more than a piece of special pleading on behalf of the new fiscal policy and the budget adjustments generally. For one thing, the tariff must inevitably restrict the scope of British comuurre in /foreign countries, and a world in a hard up condit ion is scarcely a good criterion <of what the future is going to I bring. The British Government, above all things, is bent at present on restoring industrial stability, and it is a question whether such a policy is to be reconciled as completely with banking supremacy as may be hoped. Certainly banking supremacy did not retain for Britain industrial prosperity, and to the degree in which fiscal policy is varied to supply that deficiency it may permanently limit banking ascendancy. Mr Runciman makes a very confident prediction that Britian will be better I off at the end of this year than at the end of last year, but he may be bargaining for an industrial revival on the depreciated currency as the test of improvement. It would undoubtedly be a wonderful vindication of British banking technique if sterling should supplant gold as the medium of international exchange, but what has to be reckoned with ere that change is consummated is the ultimate, practical and psychological reaction of world trade to the tradition of a gold backing for money. The wish for a substitute is father to I the thought of it, but gold is more than «a mere monetary convention. It is an objective reality.