EXCHANGE RATES

Hawera Star, Volume XLVIII, 11 September 1924, Page 5

EXCHANGE RATES

POSITION GETTING WORSE

HEAVY TAX ON PRODUCERS.

SUGGESTED REMEDY

iLLr.uiUt i i Aafi .WELLINGTON, Sept. 10. In the House of Representatives this afternoon Mr. \V. D. Lysnar (Gisborne) put the following question to the Prime Minister on the subject of exchange : Seeing that the official report of the Imperial Economic 'Conference held in 1923 discloses the fact that it was admitted on all sides, including the comittee set up by the conference, that a return to the gold standard, would be a solution of the exchange difficulty, and .the committee, also recommended that the exchange difficulties could be ameliorated if the noteissuing authorities were to accumulate sterling assets and to undertake to exchange their local currencies for sterling assets and vice versa, aiid as the exchange difficulties have obviously become more aggravated since the‘date of the conference., can the Prime Minister inform the House whether anything is being done or any proposal being put forward which. is likely to lighten the unfortunate difficulty with regard to the question of exchanges? The Prime Minister replied: The exchange position, instead’ of improving, is becoming increasingly, difficult. .The disparity is too great, and producers and exporters are at a disadvantage. It has been suggested that the difficulty might be overcome by means of Imperial short-dated currency bills,. conjointly guaranteed by Great Britain and the Dominions. Such a- scheme was very fully investigated by the expertsin attendance at the Imperial EconomicConference, and also by the .financial advisers to tie British Gvernment. These experts, however, considered that the financial and constitutional difficulties to be overcome were too great, especially iff regard to what is known as the purchasing power parity in' the respective countries and the control of credit, and currencies administered by. each country independently. The committee considered it was possible to achieve the same; or, at least, similar results by utilising, and extending the existing machinery of banking and credit, without having, resort to the creation of a new instrument of Imperial credit, with the various constitutional and financial difficulties to whicr that might give rise. • An investigation led to thre consideration of another method of overcomingthe obstacles of balanced exchange with, the restricted gold movement. Their recommendation, which was endorsed by the Imperial Economic Conference, uas that the best means of affording relief is through the operations of a central bank, with ample power to., effect and control exchange operations as between its own country and the country or countries'with which it principally trades. Under this scheme provision for the closest co-operation of the central hank and the- note-isstiing' authorities would require to be made. I have been in constant communication with bankers and other financial experts regarding the best solution of this world-wide problem, and this week a' conference with the principal bankers lias been arranged with the. object c£ considering the application of the rer commendations of the Imperial Economic Conference to the' exchange system of New -Zealand.

The resolution agreed to by the com™ittee at their meeting on November 6 1923. was as follows: “The comriiit'tee,liavmg considered their terms of referenee, and having unanimously resolved that where difficulties have, arisen. in legard to exchange between certain parts of the Empire and between such parts of the United Kingdom, considers that (a) the position could be ameliorated if the note-issuing authori—ties were to accumulate sterling assets and to undertake to exchange theirlocal currencies fo r sterling and vice versa; (b) this measure might be further developed and assisted by thie creation of central banks and by mutual co-operation, as recommended' by the Genoa Conference; (c> in some ' cases; the bank charges for buying arid selling sterling appear to be unduly liigh, and should be capable of a reduction;”: ( The Hon. J. A. Hanan (Invercargill) :- “Are' they suggesting that the note issue should be increased?” Mr. Massey: “There is no such suggestion here, but it follows naturally as a matter of course.” Mr. Harian: “It means the expansion of credit.” - The Prime Minister: “Yes.” He added that he had arranged for representatives of the different banks of Wellington to meet on Saturday morning. He hoped some good would result, be- =. cause it was necessary to get rid of.; the difficulties of the present position or to har-e them ameliorated.