MACMILLAN REPORT

Hokitika Guardian, 16 July 1931, Page 5

MACMILLAN REPORT

STABILISATION OF PRICES. URGED.

LORD BRADBURY DISSENTS

ffJmted PrEsa As&oc-iaiion—By Electrio Telegraph—Copyright*. LONDON, July 13. The report of the Committee of Inquiry into Finance, Industry and Commence, which was appointed in November, 1929, .under the chairmanship of M,r H. I’. MacMillan, was published to-day. The a e-port is signed by all the members except Lord Bradbury, who presents a reasonable memorandum in dissent.

After reviewing the mailt economic and financial developments since the return to the gold standard in 1925, the committee concludes its report as follows:

“The economic difficulties of the postwar decade are primarily due, not to -any wanton misbehaviour in monetary factors, but to the unusually large and rapid changes of non-monetary phenomena, for instance, the usual instability in the demand for capital, war debts, the rapidity of technical changes in. manufacture and agriculture, the rigidity in wages rates, the grow’th of tariffs, the embarrassments of Budgets, and the violent changes in speculative activity in New York and elsewhere. Britain's own domestic difficulties were increased by the relative over-valuation of the pound sterling on the return to tlie gold standard and the subsequent under-vain at ion by Franco and Belgium.” PRINCIPLES OF POLICY.

The broad aims of a world monetary policy are laid down by the committee ns follows: The central banks of the w’crld should adopt as their objective raising the price level to avoid, if possible, stabilisation of prices near the present level, which would be disastrous for all countries. When the point comes at which prices are appropriate to the then existing levels of salaries and wages, the monetary policy should endeavour to keep prices as stable as possible. The monetary system of Britain should be ,& managed, not an automatic system.

With a view to assisting the objectives, which cannot be reached by a single country but depend on international agreement on proposals to meet the' present emergency, the committee believes that the first step necessary is greater willingness by creditor countries to buy and lend. A concerted policy is needed between the central banks and the issuing institutions of Britain, France and the United States, and everything should be done to remove legislative hindrances on foreign lending, and towards permitting such volume of domestic credit as will encourage the market to.take up attractive foreign loans. Something might he done by the banking system to break the depression, if the banks pursued a polioy of purchasing securities and driving down the'general rate' of •interest on long-term borrowings, bringing a revival of new enterprise. The report stressed the point that such a, policy can only be pursued if adopted by all central banks, otherwise the only result would he the loss of gold reserves.' INTERNATIONAL MATTERS.

Passing to questions which can only he dealt with internally, the committee’s recommendations on the British internal system are limited' to a technical character. The interests of Britain require here to adhere to the gpld .standard. The committee unhesitatingly rejects the suggestion that sterling should be de-vnlued. It recommends that the Bank of England be empowered to issue notes up to a maximum of £400.000,000, accompanied by powers for temporary expansion, and that the minimum gold reserve he fixed by law at £75,000,000, with power to drop below this figure temporarily.

The committee does not favour any reduction in the bank’s normal stock •of gold;, stressing, on the contrary, the case for increasing both tbe gold holding and the holdings of foreign exchange in view of London’s large liabilities as an international banking centre.

As to the methods for raising longterm capital for home industries pur. poses, the committee proposes that the banks and State banking houses should co-operate in setting up one or more institutions to act as financial advisers, to carry out all types of financing business. and to develop continuous relations with industries.