STERLING'S VALUE

King Country Chronicle, Volume XXV, Issue 3372, 1 October 1931, Page 5

STERLING'S VALUE

NEW CURRENCY BASIS. ECONOMIST'S VIEW. It is a striking tribute to the leadership of Britain in financial matters that certain European countries are considering abandoning parity with gold in order to maintain parity between their own currencies and sterling, but it is not altogether surprising," declared Professor A. H. Tocker, Professor of Economics at Canterbury College, in an interview with the Christchurch Times. The professor dealt with the questions raised by the Daily Mail as to whether sterling would replace gold as a new basis of currency. Professor Tocker said that, rightly or wrongly, the gold standard had been very widely blamed for the depression and financial stress which had afflicted Europe during the last year. Consequently, news of the suspension of the gold standard was received almost everywhere with feelings of relief. In addition, many European countries, though nominally on the gold standard, operated on what was really the sterling exchange standard. Their position had been very similar to that of New Zealand. • Funds were kept in London for exchange purposes, and their internal monetary affairs were so regulated as to maintain parity with sterling.

Denmark Follows Britain.

While sterling remained at par with gold that meant that those countries were, at least nominally, on the gold standard, but when sterling abandoned the gold standard those countries had to choose between parity with sterling and parity with gold. It was a matter of particular interest to New Zealand that Denmark had elected to measure its currency against the British pound rather than to retain the gold standard. Had Denmark chosen otherwise, New Zealand and Australia, which currencies linked with sterling, would have had an advantage over Denmark in the sale of butter on the London market. As it was, Denmark retained the same competitive position as before, and it was tolerably certain that a considerable part of the British Empire, including New Zealand, Australia, India, all the Crown colonies, and possibly Canada and Egypt as well, would remain linked with sterling rather than gold. South Africa had already declared for the gold standard. It was possible that the South American republics already off the gold standard might find it most convenient to link themselves with sterling. What of the Gold? If any considerable block of European countries chose to follow suit it might mean that the sterling standard would become of more importance in the monetary world than the gold standard, and it was conceivable that countries which had accumulated huge reserves of gold might find themselves left with that gold on their hands. "The future of money is extremely uncertain," continued the Professor. "Perhaps the most probable outcome will be international negotiations and agreement to link currencies again with gold, but to manage gold reserves in such a way that the more violent price fluctuations may be avoided. It appears unlikely, however, that countries which have now departed from the gold standard will restore it unless they can be assured that they will not thereby suffer such depressions as the present one."