Manawatu Evening Standard. WEDNESDAY, MAR. 14, 1934. MONETARY SYSTEMS.

Manawatu Standard, Volume LIV, Issue 89, 14 March 1934, Page 6

Manawatu Evening Standard. WEDNESDAY, MAR. 14, 1934. MONETARY SYSTEMS.

In compliance with the recommendation of a Select Committee of the House of Representatives, a Parliamentary Committee is conducting an enquiry into the present monetary system, and into possible alternative systems, with a view to such action as may meet national requirements. In the last three years a good deal has been heard from the public platform of the shortcomings of the present system, and the Select Committee had before it a number of petitions praying for the enquiry authorised by the Government. The question . of monetary policy is of absorbing interest throughout, the Empire and in leading foreign countries. There is wide disagreement between authorities on the subject, but this disagreement, it. has been aptly said, far from being a sign of their . incompetence, is often instructive to the public. In what has been described as a brilliant address to the shareholders of the Midland Bank in London, Mr Reginald McKenna discussed at length factors . in Great Britain’s monetary policy, explained the case for a managed currency, and submitted his views as to the course her policy should take for the immediate future. On Britain’s departure from the gold standard there was uncertainty in the official policy in monetary affairs, with acts of deflation at first and afterwards expansion in the supply of money. In July, however, at the conclusion of the World Conference a declaration of monetary policy was signed by Empire representatives, which ‘ 'cleared up ( all doubts and formally adopted the principle of a managed currency with a view to maintaining a stable price level.” The declaration quoted the Ottawa Conference statement that the ultimate aim of monetary policy must be the restoration of a satisfactory international monetary standard, the final objective being a reformed international. gold standard with stability in exchange rates reconciled with a reasonable measure of stability in world prices. According to Mr McKenna this declaration may well prove to be the most important profession of faith that the world has yet had on monetary policy. It accords with an immense advance in public appreciation of the conditions of modern business life.. The. price level of commodities in daily use is recognised as the measure of stability in the value of money, and the maintenance of . such stability as the. proper objective of monetary policy.” Mr McKenna is convinced that,' whatever part gold will play in the future international monetary system, it cannot be reinstated as the monetary standard until adequate safeguards are provided against the risk of its becoming once again the uncontrolled master, and that the time is. still unripe for the reconstitution of a universal gold standard. The Government’s policy has been cheap and abundant supplies of money, and it has been successful in “maintaining the general average of prices.at a level which renders production profitable. In spite of world chaos Britain’s trade has enjoyed a distinct revival, to which the monetary factor has largely contributed, though Mr McKenna naturally mentions other important conti 1butory causes. As to the immediate "future, he advocates the course now being followed. Britain’s standard, based on the gen-

eral commodity price level, he says, is the one best suited to the needs of the great masses of world population, for not only is the pound sterling readily acceptable everywhere as a means of payment, but it is. now managed with a view to ensuring that debtors shall be called upon to pay no more in value than they have borrowed. While restoration of exchange stability is much to be desired, they must defer it if the price is too high. Commenting on the address a London writer says that the “antithesis between a gold ourrency and a managed currency need not be taken as final and absolute. May we. not hope some day to transcend it in a managed gold currency—a higher synthesis which will restore to the world the twin benefits, of stable exchanges and stable prices?”