The Manawatu Daily Times World Reflation

Manawatu Times, Volume LVI, Issue 7070, 1 February 1933, Page 6

The Manawatu Daily Times World Reflation

The ease of deflation versus inflation argued by experts has not yet closed. The bitter-enders who assert that wages in a number of lines and prices in some fields have not yet bowed to the inevitable have had their day.. Now the bar of informed economic opinion is eaerly awaiting evidence that will indicate how the nations can get going on the road to recovery. Credible witnesses are to-day appearing whose testimony lends strength to the theory of controlled inflation or “reflation,” a term not found in the dictionary but coined to convey the meaning of price restoration toward normal levels.

Among the authorities to espouse currently the cause of direct action in a concerted effort to increase prices is Sir Arthur Salter, regarded as one of the clearest thinkers of the day on economic subjects. Writing in the winter issue of the Yale Review, he suggests the feasibility of an international agreement by which some institution, such as the Bank foi International Settlements, for instance, might be authorised to issue notes which the contracting nations would accept as the equivalent of gold and which could be lent to countries which have imposed exchange restrictions for self-protection. Sir Arthur argues that as national crises have been met successfully by note issues, such as the great crisis in England in 1825, so an international crisis could be relieved by a fiduciary international issue of notes. It would be part and parcel of a “world policy of controlled reflation.”

The possible benefits he sees as an increase in prices and a new stimulus to enterprise ; relief of the burden of existing debt ; the counteracting of deflationary forces, such as hoarding ; making available new capital without requiring guarantees for foreign loans, and the gradual removal of exchange restrictions and other impediments to trade.

But any such action must be collective. The crisis is world wide. In the opinion of Sir Arthur, no one nation can go very far alone in the direction of “reflation.” A measure -of success was attained by the United States Government when its monetary policy, as exemplified in the Glass-Steagall Act and the “open market” policy of the Federal Reserve System, stemmed the deflationary forces which were creating havoc. Blit it did not raise prices. These, intimate Sir Arthur, arc amenable only to international action, unless the world is to deteriorate into a collection of ‘ ‘ closed economic units, national, regional or imperial.”

After three and a half years of deflation, the time is getting ripe for a world policy which will substitute concerted objectives for the hodge-podge of the present laissez-faire system. If nationalistic motives are to be relegated, along with various outworn creeds, to the scrap-heaps which every onward-moving age leaves behind, then counsel such as Sir Arthur offers will receive due attention. The International Economic Conference called to meet in London this year will have an opportunity to do something more than merely foster a debating society. It can define certain objectives and propose methods of action which may make out of the welter of nations a more co-opera-tive world. Not the least of these will be some international policy regarding prices.

For on a satisfactory level of commodity prices the solution of those other problems of employment, trade, debts, tariffs, profits and taxes largely depends.