Future of International Exchange

Manawatu Times, Volume 68, Issue 194, 17 August 1943, Page 3

Future of International Exchange

At the weekly meeting of the Palmerston North Rotary Club, Dr. W. M. Smith discussed the problems of international exchange raised by the proposals put forward by Lord Keynes for an. International Clearing Union and by Dr. Harry D. White, of the United States Treasury, for a United and Associated Nations’ Stabilisation Fund. The aim of both proposals, said Dr. Smith, was to free international trade from tho chaos and hindrances to which it had been increasingly subjected between the Avars. The world had not yet found an international monetary mechanism to take the place of the system based upon the pie-1914 gold pound. After 1918, Great Britain uo longer had the financial resources in the shape of over-

seas investments and the like to enable Loudon to serve as the world’s banker and the growth of economic nationalism would have destroyed the old system in any case. The British scheme, said Dr. Smith, involved the creation of a kind of international bank through which the financing of trade would be cleared. Lord Keynes suggested that the same principles of banking as apply within a country to exchanges of goods and services should apply internationally. An international monetary unit called

“bancor,” the gold value of which could be varied by the governing board, would be used for adjusting the balance of payments between countries. Each country would be given an initial credit in bancor in proportion to the amount of its international trade. Through each Central Bank, credits for exports would be lodged with the International Clearing Union and imports would be financed through these credits. The governing body would have power to require any country that was over-importing or refusing to use its credits for purcuases of loans abroad to take steps to adjust the position. The American plan, said the speaker, was much more rigid than the British. Th^international currency unit, called

“unitas, ” was to have its gold value fixed. This would involve putting the world back into a strait-jacket of gold, thou<£i it might help to solve the problems raised by the vast holdiiigs of “frozen” gold in the U.B.A. The permanent fixing of the value of national currencies in terms of unitas would mean in practice, said Dr. Wmith, that there would be a severe limitation on policies of economic expansion in those countries which did not command adequate gold assets or their equivalent. The schemes were both of a tentative character and expressly declared to be unofficial. The divergence between the British and American views was left unbridged. The question was, said Dr. Smith, whether tne monetary aspect of international trade was the one to be considered first. Ought we not to begin with trade policy? One of the harmful developments between the wars was that the U.W.A., having become the world’s greatest creditor nation, refused by a deliberate tariff policy to accept payment from debtors in goods which might compete with those of her own producers. Until we could solve the problems raised by economic nationalism, the speaker thought it was idle to propound schemes for a new international currency and banking system. This required some surrender of economic sovereign rights by the very nations that had refused to surrender political sovereign rights to tho League ot' Nations.