HOLLAND AND GOLD

Nelson Evening Mail, Volume LXX, 17 December 1936, Page 12

HOLLAND AND GOLD

PREMIER’S "EXPLANATION Dr. Colijn, the Dutch Prime Minister, broadcasting to the nation recently, explained the reasons for Holland’s decision to adopt a policy of managed currency similar to Britain’s and go off the gold standard (says the “Daily Telegraph”). He began by recalling that in 1933 a number of countries at the London World Economic Conference had expressed the view that it would be desirable to maintain the gold standard.

These countries were six in number—France, Italy, Switzerland, Belgium, Poland, and Holland: Of the six, Italy and Poland could not be regarded as being any longer in this combination, and Belgium did not now belong to the original gold‘bloc. “This left only three of the six countries —Fiance, Switzerland, and Holland. When it became known that France was leaving the gold standard, the Dutch Government’s view had been that its own currency policy could be maintained. -‘.Then, however, the Government

received from its Ambassador at Berne information that the Swiss Government had decided to align its currency with that of the leading countries, which meant abandoning the gold standard. “This decision on the part of Switzerland made it necessary for the Dutch Government to reconsider the position. The question had to be considered afresh whether Holland, as the last gold country left, would be able to hold her position. AMERICAN POLICY “America has already devalued by 00 per cent., with the possibility of further devaluation, and Belgium, too, has devalued. Holland would, therefore, be one of a trio in which it was the only one —and indeed the only country in the world —to maintain its currency policy unchanged. “It was hard to abandon this proud position, and the Government’s decision has only been reached with reluctance. Personal feelings had to be set aside in the interests of the country, however. “An increasing pressure on the gold holdings of the Netherlands Bank! would have been a certainty, and it would have been no longer possible

to maintain our former monetary policy. “The danger had to be prevented, for we were faced with a position of international chaos and the future was uncertain. So we have temporarily abandoned the gold standard, as was done during the period August 1914 to April 1925. “One has to face the position that a certain depreciation in the value of the guilder in relation to international exchanges is likely. “Special attention will have to be given to stopping the flight of capital and also to the possibility of competition with our exports. In these circumstances the Government cannot allow the new situation to develop just as it likes. Methods of payment Will be left entirely free. “The Government proposes to submit to the Chamber immediately a Bill to create an Equalisation Fund amounting to about £33,000,000, with the object of controlling fluctuations in the rates of exchange, as Great Britain has done, and as both France and Switzerland are considering doing. INCREASE IN PRICES “By these means we shall seek to

prevent unnecessary depreciations in the value of the guilder in our country. This, is equally essential from the standpoint of price levels in Holland.

“An increase in price levels cannot be entirely avoided, as the goods which we have to purchase from abroad must become more expensive if the guilder should depreciate in value.

“Whoever is guilty of unnecessary raising of prices acts in an unpatriotic manner, the Government will take measures against him with all the authority vested in it hy law. “Remain quiet for the next few days. Do not be nervous. Do as you have done last week and last month; act as if nothing had happened.

“The Government will probably not have to make a great many changes in the monetary system."

The Dutch Government, Dr. Colijn concluded, looked upon the present economic situation as one of the worst obstacles to international economic recovery. It was, therefore ready to find means to sweep away these troubles and to set up stabilisation of international currency movements. ■ - • -