This Money Business!

Northland Age, Volume 3, Issue 14, 5 January 1934, Page 8

This Money Business!

A Banking: View INTERNAL STABILITY SHOULD COME FIRST On the adjournment of the World Conference, a statement was issued signed by fully accredited representatives of the Governments of Great Britain, Canada, Australia, New Zealand, South Africa and India. The Imperial Declaration “For what did the statement say? “The emphasis was placed unmistakably upon the necessity of reducing the internal purchasing power of the Empire currency units. The importance of this emphasis lies in the fact that only secondarily, and as a step naturally succeeding the fulfilment of this condition, did the statement assert the desirability of reestablishing an international monetary standard, which, moreover, must be deliberately managed to secure the smooth working of international trade and finance. “More specifically, the secondary aim is the ‘restoration of a satisfactory international gold standard under which international co-operation would be secured and maintained with a view to avoiding, so far as may be found practicable, undue fluctuations in the purchasing power of gold.’ “Meanwhile the signatories recognised the advantages of achieving stability in exchange rates between the various currencies of the Empire. They expressed the view that this task would be rendered easier by agreement on a common policy of raising commodity prices, and by the fact that the British Government ‘has no commitments to other countries as regards the future management of sterling and retains complete freedom of action in this respect.’ An implicit

invitation was given to other countries to fall in with this general policy. A Great Change “What a reversal is here of longaccepted views of monetary stability! Hitherto a ‘sound’ or stable currency has been conceived as one that enjoys, through adherence to gold, stability of value in terms of other currencies. The first principle of monetary policy --the fulfilment of this supposedly indispensable virtue—has been relegated, after a long unchallenged reign, to second place. Instead we now have it laid down that monetary management should be directed first and foremost to the attainment and preservation of stability of the currency unit in terms of purchasing power over commodities. Puts Gold in its Place “For this reason alone the importance of the statement is difficult to exaggerate. It puts the internal purchasing power of a currency—not temporarily but permanently —in a position superior to that of external stability. It puts gold in a subsidiary place, in which, under deliberate management, gold provides a ‘standard’ only by compliment, and plays the subordinate part of an aid and guide in monetary affairs, rather than a controller. As a statement of general policy and aim, however, it is as definite as it very well could be.”—Midland Bank Review. GOING OFF GOLD STANDARD AID TO MANY COUNTRIES All the countries which two years ago in company with Great Britain dissaciated their currencies from gold and thus secured some measure of reflation have benefitted by this action economically. This conclusion is drawn in the

November monthly review of the Midland Bank, one of Britain’s four leading financial institutions. The Midland Bank has collected detailed information regarding conditions in India, Australia, New Zealand, South Africa, the Scandinavian countries and Finland. It finds that recovery in each of these areas can be associated with lowered currency exchange. “The main point which emerges from this survey,” the Midland Bank says, “is that since our departure from gold, recovery has been steady and has been shared in, one after another, by those countries which, having themselves at different times taken the same step, have participated in the benefit of a monetary policy unhampered by more or less fortuitous bonds. “The general average of commodity prices in the sterling group as a whole is now roughly the same as in September, 1931. This, taken by itself, is a disappointing result, since the average at that time was far too low and is still below the level which can be designated as sound, having regard to debt obligations, internal and external, and budget requirements. Yet how much more satisfactory is even this record than that of the gold countries, where prices have fallen by 10 to 20 percent, intensifying their difficulties in many directions. “There can be no doubt in the result, that our departure from gold has paid us already a handsome dividend : that 'it has enabled us to follow a monetary policy well calculated to induce a steady revival of business; that in consequence it has facilitated recovery over a very large part of the world ; and that its benefits must in course of time extend to every quarter of the globe.” The Midland Bank’s conclusions are strengthened by a statement issued independently by the Federation of British Industries, the leading association of manufacturers in the United Kingdom. The federation does not believe in deliberate exchange depreciation, but says that if the natural trend of vents should bring a further fall in sterling or in any other currency there would be no cause for anxiety. It finds the position generally such that even if there should be some modification of the French gold standard or a further appreciable flight from the dollar, Britain should be able to retain control of its own domestic situation.

GOVERNMENT BUYING The Government’s (U.S.A.’s), new method of keeping up prices is to enter the commodity markets in a big way as a purchaser. It is supplementary to the original method of control, not an alternative to it. Perhaps the exact description would be that it is destined to take up the slack while control is being worked out. * The Government seems to be buying almost anything of which there is a surplus. Here is a phase of the farm programme that appeals to common sense as well as humanity. Surpluses are being bought to give away to consumers who have no money to buy. This is far more sensible than the old method of storing them away. For, as we know from countless illustrations, a commodity can be taken off the market, only at great expense in money and future problems. Storing costs money in terminal fees. Moreover, the commodity has to be sold some time, and, even before it comes on the market, it hangs over transactions as a bearish element in prices. Much better is it from the economic standpoint, therefore, to give the surplus away. From the

social standpoint, such a course is also the only logical one, when, as now, 15,000,000 people are de-

I pendent upon public relief.— Christian Science Monitor, (U.S.A.)