HOPEFUL SIGNS APPEAR.

New Zealand Herald, Volume LIX, Issue 17984, 9 January 1922, Page 7

HOPEFUL SIGNS APPEAR.

TRADE REVIVAL BEGINNING. ENGLISH BANKER'S VIEW. HARD WORK AND THRIFT. [from our own correspondent.] LONDON, Nor. 18. A strong plea for a return to the prewar gold standard as the ultimate remedy for the present financial situation was made by Sir Charles Addis in his presidential address to the Institute of Bankers. He had certainly no panacea to proposo. "If we are ever to get back to an effective gold standard," said Sir Charles, "it will be by the exercise of the old virtues of hard work and thrift, public and private, and by no other means. Meanwhile do not let us discourago ourselves—and others—by belittling what has already been accomplished. For tho last two years we have as a nation been more than paying our way. Wo have been ablo to put by a little and on balance to reduce our internal debt. It is true that tho figures for the current financial year are less reassuring. "Despito the unprecedented difficulties with which the Treasury is faced — coal stoppage, trade depression, Irish trouble—l do not despair of seeing a balance on the right side at the end of the yoar." Banking opinion in the country would agrcw that the experience of the past three y n had demonstrated once more the effectiveness of the bank rate as an intsrumc"t for contracting speculation and reduoi g the inflation of prices. A rise in th" L ink rate was the danger signal, the reJ Ifchfc warning the business community of rt-cKS ahead on the course in which they are engaged. A fall in the Bank rate was the green light indicating that the coast was clear and that the snip of commerce might proceed on her way with caution. What had already Eeen accomplished would appear to confirm the faith that in the bank rate, whether for a rise or a fall, the}- bad an instrument of which the action had indeed been obstructed by the adverse circumstances of the peace, but whose efficiency for ultimately producing the financial result desired remained unimpaired by anything that had happened during or since the war. They were not without grounds for their belief who held more strongly than ever. that in the suppleness of tho bank rate lay its chief virtue, and that its efficaty, espeoially in the way of prevention, would he increased' to the great advantage of the community if it were moro frequently and, all, more promptly applied.. The tages attached" to frequent changes in the bank rate were as dust in the balance' when weighed against tho supreme advantage to trade of comparative stability of prices. Progress of Deflation. Proceeding, Sir Charles Addis dealt with the question whether deflation had gone far enough. If it were a matter of redressing the injustice as between the different classes of the community caused by tho inflation of the war, the answer to the question was "No." But though that answer was complete, it was not conclusive. Discussing the progress deflation had already made, he said that prices were now onlv 92 per cent, above pre-war level. He did not think the magnitude of the fall had been' generally realised. After tho Napoleonic wars the greatest fall in prices was in 1814-16, when the index number (Jevons) fell from 153 to 109. or 28.8 per cent, in two years. Within threo yearn of the cessation of the great war of 1914-18, they had had a fall nearly as great in threo months. He knew of "no parallel to a reduction in values of such magnitude* and -velocity. That it should have been accomplished, not indeed without sufferine, but in comparative safety, was a tribute to the soundness of our finanoial system, and. if he micrht sav go, to the efficiency of British bankii, 6 '.

Heroic Professional Classes. "The situation of the working classes in this country," Sir Charles continued, "might well give us pause when wc are asked to arrest the fall in prices. Money wages roso with the boom, but upon the whole they lagged behind prices, end Mr. dynes had reason on his side when he said, in his address to his Trade Union Conference, that the advance in real wages could only come wili the fall in prices. If this is true of the working classes, it is true in a far greater degree of the middle classes, people living on small fixed incomes. Bankers know better than most people the bitter suffering, for the most part silently, indeed heroically, borne, which inflation has inflicted, and still inflicts, upon the professional classes. I do not intend to use the language of exaggeration when I say that unless something is done for their relief there is a danger of a large section of this valuable portion of the community being wiped out, as it has already been wiped out in Germany. "Socially and economically the country is in a terrible mess, and it will take a long pull, a strong pull, and a pull all together to extricate it from its difficulties. In my judgment there is a tendency to lay "far too much emphasis upon the war as the sole cause of our troubles, and to make that an excuse for abandoning ag no longer applicable the ascertained laws of political economy. The war has. of course, greatly aggravated the present distress, but it is doubtful, even had there been no war, if we should have escaped the commercial crisis which wa® surely impending in 1914."

Usual Sequel to Stagnation. All the great historical crises had teen marked, said Sir Charles, by a departure from sound established currency principles. For his part, he took his place by the side of that voteran banker. Sir Felix Schuster, in his resolute determination to "return as soon as possible to the pre-war gold standard ... whether it be this year, next year, or in five, six, or ten years." That was the policy which he hoped the Institute of Bankers would endorse. The crisis through which they were passing was not likely to follow a materially different course from those experienced in the past. There had been the same speculative boom. "Wo are now passing through the usual sequence of a period of stagnation," Sir Charles concluded. "We shall shortly enter upon a period of trade recovery. Already in the Far East, where the touhle began; are to bo discerned the first faint streaks of dawn. In India and China trade is reviving. A little more patience, a little more steadfastness, and success is assured A little longer and the old supremacy of thig country as the acknowledged leader in the finance of the world vnll return."