THE CANADIAN DOLLAR.

New Zealand Herald, Volume LXVIII, Issue 20986, 24 September 1931, Page 8

THE CANADIAN DOLLAR.

The sharp fall in the quotations of the Canadian dollar in both London and New York and the report that the export of gold from Canada may be prohibited, direct attention to the fact that Canada's adherence to the gold standard, which was officially resumed on July 1, 1926, is far from secure. There is no central bank in Canada, the chartered banks having the right to issue notes within elastic limits and notes are also issued by the Dominion Government. which maintains central gold reserves, and the relation between note issues and reserves is only vaguely defined. Normally, parity of the Canadian dollar with the American dollar and the British pound is maintained by the natural play of economic forces, assisted by the increasing production of gold, the value of which last year was nearly £9,000,000. But the first winds of adversity appear to be sufficient to cause Canada to lose its grasp of the gold standard in its foreign commerce. Gold shipping point in Canadian-American exchange is usually considered to be three-sixteenths of a cent, In June and July, 1928, Canadian exchange was slightly below gold point, but the shipment of about £5,000,000 in gold restored the position- It fell below gold point again in December of that year and remained at a discount throughout the whole of 1929. Owing to the depletion of the note issue reserves, gold shipments to New York were suspended in February, and the embargo was maintained until the middle of last year, when the Canadian dollar rose to a" premium and gold was shipped to Canada. Throughout this period there was no formal announcement that gold shipments had been prohibited nor any official admission that Canada was off the gold standard. Yet the facts were well known ; actually, if not theoretically, Canada had suspended gold payments. By the end of last year the central gold reserves had been greatly strength-

ened, but adverse economic conditions have caused a further drain upon them in i*ecent months, and the margin available for exchange transactions must now be small. It is certainly significant that the Canadian dollar is quoted in London at the same rate as at the end of 1929 when the embargo was in force, while New York is offering only 93 cents for it. Fluctuations in the Canadian exchange have a practical interest for New Zealand owing to their effect on the attenuated trade between the two Dominions; the apparent tendency will, however, he in favour of importation from Canada and to the disadvantage of exporters.