A FREE EXCHANGE MARKET.

New Zealand Herald, Volume LXIX, Issue 21118, 27 February 1932, Page 10

A FREE EXCHANGE MARKET.

The scope and the importance of the statement regarding the exchange question issued by the Associated Chambers of Commerce were very inadequately represented by the summary telegraphed from Wellington. The latter suggested that, the statement was merely a repetition of a resolution passed on January 29 ; the text of that resolution is embodied in the statement with the misleading remark that it is "now published for the. first time," whereas it was published throughout New Zealand on January :30. Two points of greater importance are presented. One is that the Associated Chambers disclaim any sympathy with the advocacy of - artificial high rates. The other is that the conference held on February 11 appointed a committee to explore practicable methods of securing a free exchango market, while securing to the Government the amount of funds it required in London ; that the committee agreed upon a formula of an entirely practical nature ; but that on the following day the producers' representatives withdrew from the agreement. It was on the same day, February 12, that the Prime Minister announced the appointment of a committee of economists to report on the matter. This information is highly significant. It is obvious that the joint recommendation did not propose an artificial high rate. , It has long been apparent that the Farmers' Exchange Committee realises a free market would not produce the fantastic rate upon which its campaign was originally based. The withdrawal of the producers' representatives and the appointment of the committee of economists are manifestly related to a final effort to inaugurate an experiment in artificial inflation of the exchange. Further developments must await the publication of the report by the committee of economists, but circumstances may compel the Associated Chambers to disclose the "practical solution of the difficulty" devised by the conference committee. In the meantime, it is essential that a positive definition should be given to the term "free, open market for exchange." Does-this mean the abolition of all restrictions, affording complete freedom for speculative operations, for the transfer of capital and for competition among flie banks themselves? Arc the banks to maintain their established policy of stabilising the exchange, or arc exchange rates to fluctuate from day to day or hour to hour? Or is the free, open market to be confined to exchange operations related to normal trading requirements as it is in Britain? If there -are to be any rules at all,, who will draft them and by what power will they be enforced 1 These questions must be answered before New Zealand's currency is left to its fate.