THE RATE OF EXCHANGE.

New Zealand Herald, Volume LXIX, Issue 21130, 12 March 1932, Page 10

THE RATE OF EXCHANGE.

The Government's decision on the much-debated question of the exchange pool has at last been made public; there will be no alteration of the existing arrangement by which the pool of London funds is maintained, and decision regarding the actual rate of exchange is left to the associated banks. That position should be clearly understood, for it has often been obscured in recent controversy. If there is any " pegging" of the exchange it is being done by the banks, though they themselves insist that the rate now ruling is justified by commercial arid monetary conditions. Accepting that position—and nobody has been able to prove the banks wrong—the high rates which have been extolled as promising advantages of all kinds to the Dominion would be wholly an artificial creation. Thus the question of a high exchange has to be considered in isolation on its own merits, not as something actual conditions demand. Although at first sight there seems to be benefit in it from the farmers' point of view, the more it is examined the less this benefit seems. The country cannot afford to venture on a dubious course like deliberate exchange inflation in the way that has been advocated. Mr. Park, of the Treasury, offered a very pointed warning when he said once begun it would prove very difficult to control. The soundness of his observation is endorsed by what Sir Robert Gibson has said about the growing difficulty presented by the Australian exchange situation. Apart from these factors, there should be general relief that the Government has reached a decision and announced it. Whatever may be said for high exchange or low exchange, the state of uncertainty that has ruled cannot have been good for anyone, exporter, importer or anybody else. The Government intends to stand by the existing arrangement until market conditions justify a change. There the position remains, with no room for further doubt or misapprehension.