THE CURRENCY QUESTION

New Zealand Herald, Volume LXIX, Issue 21345, 21 November 1932, Page 13

THE CURRENCY QUESTION

Sir,—Mr. Johnstone agrocs with us that variations in tho value of monoy aro objectionable, but differs from us in respect to the proposed reform. He advocates revision of money contracts, to which wo have already stated three objections:— (1) That variation of contracts is objoctionablo on general principles; (2) that as a matter of practice, justice does not result from such general revisions; and (3) that tho restoration of confidence would bo hindered. There is a fourth objection which we would ask him to consider. Suppose wo in New Zealand revise contracts in December, 1932, to suit tho present value of money, and then suppose that tho value of monoy abroad continues to vary widely, as it has done at intervals since 1914. Would Mr. Johnstone advocato rovision of contracts in December, 1933. and in December, 1934, and, indeed, so long as tho value of money abroad continues to vary. We would admit that this might bo better than to allow haphazard variations in tho value of money to pass uncorrected, but we are convinced that our proposal, which amounts, in tho main, to applying tho recommendations of tho Macmillan Committee to this country, will provide a better solution. For tho restoration of the 1928 prico level would revive industry and employment, and would restore conditions in which the injustices due to previous variations in tho valuo of money were bcarablo, while stabilising after that level had been reached would avoid tho recurrence of tho worst of the evils which wo suffer from to-day. If Mr. Johnstone's plan had been adopted three years ago contracts would have had to be revised each year sinco then, whereas if this country had then aimed at stabilising tho internal value of money, the worst of our troubles would have been avoided, and the variations in exchanges rate that would have resulted would have disturbed society to a very much smaller extent than repeated revisions of contract. In the last three years, during the most severe deflation on record, an alteration of 5 per cent at intervals of six months would have enable the valuo of money in. New Zealand to retain .its stability, and even tho merchant who omitted to make use of tho forward quotations would not havo suffered heavy loss. The difficulties connected with tho exchange aro, in some cases, imaginary, for tho gain or avoidance of loss of revenue to the Stato would far outweigh tho addition to overseas interest, and in other cases they aro easily removable, as in tho use of forward exchange quotations for importers. Furthermore, if Britain applies tho recommendations of the Macmillan Committee, as is very likely, no variation in tho exchange rate will occur, so that Mr. Johnstone's charge that we advocate deliberately creating such changes falls to the ground. Currency Rkform Leagttb.