THE CURRENCY AGREEMENT

New Zealand Herald, Volume LXXIII, Issue 22540, 3 October 1936, Page 12

THE CURRENCY AGREEMENT

In his presidential address to the Chambers of Commerce Congress, Lord Elibank drew attention to the important declaration of British monetary policy contained in the Treasury's statement on the stabilisation agreement with the United States and France. Its phrasing is of considerable significance. The Treasury says "the British Government, of course, in its policy toward international monetary relations must take fully into account the requirements of the internal prosperity of Empire countries." This statement has a special interest in that the aim of British policy is specifically stated to include the prosperity of the Empire and not of Great Britain alone. And it has a general interest in that international considerations are to be secondary to Imperial welfare. The point is further emphasised later in the statement, which says the Anglo-American-French agreement "does not involve any change in Britain's monetary policy. Sterling will remain free currency, unlinked with gold or other currency." In other words, Britain is not tying her hands, and neither is America nor France, as the Treasury mentions. Each retains full control of its national currency. Their first aim will therefore be to secure internal stability in money values or prices, a'nd their second to work for stability in their foreign exchanges. So far as these two objects can be reconciled, they will be; when they conflict, national interests are to prevail. This is a reversal of the traditional policy associated with the gold" standard. Under that system the stability of the foreign exchanges became the ruling consideration, and currency and credit policies of nations were subordinated to it. In recent years nations have swung to the opposite extreme, manipulating the exchange value of the currencies as weapons in the economic war. Now the effort seems to be to arrive at a reasonable middle course.