STABILISING THE POUND

Otago Daily Times, Issue 21529, 29 December 1931, Page 8

STABILISING THE POUND

INSTITUTE OF BANKERS. (From Our Own Correspondent.) LONDON, November 18. In his inaugural address as president of the Institute of Bankers, Brigadiergeneral Sir Arthur Maxwell said that the real complaint which might be made against the gold standard system was not that it had badly, but that it had worked too well and too accurately, and had brought to light too clearly .the disturbance in international financial relations. It would be as reasonable for a patient to complain when the thermometer showed that he had fever as to jcomplaiu of the recent movements of gold, whica, in effect, were only a clear, indication ot the feverish and nervous disorder ot the world’s financial system. General Maxwell referred to the position ,in this country. Were they, (he asked) entirely the victims of an international breakdown or were there weak spots in their armour? The falUm price levels, and other developments over which they had no control, had’ aggravated their difficulties, but it must be admitted that since the war they had not made a senpus effort to deal with them. Great Britain depended for its existence upon its # oxports to pay for food and. raw materials, but they had watched its competitive power in the world’s markets gradually shrinking without any real, effort to restore it, and had been living on hopes that something would turn up before matters became desperate. STABILITY OF PRICES. It might be that they would not go back to the gold standard as it. had been worked in recent years, but it was not yet the time to make a final decision on that point. Until the time came lor that decision the plausible substitutes which were being pressed forward for political and olher reasons should be regarded with the greatest 'caution. For instance, that they should abandon, for the time being at all events, the attempt to find a workable standard for the whole world, and that countries which use sterling or hart linked their currency with sterling, with the nations of the British Empire as a -nucleus, should unite with the object of achieving stability of prices within a limited area, leaving the y rest of the world to work out their own salvation. Again, that they should cut their currency off from any fixed relation with those of other countries, concentrate on stability of the internal price level, and let the exchange rates vary at will. But 'for a country whose trade and industry were so intimately related to those of other countries, internal stability ot trices alone would not suffice. I or. a nation which was largely self-supporting it might be possible to isolate currency and trade problems and solve, them disregarding the interests and actions ot the rest of the world. But in a ftickly-pppu-lated and highly industrialised island which depended upon its foreign trade for about five-sixths of its food, and probably a similar proportion of us raw materials, which must be paid for at the price and in tlie currency demanded by the sellers, a policy of isolation must be disastrous. ~ . . . • „ It appeared to him essential to achieve an ordered relation between sterling and the other chief currencies of the world, and for the present this could best be achieved by stabilisation de facto as soon as it was clear at what level this could be achieved. TRADE BARRIERS. It was useless to think they could return to prosperity alone. The world was out of joint and, without a general restoration of confidence in the future no real progress was possible. One of the first steps was without doubt an mternational conference with a view to removing at least part of the burdens of war debts and reparations from the shoulders of those nations which could not support the burden. For years the spectre of the ultimate breakdown of the reparation agreements had haunted business men everywhere with the possibility ot grave financial disasters, involving both Governments and industries, and until that spectre had been definitely removea they need not expect a revival of business enterprise. Closely allied to that question was the necessity for conferring on the removal of the obstacles to the free play of international trade, A new outlook was needed involving a truce between nations in the use of those, economic weapons which since the war had taker ihe place of high explosives.