THE EXCHANGE RATE

Otago Daily Times, Issue 21601, 23 March 1932, Page 13

THE EXCHANGE RATE

TO THE EDITOR.

Sir, —You publish in this day’s issue the note sent by Sir Otto Nieraeycr to Mr A. D. Park, Secretary of the Treasury, expressing complete agreement with the views recently expressed by Professor Gregory on the question of exchange ana the financial position of New Zealand. Surely the supporters of the artificial pegging of the rate of exchange must feel that they have a thoroughly rotten argument or case to defend when they unload these opinions on the public to offset, if possible, the considered _ opinions_ of the group of trained economists appointed by the Government to assist with their advice—advice based on their personal knowledge of the Dominion and its resources and a full knowledge of the financial dilemma of the Government and its people. Sir Otto Niemeyer and Professor Gregory came to the dominions as the representatives of the banking interests, and of none'other. And I presume that Professor Gregory’s latest effusion was written and published at the instance and expense of one of the associated banks, and the publication of his opinion is prefaced with a statement that tends at once to confuse and mislead the reader. Was this;';deliberate? I refer to the paragraph • which introduces Professor Gregory’s opinions on “ advancing ” the rate of exchange. This is the weapon that the advocates of “ pegging ’’ have used from the beginning of this controversy—that someone, or some organisation, was advocating the artificial raising of the exchange. The statement is absolutely false. We asked for “ a free exchange. The banks insisted that the exchange should be artificially fixed or “pegged.” That is the question with which Professor Gregory deals in his cabled and published opinion, “as he who runs may read.”. I quote from his opinions as published: “If the exchange rate is allowed to rise.” Again: “ If the rise in sterling lags behind the movement in exchange.” Your readers will note there is no reference here to “advancing” the rate of exchange. Professor Gregory is dealing with the business fluctuations of a freely operating money market—the only thing for which the farmers and their organisations have asked, for we know, as our opponents know, that if exchange rates on London were left free to find their own level, exchange would soar to the level of, or above, that of Australia. Professor Gregory frankly admits that the rise in exchange rates “ must be to increase the receipts accruing to the primary producer,” and then proceeds to express his doubts as to whether it would ultimately be to our real benefit. But our local prophets have been telling us that the increase in prices would never reach our hands—that the banks and agents would impound for payment of overdue accounts. A desirable sequence, we believe. Our hearty thanks are duo to the National Bank of New Zealand for procuring and publishing Professor Gregory’s opinion. It shows so clearly how the primary producers of the Dominion have been victimised and' robbed by‘this artificial " pegging ” of the rate of exchange.—l am, etc., W, D. Mason.

Middleman;!!, March 19