EMPIRE EXCHANGE POOL

Otago Daily Times, Issue 21668, 11 June 1932, Page 17

EMPIRE EXCHANGE POOL

PRICE-LEVEL PROBLEM FLUCTUATIONS AND DISPARITIES. (Feom Our. Own Correspondent.) LONDON, April 21. Basing his remarks on Mr Downie Stewart’s statement that the Ottawa Conference would enable the whole pricelevel problem to be approached from an Empire standpoint, a correspondent —Mr Norman Crump, writing to, The Times, maintains that any monetary policy that, is evolved must, above all, he practicable. ■ “ It is a little disconcerting;” he says, “to see that While delegations of business men are proceeding from here and the dominions to the Ottawa Conference there is no evidence that the banking world will be similarly represented, or that expert opinion will be available when moneary policy comes to be discussed. Fortunately there is still time for such an omission to be remedied.” Any monetary policy evolved, he goes on to say, must recognise the right of the dominions to manage their own monetary and banking affairs; it must conform with the<peculiar needs of Inclia and South Africa, and to the close hanking relations between Canada and the United States; and, above all, it must not seek to establish some common Empire currency or to turn the Ban!; of England into the central hank of the British Empire. I/need not labour this last point of view in the many world duties and responsibilities resting upon the Bank of England, of which it cannot divest itself. As a matter of fact very little fresh machinery is needed to get rid of that great obstacle to Imperial trade, ex-' change fluctuations, and disparities between the different members of the Empire. , Let there he created an Empire exchange pool, in which the central hank 6f each member of the Empire, including the Bank of England, would keep an account. Let each central bank engage to redeem its own notes, if presented from within the Empire, by drafts on its balance in the pool at par, and then at once a uniform rate of exchange is established throughout the Empire with no interference with the rights or needs of any member. Those conversant with American banking conditions will see that this proposed pool corresponds exactly to the Federal Reserve Board's Gold Settlement Fund at Washington, which acts a clearing fund between the 12 reserve banks. This had worked satisfactorily in practice, and has restored order out of chaos, for it is not so very many years since exchange fluctuations virtually occurred between New York, and San Francisco. Compare also the operations of the East and West African Currency Boards. There is no reason why an Empire exchange pool should not work equally well, and if, it abolished the existing fluctuations in exchange within .the Empire it would be of immeasurable benefit to Imperial trade. . ./* HOW IT WOULD WORK. It may be asked, how it would work out in practice. It would be the duty of the Ottawa Conference to agree upon any necessary revisions in the par of exchange between Empire currencies, for there is no particular merit about the existing pars, and any equitable changes would alone go a long way towards removing existing difficulties. Once the • pool was in operation - it is true that any tendency of a member of the Empire to outrun the constable would through its drafts on the pool in favour ,of its foreign creditors tend to drag down all Empire currencies, sterling included. Yet inasmuch as its own share of the pool would approach - exhaustion before the drag became a seriqus one, and the peccant dominion would thereby be brought up witli'a round turn, the danger is not a serious one. Indeed it would have the great merit of bringing home to the whole Empire th£ fact that its fortunes rise and fall together. Provided that the whole Empire were “ on ” and “ off ” gold, there is no need to make the exchange pool dependent upon the restoration or final abandonment of the gold standard. Nor does it preclude any member from buying or selling gold on its own account; for to-day the United States import gold through San Francisco as well as New York, For the sake of convenience, the accounts of the pool would probably be kept in sterling. There is no need to create a special Empire monetary unit which would only be an unnecessary complication.