EXCHANGE QUESTION

Otago Daily Times, Issue 23013, 16 October 1936, Page 7

EXCHANGE QUESTION

SCHEME FOR STABILISATION A BENEFICIAL MOVE VIEWS OF LONDON EXPERT "I consider this the most outstanding event whic'.. has happened in the world of currency since the departure of Britain from the gold standard in 1931." remarked Mr A. Wigglesworth, of London, to a Daily Times reporter last evening, in the c.. of a commentary on the pronouncement of the British 'Government concerning the stabilisation of exchange. An authority on the question of currency and exchange, Mr Wigglesworth, who is a delegate from the London Chamber of Commerce to the Congress of British Empire Chambers of Commerce, is co-author of " The Gold Tangle and the Way Out," and " The Principles of Currency, Credit and Exchange." A BUFFER FUND Briefly, he said, the scheme consisted in the stabilisation of the exchanges of Great Britain, the United States of America and France by an Exchange Equalisation Fund operated bv each country in friendly cooperation. This fund, consisting of £350,000,000, in the case of Britain, acte.l as a buffer, or reservoir, preventing unreasonable fluctuations on exchange, and killing the speculation in money which had been the bugbear of European exchanges ever since the Armistice. A steady exchange would permit the placing of forward contracts by merchants. This would help the transference of stocks from the hands of the producers to the consumers, and this would increase the buying power of the growers, which, in turn, would stimulate purchases by the farmers from the manufacturers. In this way, the velocity of trade would be accelerated, and the circulation of money would be increased, with a resultant improvement in world trade. • INCREASED CREDITS REQUIRED "Obviously, Mr Wigglesworth pointed out, increased credits would be required, but these could safely be expanded to credit-worthy borrowers, and banks could safely accord additional credit so long as they had idle'funds available. After their exhaustion, however, caution would be necessary. An improvement in trade should be reflected in increased profits all round, and these would go to liquidate overdrafts, thus strengthening the structure of credit. A BENEFICENT SCHEME Touching-on the new gold standard, Mr Wigglesworth said that this differed essentially from the old, which required a higher bank rate and restriction on credit when gold was exported in excess of the nominal amount. Now it had been arranged that gold could be shipped, for instance, from London to New York, if there should be an accumulation in London of an excessive amount of dollars. The scheme operated on similar lines as between France and England and the United States of America, and the operation could be effected without putting any strain on the currency of the country concerned. Thus, currency was liberated from bondage to gold, and gold became the measuring-rod of currency values. The advantage of the stable currencies which could be secured by this beneficent selfacting scheme was obvious. "The credit of this scheme," Mr Wigglesworth said, "I attribute to the wisdom of the British Treasury, where, I consider, the best financial brains of the world are to be found." He added that the Bank of England acted as ah active agent to carry out the policy of the Treasury. When it was considered that the credit machine should respond to the exigencies of commerce and industry it could readily be grasped that the scheme would put the coping stone to such an ideal. Asked how the scheme would benefit New Zealand, Mr Wigglesworth explained that triangular trade would automatically bring the Dominion in, so that equal benefits should be gained by the export of dairy produce, meat, wool and other New Zealand products.