The Pahiatua Herald PUBLISHED EVERY EVENING THURSDAY, NOVEMBER, 14, 1935. THE RATE OF EXCHANGE.

Pahiatua Herald, Volume XLIII, Issue 13106, 14 November 1935, Page 4

The Pahiatua Herald PUBLISHED EVERY EVENING THURSDAY, NOVEMBER, 14, 1935. THE RATE OF EXCHANGE.

The parties opposing the Government are strongly attacking the existing rate of exchange so perhaps the views of an eminent authority in the person of Professor A. li. Tucker, of Canterbury, will be of special interest. He points out that the general beJief is that the present rate will be by no means permanent. No currency is stable and future parties will be determined to suit the conditions. Furthermore, there is probably not a. country in the world to-day in which the exchange rate moves freely in accordance with the supply of, and demand for, funds. Gold countries adjust tariffs and impose quotas and so forth to control the markets for their currencies, while other countries adopt these methods and pool and ration exchange as well. Britain controls overseas investments and operates her exchange equalisation fund. In New Zealand the rate has always been jd egged. This was done in order to prevent inconvenience to traders owing to wide fluctuations due to the seasonal variations in the balance of trade. In 1920 there was a large accumulation of funds in London—the Bank of New Zealand alone had about £20,000,000 —but the pate remained unchanged. A yea/r later most of these funds had gone—the Banks ha.d found £28,000,000 in a year to meet customers’ demands—but the rate was temporarily altered by only about 3 per cent. The existence of large credits in London, then, does not necessarily demand a lowering of the existing exchange rate. The real point at issue is not whether our exchange is at par with sterling or whether we have large funds in London, but whether the Dominion would be better of? than it is to-day if the exchange rate was lowered. The present high rate means more money in circulation, therefore there is an additional demand not only for home produced goods but for imports as well. As imports expand the overseas funds are drawn on and bank deposits and advances here assume a more normal level. That, is what is taking place now and confidence has been restored. The importers are not suffering nearly as much as some would have us believe. A sudden reduction now might check, and even reverse, the direction of the present movement and drive the country into deeper difficulty.