Poverty Bay Herald PUBLISHED EVERY EVENING GISBORNE, WEDNESDAY, NOV. 22, 1933. DOLLAR DEPRECIATION

Poverty Bay Herald, Volume LX, Issue 18252, 22 November 1933, Page 6

Poverty Bay Herald PUBLISHED EVERY EVENING GISBORNE, WEDNESDAY, NOV. 22, 1933. DOLLAR DEPRECIATION

The daily cablegrams from New York describing the gyrations of the

dollar in response to the Administration's purchases of gold and the nervous reactions of the American investor must be somewhat mystifying to the average reader, but they are

worth following up all the same, for they afford au admirable lesson in economies. It was strongly urged by the Leader of the Opposition in the Budget debate in the New Zealand Parliament that this Dominion should base its monetary system on the products of its own country, and that the Government should issue more money to put more men to work. In one word, inflation. That precisely is what the United States is doing, and it is rather singular that the American Federation of Labor objects. At its conference on October 111 the Federation by unanimous vole accepted a committee report denouncing currency inflation, which “would pilace additional unbearable burdens on the workers." “If our currency is to be allowed to fluctuate at random, " the report said, “and the level of money values is permitted freely to lessen, it is apparent that there will be experienced a corresponding lowering of wage levels and earnings. Such a condition must not be allowed to tako place." The convention instructed its executive council to “resort to evciy possible and practicable means at its command to prevent unrestrained and unregulated currency inflation." The conference was not inimical to other features of the Recovery Plan; on the contrary it pledged to the President “the whole-heart-ed support of the American Federation of Labor in his great undertaking." But it stuck on the suggestion of inflation. President Roosevelt, to his credit be it said, stuck also. For a long time he resisted pressure from many quarters to supplement his attempts at business revival by issuing a copious supply of greenbacks, otherwise described as commodity dollars. He chose an alternative method of inflation, the wholesale purchase, of gold. This resulted in a headlong plunge of the dollar in terms of Continental gold currencies and also in terms of British sterling, which is

independent, of gold. The President was given authority by Congress when he assumed office to devalue the dollar by 50 per cent, and at recent advices lie appears to be going pretty near to the limit. The purpose, of course, is two-fold —to raiso prices internally and to promote the export of American goods abroad. Whether these results will be attained remains to lie seen, and it would be advisable for those in New Zealand who are advocating similar methods for the promotion of prosperity to await the development of the great American experiment. It is far tec early as yet to judge as to its success or failure. The dollar for the last few weeks has been decidedly on the wobble, and the uncertainty concerning it has led to the exportation of a considerable amount of capital which should otherwise have been kept in the country for the development of industry, the haven of refuge, as usual, being England, where those who havo sent their dollar securities deem them to be safe. Meantime there is arising a demand that this jiggering of the dollar should be brought to an end and that some measure of stabilisation should be effected, either by tying the dollar

to the pound or franc on fixed ratios, or by reversion to a dollar with some definite relationship to gold. Business interests, whilst loyally supporting tho President in other respects, contend that the sluggish restoration of commerce is due to the apparent lack of a definite policy with respect to either inflation or stabilisation. So long as the dollar drifts in aimless fashion industrial leaders are diffident in launching out on their major programmes, not knowing from day to day where tho dollar will stand. Currency stabilisation must come before business stabilisation can be secured. It; may bo rather early for the effects to bo felt, but currency depreciation up to now has failed to lend important stimulus to commerce. In fact, says one report from a trustworthy source, its more recent influence has been negative, tending to embarrass the export trade of the country, a situation that is bound to exist when the currency of a country is subject to wide fluctuations from day to day. The probability is that, before long tho President, will cry a halt, with his gold purchases —he does not need it for tho Federal vaults are gorged with gold—and will issue a decree stabilising tho dollar at some fixed value. Tlio Washington Post truly remarked the other day that business recovery and rising prices cannot be conjured into existence by destroying confidence in tho purchasing power of the dollar. What is happening in America would happen in Britain, or New Zealand, if juggling with the currency were attempted. “It, may be predicted with great confidence," says a writer in the London Times, “that if a Socialist party came into power with Sir Stafford Cripps as Prime Minister the anticipatory flight of capital from this country would be on an unexampled scale, even if the currencies of every other country in the world were inconvertible. On the other hand, when we did actually leave the gold standard, not only did internal prices remain steady but a vast amount of gold was voluntarily surrendered by holders and converted into currency, a fine compliment to the National Government. In all cases the determining factor is not gold but public confidence." Gold is a symbol rattier than a cause. One of its main functions is to act as a policeman to the politicians, and in these days of irresponsible dictators and unrestricted democracies it would be difficult to overrate its importance. President. Roosevelt up till now has not been willing to forgo the supposed advantage of an unstabilised. dollar, and so has deliberately avoided a definite statement of his monelary policy this notwithstanding that in the judgment of many competent critics, among them his Secretary to the treasury, Mr. Woodin, who lias just applied for leave of absence, the greatest single obstacle to business recovery on a broad plane is the uneeitainty about the future value of the dollar.