Poverty Bay Herald PUBLISHED EVERY EVENING GISBORNE, TUESDAY, NOV. 6, 1934. MONETARY STABILITY

Poverty Bay Herald, Volume LXI, Issue 18547, 6 November 1934, Page 6

Poverty Bay Herald PUBLISHED EVERY EVENING GISBORNE, TUESDAY, NOV. 6, 1934. MONETARY STABILITY

The London Economic Conference, for which such great preparations were made, had as one of its principal objects the institution of monetary stability. The proposal came from Great Britain, which was prepared t.o throw in its lot with other nations, and to make sacrifices if necessary, to ensure the regulation of currency and exchange within fixed and definite limits. The conference, as we all know, came to a sudden dramatic, conclusion because the newly installed President of the United States flatly refused to enter into negotiations on tho subject. He had prepared a formula for recovery for the United States, and saw no need for entangling alliances with other nations. About 20 months have passed since then. President Koosevelt. has spent over ten billions of dollars —equivalent to two billion pounds—of hi.s country’s money on measures of relief and recovery. It is almost impossible for tho rnind to take in a sum of that magnitude, and yet it by no means represents tho end of tho Government expenditure entailed by the recovery plan. The results are admittedly disappointing. Whilst there has been some stimulation of business and United States' citizens, with their usual optimism, are ever looking on the bright side of things, the winter is approaching with an appalling amount of unemployment and distress yet to be dealt with, with overseas trade stagnant, and the national finances drifting into a position in which much higher taxation than American people have ever been required to pay will be called for. The pouring of immense sums of money into artificial production has failed to get business functioning again, Doles—no matter how tremendous —will not start the machine. The amount of bank credit in business in the United States has continued to contract throughout the past' year and a half, during which time the Washington Administration has employed as one of the main items of its recovery programme the creation of an abundant supply of cheap credit. Something more than chenp credit is required to do the trick and it is not surprising to learn, that the President now is turning to the course he spurned at the time of tho London Conference, and has announced that the United Stntes Government will propose to the International Institute of Agriculture, shortly to be held, international monetary eo-operation as a means of eliminating one of the principal hindrances to trade. America’s refusal of co-operation in 1933 has been explained as merely an outstanding example of the economic nationalism on which the conference came to grief. Economic nationalism has been in full swing ever since, and perhaps the best proof that the world is beginning to apprehend its futility

is the fact that President Roosevelt now considers the time ripe to ask the world to come to some arrangement whereby the values, of currencies in terms of each other may fluctuate within the narrow limits of pre-war days. The implications of this proposal arc considerable. They signify America's desire for a readjustment of tariff barriers and a resumption of trade. They suggest that experience has shown that the devaluation of United States currency, carried out to the extent of almost 40 per cent since the world conference, lias given American exports sufficient competitive advantage to warrant them .seeking a stability in international exchanges. There can be no doubt that monetary instability is one of the root causes of the world's troubles. Economic nationalism has so curtailed international trade that the struggle to obtain a s>aro of what remains creates ill-feeling, shatters confidence, and leads to, despair. As an illustration it has been' pointed out that should the United States devalue further than she has. done it is believed she will jjtfun further advantage, to the disadvantage of others, unless the people tQ whom she exports put further restrictions on their trade with. her. Exchange uncertainty extends to all nations, even to those which have kept to gold, because as regards the latter there are constant rumors, that they will be forced off the standard and the trader'has to take precautions in case the rumors should bo well founded. The necessary insurance adds to the cost and puts a brake upon the international interchange of goods. Decisions of the International Institute of Agriculture, the Sydney Morning Herald states, cannot have any binding effect on monetary policy, but tho United States would find there a sympathetic conference. The American delegates could put their views and reasons before the Institute without risking any "loss of face” through rejection. No decision as to the actual measures to be adopted would bo arrived at by the Institute, but as practically all countries are represented on that body and as it has been established for facilitating the interchange of primary rural products, tho effects which would follow any stabilisation of international exchanges could bo thoroughly gauged by it. "Wheat is the Institute’s bestknown study. Could the United States show that, the proposals she has to make would result in more buying from the countries producing for export, she would greatly strengthen her case. Two largo areas of currency stability exist —tho sterling area and the gold bloc area. The former, comprising, as it does, the British Empire and tho Scandinavian countries, is by fa- the larger. Monetary interchange between those countries has been .apparent. Though there have been many arguments in Britain and in Australia against. the maintenance of the Australian and New Zealand exchange rates, the fact that the Financial Times has declared that alterations in inter-imperial rates should be few and far between, indicates itlrat exporters an Britain now recognise the necessity of accepting the present valuation of the Australian and New Zealand currencies (ts a fact not. to bo altered without grave consequences. The stability is itself an argument for tho benefits Which would, aceruo were its extension possible to the world at large."