Poverty Bay Herald PUBLISHED EVERY EVENING GISBORNE, MONDAY, SEPT. 28, 1936. END OF THE GOLD BLOC

Poverty Bay Herald, Volume LXIII, Issue 19131, 28 September 1936, Page 4

Poverty Bay Herald PUBLISHED EVERY EVENING GISBORNE, MONDAY, SEPT. 28, 1936. END OF THE GOLD BLOC

The .action of France in finally yielding to the relentless pressure of financial and economic circumstances and devaluing the franc, should, since it has been taken in agreement with Great Britain, and the United States and has been followed by sympathetic reactions in other countries, be a major step in the direction of greater international stability. So far as France is concerned, she has made a virtue of absolute necessity, and if the truth of the recent negotiations is ever told it probably will be found that, her statesmen have played little part in the decision beyond giving way to international and domestic influences which had got beyond theii control. [ For many years, French politicians have adopted an attitude of unreasoning hostility to devaluation, adherence to gold having become a fetish with a very large section. It is striking evidence of the impotence oi politicians that the Government which was most determined in its opposition to currency manipulation, and which only last, month solemnly rejected .such a step, should be the one to capitulate. Other French Governments had been able to withstand such shocks as Britain's departure from the gold standard, the devaluation of the American dollar, and the dofection of one after the other of the few remaining gold countries, but to close observers it has been apparent for some time that the inflationary policy of the Blum Government would not make a continuation of impassivity possible. Whatever might be said to the contrary, the present i|g>vc was not unexpected, and the only question was how long it would lie before it was enforced.

Interest in the development will not lio so much concerned with the effect in Franco itself as with the international reactions, and in trie übsenco of any untoward move these ■should be wholly beneficial. There is not the slightest reason to believe that there will he any adverse influence'. In the first place, there i.s obviously complete accord between the three most influent ion financial Powers, and it may be assumed that there is some form of agreement elsewhere, It cannot, for instance, bo overlooked that. Inst month the head of the Eeichsbanlc, Dr. Sentient, conferred with the new governor of the Bank of France, and if. would be surprising if the question of currency stabilisation was not discussed and the German viewpoint ascertained. Other nationa hitherto have followed the lead either of France* or Britain,

and there is every prospect, and, indeed, already evidence, that they will continue to do so. This must, reside in a greater stability in international exchanges than there lias been at any time since, the war, and with a general linking of currencies., lo .some mutually acceptable standard one of the greatest obstacles to the free, How of .international trade will be removed. As has been pointed out; previously there is an inescapable bond between trade and finance, between currencies and trade restrictions, Countries in the gold bloc have been unable to maintain their exports in the face of competition from countries with devalued currencies, and In consequence of this loss of trade have been compelled to resort to all .sorts of barriers in order to retain their domestic .markets. Thus France not •only lost most of her export trade, but also prohiibted the greater part of her former imports. The logical outcome of her decision to devaluate should be the recovery, in part at least, of both—a freer exchange of goods with other countries. And what, applies to France, applies also to other nations, so that the newstability that i.s now in .sight should give a general impetus to international trade. It is significant that the comnmnicpie issued by the British Treasury should "attach the greatest importance to action being taken without delay to relax progressively the present system of quotas and exchange controls with a view to theii abolition."

So far as France herself is- concerned, there is still some occasion for anxiety. In the first place, it has yet to 1)0 learned what view the different political elements will take. The Senate is reported to be antagonistic to devaluation, and the Communists, who maintained the Government in power, recently peremptorily forbade such a step. It is probable, however, that they will reconcile themselves to the inevitable and realise that devaluation is not really a matter of Government policy, but an issue over which the Government actually had no control, except insofar as it was further necessitated by the Government's own inflationary policy. In this respect, there is a lesson even for New Zealand. France has learned from experience that it is impossible to raise wages and costs and heavily to increase taxation and at the same time maintain the international value of currency. The New Zealand Government is pledged, not only to all the inflationary policies hat France has adopted, but also to reduce the rate of exchange. Certainly she cannot do both, and the Government may, indeed, find it difficult to avoid still further dcvalua turn. Such a step, however, in face of the new international agreement might have far-reaching results and is an added reason for the Government's policy being watched with the utmost care. Apart from this aspect, the Dominion has everything to gain from what must be regarded as a first step towards the reopening of the world's markets, and it is her dutj to assist in every possible way in the furtherance of the movement for the elimination of currency and tariff barriers.