The Daily News. TUESDAY, SEPTEMBER 16, 1924. BURDEN OF EXCHANGE.

Taranaki Daily News, 16 September 1924, Page 4

The Daily News. TUESDAY, SEPTEMBER 16, 1924. BURDEN OF EXCHANGE.

The debate in the House last week concerning the exchange position, though affording little indication of a satisfactory move towards solving a problem that seriously and very adversely affects the producers of the Dominions, may yet lead, if not to the eradication of the evil, yet to a mitigation that may prove to be an appreciable measure of relief. The Premier (Mr. Massey) recognises that the exchange position, instead of improving “is becoming increasingly difficult,” and after recounting the various proposals that have been made for overcoming the difficulties that have existed for some long time past, he intimated that he had arranged to meet the representatives of the banks in Wellington in the hope of overcoming, or at least ameliorating, the present position. Judging from past experience In this direction, there does not appear to be a likelihood of that hope being realised, though Mr. Massey’s action may well be commended, as it will disclose whether or not t lift banks will be willing to amend a serious breakdown in their system, and so extend their existing machinery of banking and credit as to overcome the difficulties as to exchange charges for which that system is responsible. Amongst the various suggestions that have been made for overcoming the obstacles of balanced exchange with the restricted gold movement, was the institution of a central bank, and it may possibly be fopnd it is in that direction the solution of the problem is likely to be evolved, unless the banks oppose instead of co-oper-ate in such a settlement of the trouble. It has to be remembered that whilst the whole of this exchange impost finds its way into the coffers of the banking institutions, yet it does not follow that these institutions will not welcome a satisfactory’ working scheme whereby the objectionable exchange charges will be eliminated and the purchasing power parity of the units of the Empire and the Motherland equalised. There is nothing impossible in relation to solving this problem, if once the banks, the commercial community and the various Governments throughout the Empire concentrate their energies thereon. Reduced to plain terms, the exchange system is merely a matter of book-keep-ing—of debits and credits—and now that the whole of the Empire’s currency is in paper, of one kind and another, it appears to the layman at all events that there should not be any insuperable difficulty in establishing a central Empire commercial bank that would act as a clearing house for adjusting these debits and credits, thus saving producers and exporters from the burden of exchange. The expenses of such a “clearinghouse” could be met by quite a nominal charge per cent., in view of the many millions involved in the transactions concerning imports and exports each year. It is recognised that under such a scheme there would need to be the closest co-operation of this central bank and the note-issu-ing authorities, and as the matter is of such vital importance to the whole Empire, not only should this co-operation be readily forthcoming, but it should also have the backing of the several governments interested. In the course of time the central bank might be expected to build up a reserve that would of itself suffice to stabilise currency, for the reason that there would be no dividends to pay and the expenses should not be large. If such a scheme should find favour, it could only be expected to be successful as an Imperial institution, with a capable manager, the controlling authorities being appointed by the governments concerned, and. if possible, selected from the London commercial agents of the Dominions. How-

ever, the arranging of details may well be left until after the scheme materialises. Possibly some simpler or more effective plan may be evolved. If so, it will be most welcome. The main consideration is that some effective and practical solution shall, as speedily as possible, be agreed upon and brought into operation. The position has drifted from bad to worse and the producers are naturally agitating for relief from a burden that is in effect depriving them of their hardehrned returns from their capital and enterprise. In a sense the heavy payments on account of exchange represent so much wastage of money that could go towards procuring increased production by means of improvements. The economic position at the present time admits of no wastage, hence the need for a new system that will overcome the existing evil and ensure for the producers the full return for their ventures.