“RACING DOWNHILL”

Taranaki Daily News, 19 April 1933, Page 12

“RACING DOWNHILL”

CURRENCY DEPRECIATION.

A TEMPORARY ADVANTAGE.

The International Chamber of Commerce has coined a phrase, “racing down the hill,” to describe the struggle of nations to depreciate their currencies and so gain advantages over each other in world trade. In a review of the movement published in the latest issue of its official journal the chamber claims that it is necessary fo inaugurate a movement for a general return to gold. Unfortunately, it adds, marrying currencies to gold is not unlike human marriage; it is easy to say “Yes,” but the arrangement will break down unless certain collateral conditions are observed.

The many proposals eagerly canvassed in regard to monetary policy, the chamber states, give the impression that there is still not . a sufficiently general understanding of the importance of an international standard of value. When the common standard, is abandoned and the currency divorced from gold there is no barrier to a competition in depreciation among the various countries; and voluntarily or involuntarily they move in that direction. .In an. isolated instance a depreciation of currency gives the country in question a temporary advantage by way of an .export premium, but the moment the same thing is done by; others it becomes a race in currency depreciation, the only absolute limit of which would be the worthlessness of all currencies.

“Under a condition of currency instability the transaction of normal business through accustomed channels becomes difficult, uncertain and costly,” the chamber proceeds. “The lack of fixed relationships between the various currencies of the world turns normal international business transactions into a gamble. It creates further Government interference with the free passage and exchange of goods, and provokes sudden and abnormal tariffs and other barriers. Sterling fluctuations last year on onb occasion wiped out, on another occasion the 10 per cent, general duty imposed by Great Britain in March, 1932. The effect of depreciated currencies on the United States tariff, and on the whole industrial structure of the country which is linked thereto, may be judged from the fact that imports from depreciated currency countries for the -first half of 1932 fell only 7.7 per cent below the quantity for the corresponding period of 1931, while imports from gold par countries showed a decrease of 34.6 per cent. Seven depreciated currency countries showed an actual increase. “To this situation,” the review adds, "there seems only one answer. It cannot be a general sauve qui peut down the hill of universal currency depreciation. It can only be Jhe • pursuance of a policy of international co-operation and mutual concession in dealing with the causes of trade disorder and currency confusion, and of measures which will arouse confidence rather than alarm in capital and put idle currency and credit to work again.”