EXCHANGE STABILISATION

Taranaki Daily News, 29 January 1934, Page 9

EXCHANGE STABILISATION

NOW NECESSARY PROCEDURE. OPINION OF ECONOMISTS. International co-operation in the direction of stabilising exchanges will be essential now that America has definitely decided to devaluate the dollar, according to Christchurch studeiits of economic developments. They pointed out that France would be forced off the gold standard before very long, and that the other countries in the gold bloc— Holland, Belgium and Switzerland—would have to follow her. That would leave the way open for international agreement on a lower gold standard and the readjustment of the world’s affairs in trade, debt payments, and budgeting. One man pointed out that President Roosevelt had already hinted at world negotiation on the subject of the gold standard so that all countries could return to gold on the basis that America had adopted. He said he would not be surprised if that object had not been at the back of Roosevelt’s mind when the United States began its career of inflation.

It was pointed out that any attempt to create an international monetary system must solve three problems. It must not aggravate the cyclical movements of business; it must prevent any reaction on prices by reason, of the fluctuating yield from goldmines; and it must reduce the shock to general equilibrium caused by internal changes in one country. Central banks throughout the world must co-operate and modify their domestic policies in accordance with the needs of the international situation.

If France were forced off the gold standard, the sterling price of gold would fall, but the fall would assume menacing proportions only if suspension of the gold standard in France were followed by the sale of gold hoardings, the abandonment by ' the British authorities of their present control over the gold market, and America’s renunciation of the policy of buying gold.- America’s gold-buying policy had proved a failure, and now the deliberate devaluation Of the dollar was being undertaken, but it was scarcely likely that the other two conditions would be fulfilled at the same time.

If France suspended the gold standard, the international atmosphere would be cleared, and the way would be open for international co-operation in fixing a new monetary standard.