MONEY SHOULD BE REGULATED.

Star (Christchurch), Volume XLIV, Issue 185, 6 August 1931, Page 16

MONEY SHOULD BE REGULATED.

CENTRAL BANK CITED BY PROFESSOR TOCKER. The Chamber of Commerce room was taxed to capacity when over 100 members of the Christchurch Accountant Students’ Society attended to hear Professor A. IT. Tocker speak on “ Banking and Price Levels,” with special reference to Sir Otto Niemeyer s report. Mr IT. A. C. North (president) occupied the chair. “ At the present time great interest is being shown in the connection between banking and the price level,” said Professor Tocker. “This is due largely to the widespread belief that the recent heavy fall in prices is due to deflation of money. Examination of banking returns in many countries, however, fails to show that deflation preceded the fall, and it appears that the price decline has been caused larg'd v by conditions over which bankers can have no control. In America, for instance, bank deposits increased greatly between 1922 and 1928. There was no corresponding increase in prices of goods, but prices of shares increased much more than proportionately. Bankers may control the total supply of money; they cannot control the proportions which the public elect to use • for commercial and for financial purposes respectively. Consequently the commercial circulation might increase or decrease greatly and prices might rise or fall without any variation .*in the total quantity of money. Price Movements. “ It follows, therefore, that the control which bankers can exert over prices is very limited. Price movements are due to many factors, and the volume of money in circulation is only one of those factors. “An important recent step has been the establishment of the Bank of International Settlements in Switzerland. The hope has been widely expressed that through the agency of this bank the activities and policies of the central banks of the leading countries will be co-ordinated, and hence a greater degree of rationalisation and co-opera-tion will be secured in the international management of money. Should this be done, prices, credit conditions and business, both national and international, would have a sounder basis and would probably be much more stable. The efforts already made to secure co-opera-tion in dealing with the German financial crisis indicate that very good results may be expected from such cooperation. Long Overdue. “In New Zealand, where the gold standard has been suspended and the currency has been on a paper basis since 1914, some definite regulation of the monetary system is long overdue. Nearly a year ago, Sir Otto Niemeyer visited New Zealand to report on methods of currency and exchange regulation. His report has now been published by the Government. It recommends the establishment of a Central Reserve Bank, whose main function would be to manage a uniform note issue and to maintain stability of exchange and of credit conditions. The bank should be entire l free from political control, should have its profits limited, and should have certain privileges granted in exchange for the responsibilities it has to undertake. “ It could not be expected that anv variation of our monetary system could safeguard us completely from the effects of wide fluctuations in world prices of the products we export, but the Niemeyer Report offers us a means of monetary regulation which is consistent with monetary practice in New Zealand, which could be relied on to maintain stable conditions of _ currency and exchange, and which might, at the same time, rationalise our methods of credit control and make possible substantial economies. As such it should receive the fullest consideration.”

Question time provided many inquiries to which the professor gave full and detailed replies. A vote of thanks by acclamation closed the evening.