STABILISATION OF TRICES

Wanganui Chronicle, Volume 73, Issue 424, 15 November 1930, Page 13 (Supplement)

STABILISATION OF TRICES

“Attempts to stabilise prices must le international if they arc to have any hopes at all of success,” Air Gilbert C. Layton says in an article in the Banking Record. “Interest rates and prices are both consequences, not causes. They are controlled by the production and consumption of goods ami services, though it must be granted that th?.-' themselves affect both. As the present time is demonstrating, low interest rates will not necessarily bring about a rise in prices. On the contrary, while depression continues ami consumers are holding off. prices will be low because producers do not require credit to produce goods which are not wanted. . . .

Central banking powers to regulate price levels are incontestably subject to very severe limitations, but such institutions are demonstrably capable of exciting a definite influence over prices, it may be stated, paradoxically, that ,the justification for central banks pursuing policies designed to stabilise prices lies in the limited extent to which they can achieve their desires. To a greater or less degree, according as they are free from technical handicaps, banks are able beneficially to in.ligate temporary floatations am] to smooth out general price trends. Their inability entirely to prevent sustained movements indicating fundamental discrepancies between supply and demand leaves considerable scope for the sain laiy influence of price changes to have i lay.”