CURRENCY DEVALUATION

Wanganui Chronicle, Volume 74, Issue 229, 28 September 1931, Page 7

CURRENCY DEVALUATION

INTERNATIONAL COMPETITION ?

RESULT WOULD BE COMPLETE FINANCIAL CHAOS

POSSIBILITY OF PREMATURE INDUSTRIAL BOOM

CONFLICTING OPINIONS 0 N THE WORLD OUTLOOK

[By Telegraph—Press Association —C »pyright] Received Sept. 27, 5.5 p.m. LONDON, Sept. 26. It is financially impossible yet to attempt to assess the effects, either at home or abroad, of Britain’s departure from the gold standard, but the fact must be faced that the devaluation of the sterling threatens the exchange stability of practically every nation of the world, as a result of v hich, whatever the immediate repercussions, Britain’s trade balance will be temporarily paralysed. Early developments of the situation appear to depend firstly, on whether foreign countries, alarmed by Britain’s altered exporting position, devaluate their own currencies ahead of ours; secondly, whether, if they do, Britain’s devaluation will progressivly continue, thereby causing an international competition, and resulting in complete financial chaos. , There is room for serious doubt whether the devaluation oi the sterling by say 25 per cent., would improve Britain’s trade balance to"the extent that the public at present contemplate, as indicated by stock exchange quotations for industries. The public thus far has not attempted to differentiate between exporting companies with a high or low ratio of raw materials costs to the total costs of production, although the former will obviously benefit less than the latter from the depreciated exchange. Thus the present minor boom in industrials is likely to be subject to considerable fluctuations before prices reach 1 no economic levels. The anxiety of the authorities to prevent a premature industrial boom explains the apparent anomoly of the 6 per cent, bank rate. This, however, has not sufficiently deterred speculators, hence the edict that all bargains must be on a cash basis. Nevertheless, many are of opinio n that sound industrial equities are now a better investment than gilt-edgeds, as representing a partial insurance against the possibility of a further flight from the pound. One fact emerges from the welter of conflicting theories, and that is that until the sterling is stabilised, Dominion products is in nowise detrimental to the pound. On the contrary, it is most advantageous, as the Dominions are our best customers.