The Wanganui Chronicle SATURDAY, AUGUST 13, 1932. EMPIRE MONETARY POLICY.

Wanganui Chronicle, Volume 75, Issue 190, 13 August 1932, Page 6

The Wanganui Chronicle SATURDAY, AUGUST 13, 1932. EMPIRE MONETARY POLICY.

J7NTHUSIASTS for the various schemes for raising the price level will find cold comfort in the report agreed upon by the sub-committee on monetary policy set up by the Ottawa Conference. In the main the policy which the committee lias agreed on is in accordance with orthodoxy. Orthodoxy has triumphed in this Conference. Everybody is agreed that the present level of prices is lower than is convenient for the carrying on of world production and trade and that some method of reviving prices to a higher level is to be sought. When the committee states that this can best be done by raising gold prices it makes a statement which may not be clear to everyone. What is meant by the term ‘‘raising gold prices,” is that the price of commodities in terms of gold shall rise and not that the price of gold as a commodity shall be further advanced. But the difficulty about gold is that it is an international commodity, and as an international commodity it knows no geography. Gold tends to run to the point of the greatest reward. The point of the greatest reward is that country where prices of goods are lowest when compared with the price of gold. Put in another way, it may be said that gold tends to go to that place where it will buy the most. This is really too simple a statement of the actual conditions as they now prevail, but despite the fact that such a statement ignores some other disturbing factors it is nevertheless true for abstract argument. If then gold being an international commodity tends to go to those countries where the price levels are low, then it naturally follows that should the British Empire embark upon a policy of credit expansion which did actually result in the raising of prices within the British Empire then the effect of such success would be questionable. Production costs would rise within the British Empire and gold, insofar as it was mobile, would tend to go to those countries where the price levels oE goods and services was lower than those of the Empire. The low prices outside the Empire would, in consequence, tend to defeat the effort at raising prices within the Empire; for, with the outflow of gold, credit would be restricted and prices would thereupon again tend to fall. The sub-eommittee’s assertion that the raising of the pricelevel of goods through making gold cheaper can only be done by international action, is therefore quite sound. The question, therefore, removes itself, out of the Empire arena into the arena of international affairs. Having decided that the vital problem of the price level can only be dealt with by international action, the steps of an inter-Empire nature which are to be considered at Ottawa, thereupon take on a different aspect. Inter-Empire action cannot obviously be of an exclusive nature with the rest of the world when the co-operat.ion of the rest of the world is to be enlisted in order to solve the fundamental problem of the price level. If any considerable portion of the nations of the world are antagonised by anything done at Ottawa, then the mueh-to-be-desired co-operation of the other nations is hardly likely to be forthcoming. Instead of turning its attention wholly inwards the British Empire has been led by the simple force of logic to look at the problem of the depression from the viewpoint of the world; and who shall say thflt in so doing the sub-committee of the Committee on Monetary Policy, at Ottawa, lias not acted aright?