The Wanganui Chronicle, MONDAY, JANUARY 10, 1944. POST-WAR CURRENCY

Wanganui Chronicle, Volume 88, Issue 7, 10 January 1944, Page 4

The Wanganui Chronicle, MONDAY, JANUARY 10, 1944. POST-WAR CURRENCY

THE statement that he hoped the United Nations’ post-war 1 monetary stabilisation conference would be held early in 1944, made by Mr. Henry Morgenthau, Secretary to the United States Treasury, is a good augury. It appears probable that the war will be concluded during the current year. It may not be so, but it would be unwise to assume that the post-war currency question can he left unresolved for another year.

The problem which will confront the world after the war is that there will be many countries which will have no Treasuries and no taxation capacity at all. Other countries will have financial resources that will be inadequate for their needs, both immediate and in the short and long runs. Still other countries will be creditor nations with large overseas debts due to them as a result of Ihe war, which debts the recipients ol: the war-purpose goods will not be able to repay. These equipped nations will need to have overseas markets in order to maintain in employment the many men and women who have been drawn inlo these wartimeenlarged industries. It will be necessary to bridge the gap between the needs of the peoples of the world and their ability to pay for the goods on which they shall live and earn profits with which to repay those countries that have helped them to re-establish themselves.

Before any long and short-term contracts can be entered into between the governments of the various countries, and with individuals within those countries and those in other countries, it will be necessary to have some unit of value in which these contracts can be calculated.

The post-war slump of 1921 and the delayed slump of 1929-32 were the direct results of the fluctuation of the values of the various world currencies. A devaluation of the currency of a country is a partial theft, even though it is undertaken under the stress oi’ necessity or, as in New Zealand, for the benefit of the politically dominant group. But while it works to the detriment of the creditor currency depreciation also operates to the eventual detriment of the debtor as well, for it becomes increasingly difficult for him to buy forward. When a man’s ability to make future payments to the full is impaired his credit suffers, and he must perforce make immediate payments for everything that he purchases. When a country’s currency is depreciated a very similar result follows: the sellers to that country do not always demand immediate cash, but they do demand repayment in their own or soine other stable currency. To that extent the currency of the country of the purchaser actually goes out of use. The time-contracts of international trade are concentrated upon the stable currencies. Unstable currencies are ignored.

During the last century sterling became virtually the international currency. This is not strictly, but only approximately, correct; it was in part the cause and in part the result of the dominance of London as a financial world centre. Whenever there was an adverse balance developing in English trade the bank Tab" was raised, and because of the favourable conditions ini’ money being deposited in London gold flowed into the City. This brought up the balance, once again. Gold was the balancing agent. Since World War I two developments have occurred: the in creased output of gold by Russia until it has become the world’s largest producer, and the increased gold holdings of the United States until it has become the largest gold-holder in the world. The counter-balancing function of gold will still be necessary, but it will not help Russia to produce gold that nobody wants nor will America feel happy at becoming the automatic and, without profit, custodian of the world’s gold stock. Actually men don’t ward gold; they want goods. It is the function of a currency to facilitate the exchange of goods and it is the function of gold to keep the currencies stable. Where a condition of unbalance develops in the trading account of a nation it must find some means of satisfying the balance. If the balance is adverse it can ship gold to the creditor country; if the country is enjoying a favourable balance it can receive gold in settlement of the excess of exports over imports. Gold actually becomes then a commercial commodity. Gold, however, can only perform this balancing function while it is universally acceptable. Clearly, Russia, as the largest producer of gold, doesn’t want to receive more of it from the countries which become her debtors; nor does the United States desire to add to her present heavy hoard of gold. The old method which worked well enough throughout the greater part of the last century then will no longer fit the ease. Some other means will have to be found to bring stability into the currencies of the world or to provide a currency in which international transactions can be negotiated on a basis of the permanent value of the unit. While it is possible to contemplate the right of every nation to do what it will with its own currency—that is to say to use it for the purpose of robbing some of its own citizens—it must, in fairness to the citizens of other nations, stop short of robbing them. This would be a violation of that hoary principle that there should be no taxation without representation. As foreigners cannot be represented save in their own Parliament it is wrong for a State to endeavour to tax foreign capital, or to expropriate any part of it which happens to be within the State’s jurisdiction. The Communists think otherwise and so did the men of the New Zealand Parliament who voted for the reduction of the value of New Zealand’s currency by 20 per cent. To bring back the world to its feet a great international co operative movement, will be necessary, and to facilitate this a stable currency must be set up. A great deal of thought lias been exercised on the matter already and some off-the-record discussions ol great value have taken place. The American Treasury has produced the White Plan: the British Government has put forward tentatively the Keynes Plan. The Canadian Government has spun sored yet another plan and the French have also brought forward i plan. The Soviet Union, as was to have been expected, has als< xpressed its adherence to the gold backing of the international urrency, which will naturally give some ‘‘currency reformers headache. There is no dearth of plans. There is a plenitude l difference of opinion concerning the details of the various plans md these will have io be thrashed out by those who have an intimate knowledge of the subject, accompanied, of course, by a chorus of doctrinaires who have become intoxicated with genera, ideas which they refuse to examine closely.