Western Star AND WALLACE COUNTY GAZETTE. PUBLISHED Every Tuesday and Friday. TUESDAY, APRIL 13, 1920. EXCHANGE AND PRICES.

Western Star, 13 April 1920, Page 2

Western Star AND WALLACE COUNTY GAZETTE. PUBLISHED Every Tuesday and Friday. TUESDAY, APRIL 13, 1920. EXCHANGE AND PRICES.

Grave concern is felt in all quarters which appreciate the dangers of tho situation by the continued fall on the foreign exchanges in the value of the pound sterling. The fall is common to the currency of all tho countries which " participated in the war, including Germany, which is considered by good authorities to 1 be heading straight for bankruptcy. The present value of the German mark, which had a par value of one shilling, is three farthings. From! the British point of view the most embarrassing feature is tho fall of the pound sterling on the New York exchange, it being now quoted at 14/1. This means, of course, that the pound loses more than a fourth of its nonmal purchasing power in America. When this depreciation is viewed in relation to transactions in huge sums, its disastrous effects on trade are apparent. The effect upon imported food prices in Britain, and of articles imported into Now Zealand, is felt in every household. Thus the British purchaser has to pay £1 os lid for food stuffs which normally should) be purchased for a pound. International action was urged by leading bankers, and financiers waited upon the Imperial Chancellor of the Exchequer on the subject. Three suggestions were put forward by the l deputation. The first was the fixing of artificial rates of exchange. This was ruled out on the ground that it would create a greater chaos than now reigned, A second! proposal was that the British Government should undertake to guarantee foreign credits for a considerable time in. the case of certain Central European Powers. This was also turned down as impracticable. The third proposition was a proposal for a. loan to some European countries, notably Austria. To do this, in view of the straitened financial position, Great Britain/ would either have to raise an internal loan or impose additional taxation. The Imperial authorities might feel disposed to adopt one of these courses to render assistance if the United States would take the leading part in financing such a scheme. The United States, however, which is after commercial supremacy, will not join in concerted national measures. Its official statement to that effect tells Europe to drop armaments and get to work. Mr Carter Glass, secretary to the United States Treasury, has laid down the Aim erica 11 position. Ho declares that the rectification of the exchanges now adverse to Europe lies primarily in the hands of the European Governments. The normal method of meeting an. adverse international balance is to ship gold. The refusal to ship gold prevents the rectification of an adverse exchange. “ Relief,” he says “would be found in disarmament, tho resumption of industrial life and activity, tho imposition of adequate taxation, and the issue of adequate domestic loans. Tho American people should not ho, in my opinion, called upon to finance, and would not, in my opinion, respond to the demand that they should finance, the requirements of Europe in so far as they result from failure lo take these necessary steps. Such things as international bond issues, international guarantees, and international measures for tho stabilisation of exchange were utterly impracticable.’’ This is the American view. Mr Reginald McKenna, ex-Chan-, cellar of the Exchequer, presiding at n Bank meeting, in the course of an acMre'A, said that pnees vogld ft-

main permanently 7 on a far higher level than in 1914. Increased! production would bring down, prices to a certain extent; but the purchasing power of the world, measured in money, could not be materially diminished, Deflation would be very slow. An attempt to bring it about rapidly would cause widespread! ruin among manufacturers and traders. The only condition on which they would be able to’ check the rise in prices was that our annual expenditure was brought within the compass of our revenue. He pleaded for such a ruthless cutting down or postponement of' all financial outlay ’ by the State as would reduce our expenditure to a figure loss than our tax revenue, for by this method alone could we hope to 1 restrict the issue of currency, check.the rise in prices, restore our foreign exchange, and re-establish London in her old position as the financial centre and free gold market of the world. Air McKenna added that our existing taxation, which he believed to be higher than any other country in the world, was already dangerously near the point at which thrift, business enterprise, and needful capita! development became seriously impaired. From all which it may be gathered that the true economic remedy for disorganised exchanges is increased exports and national economy. If Britain can produce goods in sufficient quantities, which America desires to possess- then British credit will recover, there being, no chance of recovery while American imports are not being paid for by British l exports. To help iu the production of British goods, cost of production must be cheapened by relieving industry of burthensome taxation, _ and this can only be done by national economy so that national expenditure may be reduced to a figure less than the tax revenue.