The Waikato Times With which is Incorporated The Waikato Argus. SATURDAY, JANUARY 21, 1933. THE RISE IN EXCHANGE.

Waikato Times, Volume 113, Issue 18850, 21 January 1933, Page 4

The Waikato Times With which is Incorporated The Waikato Argus. SATURDAY, JANUARY 21, 1933. THE RISE IN EXCHANGE.

The Government is to be congratulated on its decision to raise the rate of exchange to 25 per cent. It is the fairest and most effective method of affording that relief to agriculture which is necessary if it is not largely to collapse. The discrepancy in prices of imported and locally-manu-factured goods as compared with tho prices of exports made adjustment inevitable, and the difficulties of any other method left exchange as the sole choice. It has been argued throughout the Dominion with much heat, and unfortunately in most cases from a personal point of view. The importer who thinks high exchange will injure his business is willing to see every farmer who cannot pay his interest sold up, and actually seems to think that some benefit will be obtained thereby. City newspapers with city interests are almost unanimous in opposition. Economic experts are equally unanimous in approval, and it is to the credit of the Government that they have listened to the disinterested adviser. The 25 per cent, exchange Is not going to cure all our troubles, but if Is going to help, and to help more effectively than any other method.

The banks and the importer.-, are haunted by the fear that imports will cease because of the exchange. That has not been the experience in Australia, and is not likely to be so here. With more money in the country trade will Improve. For the past two years imports have been much less than normal, and stocks are low. With any revival of trade there will at once bo larger orders sent Home and the Government who have agreed to take from the banks any surplus of exchange beyond that required by importers and by the payment of interest in London, will find that their guarantee involves them in little or no liability. The Ottawa Conference stipulated that there should be a reduction in our tariff, over and above the specified lines, which were few and small enough. As a set-off to the increased protection given by higher exchange there should now be a general reduction of duties so as to obviate any increase in the cost of living. This will not injure the local manufacturer who will get his protection from exchange instead of from tariffs.

As for the future course of policy it is impossible to say. It depends upon the course of prices which again depends upon the policy of many countries, notably the United States. It is not at present possible to decide upon any line of action for more than a limited time in a world where conditions arc changing so rapidly. This was the reason for the formation of a Coalition Government and the appeal to the country for support. The Government's action in raising the exchange is in strict accord with the purposes for which they took office. There will he general regret that Mr nownie Stewart was not able to agree with Ills colleagues on the question, but in the circumstances lie has done well to resign. II is not, a parly question, hut one which will be decided by events. In six months’ time we shall

know whether the right thing lias or has no! been done, and we do not think there will be much hesitation in deciding in its favour. It is notoriously unwise to prophesy. The many announcements that we have turned the corner have provoked ridicule. W'e

I are not going to add to the number of

such announcements. We have always held that among many causes of depression, political action and particularly that of the United States is chiefly to blame. In that country financial and economic experts are aware that the policy is wrong. The average American has this still to learn, and it is very doubtful if he will learn it from argument or from anything but ocular demonstration. If he sees Europe escaping from depression while his own country remains in it he may believe, but argument will simply be called academic or denounced as Wall Street.

It is fortunate for the world that there are faint indications of better times in Europe. Britain is certainly more hopeful and with reason, hut in addition the Economist newspaper provides a valuable barometer. It receives reports weekly from every country of importance and many of these reports point to indications of a ohange in conditions. It is one thing in one country and another in another country, but all in the direction of improvement. We cannot look for any great change until the possibility of international trade is restored by moderating tariffs and abolishing quotas.

Whether the world has learnt the lesson that tariffs for anything beyond revenue are unadulterated mischief, is still uncertain, though we may feel inclined to say that if they cannot read the signs of recent years they would not be oonvlnced though on 3 rose from the dead. If anyone wishes to argue that increased exchange is on the same footing as protective tariffs it can be pointed out to them that the tariffs have created the desperate disease for which a desperate remedy has had to be found.