THE MAIKATO TIMES MONDAY, AUGUST 26, 1935. CURRENCY STABILISATION

Waikato Times, Volume 118, Issue 19664, 26 August 1935, Page 6

THE MAIKATO TIMES MONDAY, AUGUST 26, 1935. CURRENCY STABILISATION

World stabilisation of exchanges is an objective of British iinancial policy, but it is not of ‘recent adoption. Stabilisation depends primarily on the readiness of all countries concerned to make the adjustments necessary in economic policy for the smooth worlnn o of an international gold standard. This will prove a lengthy piocess There is still no sign of general desire for stabilisation, and only after the desire has been generally shared can the implementation o the policy be undertaken,

But, in the meantime, a meed of stabilisation has been achieved. When Great Britain abandoned the gold standard in Septem ei, 1931, her action was followed by certain other countries for vhom the importance of connections with the United Kingdom made l imperative that their currencies should be kept more or less in equilibrium with sterling. Since then, others have adopted a similar policy and the nations in the sterling area now include more than onethird of the estimated population of the world and approximately the same proportion of international trade. Apart from the Bntis Empire, the sterling area does not comprise a political or even an economic union. Tho sterling group may be said to comprise t e British Commonwealth - (with the exception of Canada), Denmark, Estonia, Finland, Norway, Portugal, Siam, Straits Settlements, Sweden, and most of the South American countries. The area thus includes nations with widely differing economic problems, methods ot government and standards of prosperity, and the only feature common to most of them is their interest in the British market.

For most of the countries in the sterling area, trade with the United Kingdom forms a very large part of their export business and, realising the vital importance of their market they have taken steps to safeguard their interests. Similarly the United kingdom has endeavoured to expand her markets by concluding trade agreements with countries inside and outside tlie.group, the most important development in this direction being the arrangements concluded at Ottawa between the chief countries of the British Empire. British countries have benefited as a result of this policy.

The ability of the nations in the» sterling area to maintain and to expand their exports to the United Kingdom during a difficult period for world trade generally has been partly responsible for the improvement in economic conditions experienced, lhe moie favourable position of external trade has stimulated domestic business and the revival has been reflected in a reduction in unemployment and an expansion in production, while the increase in imports has had favourable reactions on the demand for British products.

Dealing with conditions over such a large area, however, it is not possible to generalise. The depreciation of the currencies of the countries in the group has undoubtedly helped to stimulate their export trade and lias tended to restrict their imports from countries which have continued to maintain their previous gold parities. In the case of the United Kingdom, and probably of certain other countries, some depreciation was needed to correct an existing maladjustment between internal and external costs and prices, thus removing an important handicap under which they had been suffering, although this movement has had adverse repercussions on the gold standard countries. It should not be overlooked, however, that the sterling area has not had a monopoly either of industrial statistics or of currency depreciation, but, at the same time, the statistics of British trade suggest that some special influence has been in operation to encourage trade within this particular group of nations and, apart from their interest in the prosperity of the British market, which is also shared by many other countries, the only common factor not applicable to those outside the group is stability of exchange quotations in terms of sterling.

Sterling is the bridge that is carrying the sterling countries from depression towards recovery, and when this bridge is strengthened and 'widened by world stabilisation, the road to recovery will be opened before us.