Currency Problems.

Press, Volume LXVI, Issue 20099, 1 December 1930, Page 10

Currency Problems.

The- latest number of the New Zealand Financial Times contains an interesting article by Professor B. E. Murphy about Sir Otto Niemeyer's visit to New Zealand " to advise the Government on " the present position and proper " future policy in regard to the major H problems of currency, finance, and "exchange." Professor Murphy dismisses, as unnecessary and wasteful, any return to a convertible pound in the Dominion, and, while disclaiming "inside information," gives it as his opinion that Sir Otto Niemeyer will recommend that the note issue in New Zealand should be converted into sterling exchiftge: that the banks " shall be compelled to buy and sell " sterling drafts on London at a price M within the theoretical gold points of " 27s 6d per £IOO either way." He bases this view on the argument that from the days of convertibility the nominal currency standard in New Zealand has been the gold standard; that the real controlling factor in the currency position was, and still is, London exchange; and that it would be better to build any currency changes on the de facto sterling exchange standard which the country has followed for so long, and to clarify and determine its fluctuations. The proposal would mean that the banks operating in New Zealand would have to make their own arrangements for cover in London, and that in their own interests they would be forced to devise some method of separating Dominion exchange from Australian. The first task, in Professor Murphy's opinion, will present no difficulty, since the banks " tiave plenty of gold to do i t with," but the second, he admits, will not be easy. It would appear, indeed, to be his opinion that until New Zealand establishes an independent exchange her currency problems cannot be solved. He also believes that another problem submitted to Sir Otto Niemeyer was the possibility of a uniform note issue for New Zealand which would involve taking the note issue out of the hands of the trading banks and transferring it to a Note Issue Board, somewhat on the analogy of the Issue Department of the Bank

of England, but on the merits of that proposal he declines at present to express a final judgment. Nor does he attempt to say whether the recommendations actually made will meet with the approval of the Government, the banking authorities, and the people generally. Although a strong, stable, and independent currency and exchange system means everything to New Zealand, it is never very certain that politicians can be persuaded to listen to economists.