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RATES OF EXCHANGE

!> A COMMERCIAL PROBLEM

POSSIBILITIES OF A STATE BANK

•' A- cablegram from London mentions that American financiers aro arranging u conference with British financiers to discuss "means of arresting tho declino in tho value of the .sovereign, which, it is recognised, seriously threatens America's export trade." Tho present .abnor. mul couilition of excliango is attracting a great deal of attention in local commercial circles, and any arrangement that can be made to restore tho value of tho sovereign in the United States and generally stabilise exchange conditions will bo welcomed. The existing rates', involve a loss of about 3s. on the sovereign when it is turned into dollars, and a corosponding gain to the Anieri. caus whon the dollars aro turned into sovereigns. Tho situation acts as a severe restraint on trade.

Sir Joseph Ward, in the political manifesto ho issued last week, mentioned that during tho war rates of exchange had advanced materially, and ho thought that tho timo' had arrived to "appeal to tho whole of the financial institutions" ill order to secure a reduction. "This is one of the directions in which a State, bank jvquld prove of considerable value," ho added. "It should not. of course, be a part of its policy to carry on any section of its business at a loss or without providing n fair profit for the work done for its clients, but it would have a. valuablo influence in helping to keep tho rates of exchange at a level where they would not bo such a hoavy tax as at present -upon producers and exporters." Banking authorities in Wellington aw not generaljy disposed to believe that a State bank could effect very much in the way of reducing rates of cxohaiige ".Rates of exchange are not determined in New Zealand, though admittedly th® banks work together to tho extent of maintaining a conventional rate," said ono banker yesterday. "That conventional rate is dependent upon tho rate prevailing in the Loudon market, and there does not appear jp be any way of changing that position. Business people are aware that under ordinary conditions rates of" exchange for many countries fluctuate from day to day. The financial houses In London watch the fluctuations with extraordinary keenness, and make some of their profits out of adjustments and movements of money, with percentages of profit so small as to look scarccly worth attention to the uninstructed layman. British Dominions, having strong and well-organised banks, have generally escaped those fluctuations by tho adoption 'of conventional rates, of exchange. But the rates muqt have a close relation to the London rates."

It 'was impossible to discuss intelligently the effect of a State bank on rates of exchange, . added the banker, without knowing something of the organisation and scope of the suggested institution. A State bank, acting: independently of the private banks, might choose to cut down its own profits by doing; exchange work slightly below the current rates. But the benefit to the commercial community would not be large, since the profit of the bank was only one of the' factors governim; exchange. 'The State bank would hot bo able to operato independently of the London monoy market. If a State', bank, handled ail the payments in coiuicction with the export of New Zealand produce, it would undoubtedly accumulate very largo credits in London and might be able to reduce exchange rates. It was well known that soine business houses saved money by arranging exchange between themselves. If A, a New Zealand exporter, had sold produce worth in London and had the money to his credit there; and if B, doiug business iu New Zealand, wished to pay for ,£IO,OOO worth of British goods for export to the Dominion, it was possible for A and B to arrange matters between themselves and save exchange. B could pay A ,iloiooo in New Zealand and tako over the ',£IO,OOO held by A in London. But it would hardly be suggested that a State bank would linndle nil the payments,' and failing that, it would bo in much the samo po'sition as the other banks. It is thought in financial circles hero that the effort of the British and American bankers to adjust exchange rates will bo successful, though some' time may elo-Dse before the pre-war position is fully' restored. The Americans are getting an advantage under present conditions, but they realise that if tho conditions continue the other nations will be forced to cease buying American goods. A strong effort will be made to prevent' this occurring.

Permanent link to this item
Hononga pūmau ki tēnei tūemi

https://paperspast.natlib.govt.nz/newspapers/DOM19190826.2.62

Bibliographic details
Ngā taipitopito pukapuka

Dominion, Volume 12, Issue 283, 26 August 1919, Page 6

Word count
Tapeke kupu
760

RATES OF EXCHANGE Dominion, Volume 12, Issue 283, 26 August 1919, Page 6

RATES OF EXCHANGE Dominion, Volume 12, Issue 283, 26 August 1919, Page 6

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