CANADA NOT INFLATING

Evening Post, Volume CXV, Issue 69, 23 March 1933, Page 10

CANADA NOT INFLATING

A. breach of contract is harmful not merely in what" it does, but what it is considered to imply. The man whose property is liable to 'be reduced by arbitrary Governmental interference with the value of the country's money, or with the terms of the country's bonds, may tolerate the present action,-but yet may be nervous of the future. Flight from the money unit whose value has been revised, down wards is a. common experience, and . one of the main grounds on which the Canadian Minister of Finance opposes inflation is the; "inevitable" result—"a flight from- our dollar, and withdrawal on a large scale of capital invested by foreigners in this country in the form, of securities and bank deposits." Foreigners who invested in a country when that country's money was about par are divided between dislike; of loss if they withdraw at a discount, and fear of greater-loss if they do not withdraw and if the discount becomes greater. To the two words "controlled inflation" they have a t double objection—they read .present loss in one, ;md doubt of the future in the other. A Government that has once inflated has the greatest" difficulty in assuring people of the future effectiveness of its control.1 At any rate the . Canadian* Government . expressly repudiates any intention to inflate or deflate. The fact that the Canadian dollar is "fluctuating about half-way between the United States dollar and the English pound" is deemed by the Minister of Finance (Mr. Rhodes) "a not unsatisfactory compromise." At the same time, the Minister proposes to do' something to even out those fluctuations of the external .value of money that injure the exporter. His proposal, as so far disclosed, is to do something directly for exporters, not to decree a general depreciation. He says that, for the purposes of meats and milk products and other defined lines of primary produce, "a stabilisation fund" will be created "to make good to exporters; the difference between the actual day-to-day exchange value of the pound and the pegged value." This is a proposal that will need to be examined to see that it keeps within the limits promised.by its author.' It is also a proposal that must command attention from New Zealand dairy exporters who compete with Canadian cheese in London, and who hope to get butter into Canada without incurring penalising clauses in the New Zealand-Canadian trade agreement;

Another principle laid down by Mr. .Rhodes is that when the Canadian Government proceeds presently with a loan conversion campaign "it shall keep faith with investors, and not in any sense repudiate existing contracts." With the prospect of a general fall in interest, conversion of 5 per cent, loans is sound for all parties. This is such good selling that the Canadian salesman will not carry a gun, and there will be no implications for the Government to live down. The premiums on Australian bonds suggest that these implications have already been lived down by the Australian Governments. They seem to have convinced the investor that there will be no more raids. To create a similar state' of mind in die Dominion should be the purpose of it!? 2 New Zealand Government.