"THE SUREST ROAD"

Evening Post, Volume CXVI, Issue 24, 29 January 1934, Page 7

"THE SUREST ROAD"

AMERICA'S EECOVERYi

STABILISING THE DOLLAR

ECONOMIST'S ANALYSIS

Sir Walter Layton, editor of the "Economist," speaking on "The Dollar Experiment" at a luncheon of the American Chamber of Commerce, '.in London, said that if he expressed soma criticisms regarding American policy it was not for want of appreciation for what had in fact been accomplished by the new Administration, reports "Tha Times." President Roosevelt had contrived to do some splendid things. It was obvious that he had created a new sense of confidence throughout America; he had dealt with the Budget and with the enormously vexed question of soldiers' bonuses, and had succeeded in getting the banks open again. Since then he had done many things which would have a profound effect upon American economic life. , .- '■• He had taken steps to remedy some of the paradoxes of the American wage system, had assisted labour in many directions, and had taken action in regard to the structure of finance. His. company law had been much- criticised, but he (Sir Walter Layton) thought that it contained a great deal of good. Events, not only in the United States,' but in England, had done much in\jth9 last three years to' ■" emphasise that everything was not right withi what.we were pleased tov call • the capitalist system, 'and that there was room, both, in England and in the United States, for a much higher standard of j trusteeship on the part of those who were engaged in directing and' controlling grea-t business and financial organisations. President Boose velt was carrying into the sphere of monetary questions precisely the same general idea which pervaded a great deal of his policy, and foreign countries had.no reason to imagine that they were being taken unawares. The great events that had happened in the United States since March started with the banking. ,crisis of that month. It should not. be forgotten that the monetary problem was not just a thing by itself, but was intimately related to the whole economic crisis. Monetary" influences were not responsible for that crisis, nor. could they cure it. ' ECONOMIC ADJUSTMENT , NECESSARY. A great economic adjustment . was being called for. throughout the world. It was particularly necessary in the case of the United/States. The fall-in prices had affected the whole economic. life of the United States in a greater degree than that of any other great developed country. Since Mr. Boosevelt came into office there had been various attempts to' lift ; the level of commodity prices. One was made in May and June last year, and took the form of talking up prices and talking down the dollar. To some, extent it worked, but it was accompanied by active speculation and ran, far ahead of the events. The second phase was associated with the National Recovery Act and the attempt to produce prosperity by raising wages and getting purchasing power in the hands of the wage-earners and increasing the spending power of the community. But the problem of the recovery of trade and the development of prosperity depended on some' sort of balance in expansion. As a drastic means of forcing up prices it naturally ran into difficulty in connection ■with the increase in costs and produced inevitable setbacks. ' ' -' QOLD-BUYING POLICY. The third - phase was the attempt t« lift prices by a deliberate gold-buying policy. If that policy was confined to the buying of domestic gold it was of no significance and could not affect the general price level, but if an attempt was made to affect the- international price of golditwas a different proposition. A continued maintenance of the dollar below its normal level could,, be achieved only by constant and con^ tinual purchases of gold in the open world market. It was a costly ; procedure and would be difficult to commend to the United States in view of the enormous accumulations of gold she already held. The policy of gold purchases was open to other objections and criticisms. ' ", , .' The situation in America had created a position 'of very great uncertainty. He considered that while forces of recovery were, set in operation in the early months of President Boqsevelt's regime, the United States would have been farther on the road to recovery if greater time and care had been taken over the National Becovery Act and if nothing whatever had been done about the gold purchase policy. AlthougE the immediate results might riot be so effective, the surest toad for the United States now to pursue was to get some degree of stabilisation of ■■ the- dollar, which could be made in agreement with Great Britainl The United Kingdom was right to avoid following the .move-■ ments of the dollar as long as it jeould.