DIFFICULT TO CHECK RISING PRICES.

Hawke's Bay Herald-Tribune, Issue 112, 28 May 1937, Page 4

DIFFICULT TO CHECK RISING PRICES.

Questions bave again been raised recently as to tbe effectiveness. of a managed currency, according to tbe Alexander Hamilton Institute. In 1932, says tbe report, wben inereased monetary management was initiated in a number of European countries, it was declared tbat tbe purpose of sucb management was to maintain a relatively stable price level and to prevent excessive swings in business aetivity. In 1933, wben tbe United States abandoned tbe gold standard and additional powers were granted to tbe Board of Governors of the Federal Eeserve • System, a managed currency system was established in that^ country. However, wbile most countries were willing to adopt. tbose policies which result in an increase in prices and an increase in purcbasing power ,tbey bavo so far refrained from adopting measures whicb tend to decrease commodity prices and eontract purcbasing power. Thus, in ptaetically every country, tbe currency was devalued witb a view to raising prices and stimulating business aetivity. If tbe various Governments or tbeir central banks really wanted to adopt a managed currency they should be tbinking seriously of raising tbe gold value of tbeir currencies in order to prevent commodity prices from rising too sharply. So far, bowever, no Government bus made any effort to revalue its currency upward. Tbe fact . tbat tbe various Governments are unwilling to adopt deflationary measures will obviously result in tbe abandonment of managed currencies as a practical policy becanse it will have proven ineffective in tbe prevention of infiation and boorn conditions. Tbis will strengtben tbe. arguments of tbose wko fcivve always favouj^d a return to tbe gold standard* •