Hokitika Guardian & Evening Star THURSDAY, FEBRUARY 26th 1920.

Hokitika Guardian, 26 February 1920, Page 2

Hokitika Guardian & Evening Star THURSDAY, FEBRUARY 26th 1920.

THURSDAY, FEBRUARY 26th, 1920

THE FREAKS OF THE ROUND NOTE,

Writing of the financial position at Home in December last, the Daily Mail pointed out that one of the many curious results produced by the war and the manufacture of paper money in Europe to pay for it is that to-day there is one spot at which the frontiers of France, Italy, and Switzerland meet, where the British pound Note has three Extraordinarily different values in francs. On the Swiss side its yalue is only 19 francs; on the French side it i s worth about 43 francs; and on the Italian side it exchanges for some 50 franc®. Before the war the pound was worth 25 francs in all three countries. What adds to the chaos is that these values are perpetually changing, so that no one from day to day knows what hl.s money will be worth when it is used to make payments abroad. Professor Einstein’s theory of relativity has brought confusion into the higher geometry, and now we are experiencing in financial Affairs trouble from a money standard which alters perpetually. Tflue same complication affects business dealings between Britain and the United States. In the last three months the amount of dollars and cents

that our pouud Note will buy has fallen 10 per cent. As the financial stringency, caused by the rate of exchange, the opinion is advanced that there 1* a general feeling that something ought to lie done by international agreement, but opinions differ very widely as to the degree of Government participation. The crisis, simply stated, is a,. breakdown

of international credit. Before the war the countries of Europe were paying their way, their industries producing sufficient to meet by exports what they owed for goods imported. Now it is not so. The case of Austria affords the best illustration. She wants food and other necessaries- of life which America and ourselves can supply. But Austria .has not the credit to pay for them. Before the war her exports to this ;pantry resulted in pounds sterling (directly or indirectly in the form of bank balances here) being pass-

ed from the importers here to the A us. trian exporters, in payment for goods,

With the sterling thus placed at their disposal the Austrians were able to pay for British goods. Now her industries are so disorganised that she has practically nothing to export, and therefore no sterling to pay far British goods or food from America. She has plenty of paper crowns, but if she offers these here the recipient has to convert them into sterling. Immediately the rate of Exchange-—tftio number of crowns that will be accepted for each pound sterling-—goes up to a prohibitive extent. Dealing with the general

position, at. one of the great London banks the foreign branch manager expressed ’ the view that some interna-

t ion a 1 agreement and Government guarantee would ibe necessary but tlmt the necessary credits must bo arranged through the ordinary banking machinery. “We want no more Government Departments,” be said, “dealing with such technical matters as commercial exchange and banking. There ought to be something on the lines of the Belgian Consortium. 'Die British banks advance sterling credits against the acceptances of the Belgian bank, knowing

that the Belgium bank have the guarantee of the Belgian Government behind them.” In regard to the specific British position, and the value of its pound note, the Daily Mail concludes by staking that there are only two certain cures for it, and both must he applied in combination—much larger production of goods to exchange abroad

for tlie food and raw materials we are importing, and stoppage of all wasteful and unproductive exponditur. If something does not happen soon, something will happen. Put in the briefest

way, in the words of a brilliant financial writer, “the buying power of our money is seriously diminished by its mere quantity.” We are manufacturing too much money (with the printing press) and not enough goods; and we are sending abroad too many promises to send goods hereafter —which is what Notes mean—and too little stuff.