CURRENCY AND EXCHANGE.

Hokitika Guardian, 9 March 1920, Page 4

CURRENCY AND EXCHANGE.

ADDRESS BY SIR JOHN. FINDLAY At the invitation of the Canterbury Chamber of Commerce, Sir John Findlay, K.C., delivered an interesting address on “Currency and Exchange.” Mr J. Gr. Herdman, president of. the Chamber, occupied the chair, and there was a very large attendance, numbers of those present being unable to find seating accommodation. Sir John Findlay said that many people regarded the sovereign as pos- 1 sessing a stable unvarying purchasing power, that neither rose or fell. It was, they thought, commodities whose prices rose and fell. Here lay a blun-„ der which had a wider pernicious effect than most people dreamt of, for few tried to trace the movement of prices to the main first cause. There was an urgent necessity for a clearer vision wit., regard to our currency, and this necessity had been impressed upon us by the war and its consequences. Vast inflations took place in the paper currency, and bank credits among belligerents, and in gold inflations among neutrals. The result had been that the purchasing power of money had everywhere fallen. It could not be too strongly impressed upon the public mind that the more money there was in circulation in a country the dearer did commodities become, while the less money there was, the cheaper they were. Two great causes could be assigned for the growing evil of the rising cost of living—one was the reduced production of commodities generally, but the other, and the greater cause, was the enormous inflation of all kinds of money, due to war expenditure and war conditions. In the absence of a world war the reason for the rise and fall of prices was really due to gyrations of our monetary system, and to the fact that so far from the sovereign possessing a uniform stability of purchasing power, its purchasing power had always been unstable, its stability varying with different conditions. This was because the unit of money as at present determined was not really a unit of value at all—that was of “purchasing power” —but strictly a unit of weight. The sovereign was not guaranteed by the State to be of any fixed value, nor to have any fixed purchasing power, and it was not guaranteed to be in any way non-fluctuating. All the State guaranteed was that it should have a fixed weight in gold of 123 J grams eleven-twelfths fine. In point of fact our monetary unit, the sovereign was ij.c only unstable and inconsistent unit left in civilisation. After giving some concrete examples of the unstable nature of the sovereign in terms of purchasing power, Sir John said it was in the world of. wages and fixed salaries that the wider’ injustice was now created, and if the present' 1 system was continued, they would perpetuate the main sources of social discontent, industrial unrest, and extremes to which an ever rising cost of living was driving a large proportion of the workers. The causes of the diminishing power of the sovereign, or to put the question in another way, the main reasons assigned for the in- ■ creasing cost of living were: —(l) [ Speculation; (2) profiteering; i(3) lab- ; our unions’ campaigns, strikes, etc; ; (4) go-slow policy; (5) rings, combines, f and monopolies; (6) high price of land and its monopoly ; (7) extravagance of I Government; (8) mismanagement of public services; (fl) the war, its cost, and consequences including the enormous withdrawal of men from the fields of production; and (10) the increasing inefficiency of labour. There was no doubt that these causes had contributed to the increase in prices, and that the war had been a large factor, but those who thought the war could be invoked as a new cause, overlooked the fact that long before the war there was a gradual increase in prices, which increase was still going on. Though the causes enumerated above had no doubt influenced the ris- : ing cost of living, he maintained that the rise had been generally, if not mainly, due to the inflation of oiir currency by the over issue of paper money. All the signs arid proofs of this were present in New Zealand, i.e.: (1) The premium on gold; (2) the rise in the rate of exchange; (3) the flight of metal money; and (4) the rise in prices. The first duty of a Government when it perceived these signs was to absolutely forbid the emission of any more paper money, and if the extreme level of a safe issue had been overstepped it must endeavour to retrace its steps,’ and destroy the paper money as it returned to the Treasury .until the right amount was in circulation. This involved a sacrifice on the part of its revenue. The speaker said the great desideration was from the State to stabilise the gold standard, and to provide a sovereign of constant purchasing power. It ..was clear that if the currency remained inflated as it was now, prices would not fall and if the present high prices had come to stay wages should be promptly and carefully adjusted, so that the “real wage” intended should be secured by . such increase in the “money wage” as was necessary for the purpose. Sir John then spoke of the effect currency inflations had both nationally and internationally, and explained the operations of foreign exchange. The only cure of the present state of affairs was to press on with increased production, and to reduce the eurrencyjjiflation. Sir John was loudly applauded at the conclusion of his address, and a hearty vote of thanks was carried enthusiastically.