The Hokitika Guardian THURSDAY, FEB. 9th, 1922. COLLAPSE OF CURRENCIES.

Hokitika Guardian, 9 February 1922, Page 2

The Hokitika Guardian THURSDAY, FEB. 9th, 1922. COLLAPSE OF CURRENCIES.

A geeat fiscal problem will face the coming Genoa conference of European .nations in the fact that the most of tlie countries represented are suffering 1 grievously by reason of the collapse of their paper currencies. The collate affects- not only their foreign trade but also the internal life, and they have not the resources to enable them, as has been said, to “get out o£ the fatal cycle of currency inflation and currency depreciation.’* There is social demoralisation because of the need for an effective medium of exchange. In dealing with the vast and intricate issues involved, an American financial journal thus discourses on the fundamentals of currency which is wort!' studying as an illuminating exposition of the economic outlook for Europe. The fundamental requirements for currencv reform of the European situation are that the currency shall be divorced from the fisoal needs of the governments and that paper money shall he redeemable in something that all the world esteems of rqai value. Apparently there is no way out for most of the countries referred to above but by cutting loose entirely from the old currencies which have become so vast in volume, and so depreciated in value that they would Bink any new monetary '

system that attempted to become responsible for them. Their fate will ■have to be left to the future. Once the governments; are on their feet financially some plan for disposing of the old issues, by funding operations or otherwise may be possible, but the new system should start free from every such incubus. The committee of the League of Nations, in attempting to deal with Austria has planned a new central banir with note issues based upon a gold reserve, although nothing has been done about it yet, because certain claims upon the Austrian government by other governments must be postponed by consent to enable the Austrian government to provide a share of the capital. Other plans for banking organisations on a gold basis have been proposed. Mr Vanderlip has proposed one for a great international hanking corporation which would have subsidiary national banks in the several countries. These plans have the great merit of offering a currency not involved in the government finances, and not attached to the great mass of outstanding issues. It is assumed that the public everywhere would welcome an opportunity to do business in terms of gold, and that gradually business would be shifted to the new basis. It is believed that in all of these countries there are considerable amounts of gold in hiding that would come to the new institutions, and that outside capital would improve the opportunity to enter the countries and do business, on a gold basis. The banks would he rallying posts for all interests desiring to co-operate in the introduction of sound money in those countries. The difficulties attendant upon any such change are great, but somehow the change must be made. As for the dan ger that gold would be withdrawn from the new banks for export, obvi ously it would have to Be the policy of the banks not to incur any obligations that were not offset by gold assets, either in hand or in the shape of foreign credits. This .would seem to limit their business in the beginning to very small proportions, but there does not appear to be any other way that a new beginning can be made. The now institution must not be entangled in any discredited system.