EXCHANGE .DIFFICULTY

Hokitika Guardian, 12 September 1924, Page 1

EXCHANGE .DIFFICULTY

PRIME MINISTER’S STATEMENT. WELLINGTON, September 10. In 11 10 House of Representatives this afternoon Mr IV. 1). Evsnar put tlio following question to the Prime Minister oil the subjec t of the exchange: Seeing that the official report of the Imperial Economic Conference, held in 15)23. discloses the fact that it was admitted on all sides (and by the Committee .set up hy the Conference) that a return to the gold standard would he the solution of the exchange difficulty, and that the Committee also recommended that exchange difficulties could he ameliorated if note issuing authorities were to accumulate sterling assets and to undertake to exchange their local currencies for sterling assets, and vice versa, and as exchange difficulties have obviously become aggravated since th date of the Conference, can the i rime Minister inlorm the House whether anything is being done, or any proposal being put forward, which is likely to lighten the unfortunate difficulty with regard to the question of the oxeha ages. The Prime Minister tcplied : The exchange position, instead of improving is becoming increasingly difficult. The '•isparity is too great. Producers and exporters arc at a disadvantage. It has been suggested that the difficulty might be overcome by means of Imperial short-dated currency .bills, conjointly guaranteed by Great Britain aiul the nominions. Such a scheme was very fully investigated by experts in conference, also by the financial advisers to the British Government. These experts, however, considered that the linaneial and < (institutional difficulties Lo be overcome were too great, especially in regard to what is known as "purchasing power parity” in the respective countries, and the control of credit and cm rencics administered bv each country independently. The Committee considered it was possible tu achieve the same, or at least similar results, by utilising and extending the existing machinery u[ banking and credit, without having resort- to the t n ation of a lien in,tt urnout of Imperial credit, v. itli tb(' various constitutional and linaneial difficulties to which that might give rise. Investigation led to consideration of another method of overcoming the obstacles of exchange with restricted gold movement. The recommendation, which was endorsed by the Imperial Economic Confereme. was that the best means of affording relief was through the operations of a central bank, with ample power to effect and control exchange operations as between its own country and the countries with which it principally traded, f'nder this scheme provision for the closest co-operation between the tentral hank and the note issuing authorities would require to lie made. I have been in constant communication with bankers and other linaneial experts regarding the best solution ol the world-wide problem, and this week a conference with the principal bankers lias been arranged with the object of considering the application ol the leeoniinendations of the Imperial Economic Conference to the exchange system of New Zealand. CONFERENCE'S REC’t iMMENdation. The resolution agreed to by the Committee at their meeting on November (!ih., l!»2.'l, was as follows: —The Committee, having considered their terms of reference, have unanimously resolved that where difficulties have arisen in regard to exchanges between certain parts of llie Kmpiio and between sueli parts and the I liited Kingdom —(a) The position could be ameliorated if note issuing authorities were to accumulate .sterling assets and to undertake, to exchange their local currencies for sterling and vice versa; (b) this measure might be further developed and assisted by the creation of central banks, and by mutual co-ope-ration as recommended by the Genoa Conference; (c) in some cases hank charges for buying and selling sterling appear to be unduly high and should bo capable of reduction. Hon. .1. A. Hunan: Are they suggesting that the note issue should be increased “ Mr Massey : There is no such suggestion here, but it follows naturally, as n matter of course. Mr Tlannan: Tl means the expansion of credit. Mr Massey: Yes. He added that he had arranged for representatives of the different banks of Wellington to meet him on Saturday morning. He hoped some good would result, liecnuse it was necessary to get rid of the difficulties of the present position or to have thorn ameliorated.