The Guardian And Evening Star, with which is incorporated the West Coast Times. THURSDAY, AUGUST 26, 1926. THE ITALIAN CURRENCY.

Hokitika Guardian, 26 August 1926, Page 2

The Guardian And Evening Star, with which is incorporated the West Coast Times. THURSDAY, AUGUST 26, 1926. THE ITALIAN CURRENCY.

The Belgian, French and Italian cuirencies* remarks a New York financial journal, are often spoken of as linked together sympathetically or in the minds of the public so closely that they must of necessity maintain approximately the same gold value. It i.s difficult to find any considerable basis for this theory. They had the same gold value before the war, but that has little to do with present- values. The latter depend in the three cases upon many conditions which are quite different in the three countries. They have certain competitive relations which affect trade movements, as described in the case of Belgium, but these are less important as affecting Italy than in the case of the other two countries. Italy is practically free from the incumbrance of a floating debt which must be continually renewed and which under

unfavourable conditions might lie rapidly converted into currency. The Italian Treasury is enjoying revenues which show a good margin over expenditure. Tn these respects the Italian position is stronger than thaj. of Belgium or France. Furthermore, the government of Italy is unified and has a. definite and sound policy; in this respect the situation there differs from the situation in France. When it comes to the balance of payments between ItaV and foreign countries t' situation is not quite so clear. Italy has an adverse trade balance, over against which are to be counted the expenditures of tourists in Italy, the remittances of Italian emigrants, the earnings of Italian shipping and perhaps other invisible items of smaller importance. Tt is not certain that these make a complete offset. The action of the exchanges of late showpressure, but in the present state of the exchange markets speculation is so important a factor that the cause of current fluctuations cannot be accurately named. In 1923 the rate on New York ranged between 22.fi and 23.4 lire to the dollar and in 1925 between 23.3 and 30.0. In the last two months the rate has declined from 24.8 to 27.5. Probably the rate has been affected by the decline of the Belgian and French currencies, but if so it signifies a speculative anticipation of the future course. Whether that anticipation is correct or not remains to he seen, but there seems to be little reason for supposing that there is any economic relationship requiring that the three currencies move together. What the public thinks about values, however, is very likely to influence values, at least temporarily. The balance of trade on merchandise account always has been against Ttnly, but covered usually bv tbe invisible credits named above. Tt is probable that the balance of payments on all accounts is not a very large sum. Th|ft Government of the country is making every possible effort to increase exports and diminish imports in order to make the currency situation secure. All three of these countries endeavour to impose close control over exchange transactions in order to prevent adverse speculations or the transfer of capital to foreign countries. but there is room to doubt whether these regulations on the whole accomplish anything for the purposes in view. They are not completely effective in preventing the transfer of capital out of a country, hut very effective in inducing everybody to avoid bringing capital into that country. They hamper legitimate international business in many ways and by so doing tend to restrain the action of the eeoqomic

forces which tend always to restore normal relations.