EXCHANGE AND MONEY

Hokitika Guardian, 6 September 1930, Page 2

EXCHANGE AND MONEY

VALUE OF STABILITY. NOTED PROFESSER’S VIEWS. Fully 600 people mostly men, crowded a hall to hear a lecture arranged by die Economic Society of Australia and New' Zenlumd (Victorian branch) by Professor T. E. Gregory, Cassel professor or banking in the University of London, who is associated with Sir Otto Niemeyer in financial mission from England says the Melbourne “Age.” The subject of the lecture was the International Monetary Situation, and had “no reference, to the kind oi Australian problem with which the lecturer is concerned on his present trip.” Whether we liked it or not, said Professor Gregory, the whole world was bound together by the fact the livelihood and bread and butter of the ordinary citizen in any part of the universe to-day was influenced by circumstances taking place many thousands of miles, perhaps’, (from the place where he was actually working. The consequence of that from the standpoint money was the necessity for preserving a stable level rates of exchange, and, secondly, a reasonable stability in the value of money, not only between place and (place', but between one pei lod of time and another. It was not more than ten years since of these conditions was satisfied by the actual existing currency conditions. STABILISATION. Between the years 192 l and 1925 the gold system as tbe coiiihioll standard of value Was readopted. ! s be first system of overcoming tlie difficulties associated with fluctuating currency was to stabilise it. In Great Britain the results of stabilisation were to stimulate a deprea sion, but in countries like France and Germany what looker},. like a miracle took place. Both the latter countries lid the right thing, followed the straight and narrow path of virtue and for once found that it paid. (Laughter.) Because instead of the stabilisateion of their currency they dis covered that their price level at the moment of stabilisation was so much lower than the world price level that they could go on expanding credit ana sell at prices with which no other country could compote. But in the last two or three years the difficulties of the international monetary system had increased and tlie first of the really serious problems which bankers, economists, and statesmen had to face now was the position of what it was usual to call international .short loan fund. What happened to countries which depended upon their exports and a continuous system of international loan flotation if those loans suddenly came to an end ? I rom the standpoint of the economist one result was very obvious and painful. It wan this. In all those countries which had been particularly affected by the cessation of international loans the tendency to get back to the gold standard again had become very marked. Speaking of a sister Dominion, Canada, it was very doubtful if Canada was on the gold standard. They said they were, but English economists found difficulty in believing it.

It was certainly true of the Argentine, of Brazil, and other countries, that since 1929 there had been a tendency to get back to the gold standard. But economists foresaw that in an international scramble for gold the world price level would go down. In the period of depression which had succeeded the period of optimism, prices had gone on falling and no one knew how many years it would take before this condition would be checked. It looked as if the bank rates in London and New York were going to fall to a level not experienced since the ’nine tics of the last century. CENTRAL BANKS BLAMED. It was the malpractices of central banks in recent years that bad started the drop in the price level, and all people of the world had been saying, “A little taste of inflation will not do us any barm.” (Laughter.) Well, the central banks were faced with the extraordinary problem of stabilising the price level. But there was one thing even the Governor of tlio Bank of England could not do, and that was to produce an influence on people’s minds. What the economists were asking the central hanks to do was to stake their future on a theory. One of the troubles | in the way of international co-opera-tion was that the smaller central hanks