MANAGED CURRENCY

Hokitika Guardian, 15 July 1931, Page 3

MANAGED CURRENCY

. MACMILLAN COMMITTEE REPORT. (.United I’rtdß Aeoociauuu—iij n,lectn< Telegraph.—Copy right, j LONDON, July 14. The report of the MacMillan Comini.tee on Finance anu Industry, , which was presided over by Ixnd .UadMillan, was published to-day. The report is signed by all the members of the Committee, except Lon, Bradbury, who presents a■ _ reasoneu memorandum of dissent. After reviewing the maink'e'conomi, and financial developments since the return to the gold standard, in 0) year 1925, the Committee conclude : “The economic difficulties ol' the post war decade have primarily been due not to any wantom misbehaviour ii. the monetary factors, but to unusually large and rapid cnanges in non-inone-tary phenomena—for instance, an unusual instability in the demand fo. capital, war debts, the rapidity ol technical changes in manufacture and in agriculture, the rigidity of wage; rates, the growth of tariffs, the embarrassments in budgets, and the vio lent changes in speculative activity in New York and elsewhere. Britain’: own domestic difficulties have been in creased by a relative over valuation o. the pound sterling on the return to th gold standard and a . subsequent unde) valuation by Erance and Belgium.”

i The broad aims , for world monetary policy are laid down by the Committe as follows The,.Central Banks of th world would adopt the objective o raising the price level to avoid, if po; sible, the stabilisation of prices nea. their present level, which would b disastrous for all countries. When tie point comes at which the prices are ap propriate to the then existing level of salaries and wages, the monetai. policy should endeavour to keep th prices as stable as possible. The in one tary system of Britain should be

managed system, and not an automati system, with a view to assisting ol jectives which cannot be reached b any single country, but which depenc on international agreement on proposal to meet the present emergency.

The Committee believe that the firs step necessary is a greater willingnet. on the part of the creditor countri. to buy and lend. A concerted polic; is needed between the Central Banlc and the issuing institutions in Bi. tain, France and tlie United .States, am everything should be done to remov legislative hindrances on foreign lent ing, and towards permitting such a vo. lime of domestic credit ns would u. courage the market to take up attra tive foreign loans. Some.hing migl be done by the banking systems break the depress.on if the banks pu. sued a policy of purchasing secur.t and of driving down thv general ra of interest on long term borrowing; thereby bringing a revival Of new i.u t ei prise. .t is stressed that.su'li- a policy ca only be pursued i> it is adop.ed by of the Central Banks, as otherwise, 1 only result would be the loss of gr reserves. Passing from questions which ca. only be dealt with internationally, t 1 ’ Committee's recommendations on C ■Bri ish internal system are of a limit • and technical character. The • interest: of Britain reqin ;t her, they state, adhere to the gold standard. The Co mittie unhesitatingly • re ; ect, the ,sug gestion that the pound sterling shot be They mend th th? Bank of England be empowered

issue notes to a maximum of four In dr; cl mil ion pounds, accompanied h; powers for temporary expan-si•> .hat ihe minimum gold reserve be fiby law at seventy-live - millions, with the power to drop below this tigi ■ ti mporarily. The Committee do not favpur any rfcd action of the Dank of England s normal stock of gold, stressin?. on tlv on trary, the case for increasing both it, gold hold.jigs and its holdings of foreign exchange in view of London’; large liab.lities as - an' international banking centre. .is to the methods of raising long term capital for home industrial purposes. the Committee propose that th banks and the State banking house; co-operate in setting up one or mort institutions to act as financial adviser: and to carry out all types of financing business and to develop continuous ielations with industries.