The Guardian And Evening Star, with which is incorporated the West Coast Times SATURDAY, OCTOBER 10, 1931. BRITISH TRADE.

Hokitika Guardian, 10 October 1931, Page 4

The Guardian And Evening Star, with which is incorporated the West Coast Times SATURDAY, OCTOBER 10, 1931. BRITISH TRADE.

The recent reports from Britain are of a pleasant nature, recording as they Have done of a sudden and remarkable revival of activity in many British trades, and‘a demand for labour to meet the requirements of the industries concerned. Apparently even such authoritative newspapers as the “Daily Telegraph” are inclined to take an optimistic view of the situation and to predict the return of better times for Britain in an industry.'?' nad commercial sense in the near future. It may be well, therefore, to bear in mind that this unexpected “boom” is merely the direct outcome of Brit- | ain’s abandonment of the gold standard and the consequent depreciation of the pound sterling; and while this revival of prosperity can, under the circumstances, only be temporary, it is likely ' to be accompanied by serious disadvantages which may outweigh all the benfits Ithat the country might otherwise secure. The explanation .of this sudden outburst of industrial and commercial activity is simply that the depreciation of sterling to gold is enabling British producers and exporters’ to undersell their foreign competitors in all markets where prices are still regulated in accordance with the gold standard. If the pound sterling should become so far depreciated ae to be worth only ten shillings in gold, then the British producer, other things being equal, could afford to cut his prices, as against gold using competitors, by 50 per cent., and still sell at a profit; and the same s argument applies to any other measure of depreciation to which sterling may be subjected. Moreover, even in markets where the gold standard is not operation. if sterling is more heavily depreciated than the rival curiencies, Britain can still undersell her foreign competitors: This is the case w ith (Sweden, where the gold standard is now suspended. But a rise in prices will encourage a general demand for the circulation of a larger volume of currency, based on securities or otherwise safeguarded: and the increased circulation of purchasing power, which moans a stronger demand for goods, will raise prices again with similar results, finis completing “the vicious circle of Inflation.” Moreover, the fall in the r.urchasing power of sterling will render >it more difficult for Britain to buy abroad the food that she re quires* and the raw material indispensable for her industries. Finally, the I depreciation of the pound will under-

mine Britain’s credit and make it much more difficult to maintain the equilibrium of her financial system. We must not disguise the fact'Chat the abolition of the gold standard means inflation, with all its attendant possibilities for evil, though no doubt every efFort will be made to check the movement.