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Hokitika Guardian, 28 September 1933, Page 4

In an article on “Prices and Exchange Rates” in Lloyds Bank’s monthly review, it is pointed out that “for many years past discussions have been ’proceeding as to whether sterling is over-valued or undervalued in respect of other currencies, while during the last two months the question of the true ■equilibrium rate (purchasing power parity) between the pound and the dollar has come very much to the front.” The article then proceeds to give an analysis of the position based on index numbers and rates of exchange, and reaches the following conclusions :—“lt is impossible to define the true equilibrium rate of exchange except within very broad limits. If and when the time comes for de facto stabilisation, the most that can be done is to make as good a guess as possible at the true rate, stabilise there, and sec how it works, if either the pound or the dollar turns oilt to be seriously over-valued, the fact will soon become apparent, just as it gradually appeared that the pound was over-valued from 1925 to 1931. Secondly, it is impossible to lay down the law either that prices ■determine the exchange or the exchange determines prices, for in actual fact each reacts upon the other. This again makes it necessary to insist upon the n eed for caution and freedom from dogmatism, and even implies that si do facto stabilisation rate may have to be altered after a relatively short period of time.”