THE DEARER DOLLAR

New Zealand Times, Volume XLIV, Issue 10289, 26 May 1919, Page 6

THE DEARER DOLLAR

MEANING OF RELAXED CONTROL OF'NEW YOtKK EXCHANGE.

Tbe announcement 'by Messrs J. P. Morgan and Company in New York that they had received instructions to cease purchases of sterling in order to maintain tho relationship between dollars and sterling (writes the city editor of the London "Daily News") is a plain statement that the British Government'has given-up the control of the" New York exchange. Its policy in this respect has not been altogether unexpected, because early in the week there was a sharp break in the New York Exchange, which dropped at one time to 4.65, as against the old fixed rate of 4.76 7-16.

The announcement caused a sharp drop, and the rate touched 4.48," but finished a little steadier at 4.57. This means that about 4} dollars are now equivalent to a .pound sterling, as against a pre-war standard of nearly live dollars to the pound. The, control of the exchange had 'been in force some 3j years, ana it was very necessary at one time that it should 'be in thai condition, because the Allied Governments would not otherwise have objtained tho munitions from the States I wherewith to oarry on the war. The cessation of hostilities, however, took away this reason for control, and its further continuance had tho effect of encouraging American imports at a time when it should be our effort to export rather than to . import merchandise, and this encouragement to American traders was effected at very serious cost to the British Treasury, which had to pay the whole expense of maintaining tho exchange at its artificial level.

In some quarters it is doubted whether the moment is altogether suitable for the step, but it is certain that in the long run a return to natural conditions will-.be the best thing for trade in general. But it must be remembered that t< return to health in the matter of exchange will entail some hardship to the people of this country. The exchange on New York is likely to go still lower, and this will mean that the cost of many primary articles, such as cotton, meat, wheat, oil, and so fortn, will bo considerably increased, thus rendering the position of manufacturers and consumers alike more difficult; hut once natural conditions are established, there is hope that the position will eventually ease and compensating influences will come into force that will tend to cause an improvement in exchange.