MANAGED CURRENCY

Wairarapa Times-Age, 21 June 1938, Page 3

MANAGED CURRENCY

(To the Editor.) Sir, —How the world’s currencies are managed, the following will show. My information; is chiefly derived from the “World Economic Survey,” published by the League of Nations. When the £260 million fiduciary issue of paper sterling began to take effect in 1930, its fall was averted by reducing the price of all imports of foodstuffs and raw material by up to 60 per cent. That just about ruined the producers, especially the farmers, the world over. Is that why so many nations are spending millions of borrowed money or else,, by adopting the Douglas method of costless credits, per medium of the printing block, to subsidise primary production? How long can that last? What will become of the producers when that comes to an end? It can’t go on for ever, can it? But in spite of the above, sterling continued falling. .. At the Economic Conference in 1933, therefore, it was proposed to get all nations to debase their currencies. Many countries followed the suggestion,. The gold bloc did not. But in the summer of 1936 the gold bloc, notably France, Holland and Switzerland, capitulated. America had already caved in before. To make sure/ that all would be well, the tripartite .treaty was fixed up to stabilise the three principal currencies, sterling, dollar and franc. Did they really think that their currencies could be stabilised by such unstable things as inconvertible paper and a treaty, like the one in question, that could be cancelled within 24 hours? For that was one of the conditions of the tripartite treaty. Need one wonder, then, that only a year later France had a deficit of 35,000,000 francs? The gain of 15,000 million francs made by the devaluation disappeared in the vastly increased costs, due to the fall of the franc. A loan from the Bank of France of 15,000 million francs was about as much good as a drop of water to a man that is dying of thirst. A desperate attack on the franc under these circumstances had the desired effect. France again reduced the gold in the franc by 6 milligrammes. They estimate that France will have to curtail expenditure on public works by about 25,000 million francs this year. That means distress to hundreds of thousands of workers. So that is where costless credits have brought France. And not only France, but there are about .55 other countries, including New Zealand, that have done ’the same thing. In the meantime, England has increased her fiduciary issue of sterling to £5OO million. The Exchange Equalisation Fund, whose business it is to buy and sell exhange, has increased its funds from £370 million to £570 million. Just now industry is booming in anticipation of the next war. Could it be otherwise, with over £lOOO million pounds worth of paper in circulation? Progress!. Ay, but where to? America is not behind the rest. The devaluation of the dollar has had its usual effect of high prices and high costs. The farmers have had to be kept on the farms by subsidies amounting to hundreds of millions of dollars. That is what it has cost America to get over the difficulty that by a divinely instituted law we cannot have high prices without high costs of production. The subsidies, plus the extra cost of running the Government, have increased the national debt from 19,000 million dollars in 1932 to 35,000 million dollars in 1936, this in spite of the profit of over 8000 million dollars made by the devaluation. But then the people must be prosperous? Yes, so prosperous that nearly one-third of the population is short of necessaries. Does it pay to play fast and loose with the laws the Creator has instituted in economics? The speculators are taking advantage of the fall of the dollar to send 2000 million dollars over’ to the States to buy shares in American companies. The gold is leaving the country because the equalisation accounts in London and Holland are making them redeem their paper with gold. Why not ask the Premier what he is going to do to prevent our currency going the same way? —Yours, etc.,

HANS C. THOMSEN. Masterton, June 20.