Evening star., 1933-06-25
BY SIR ARTHUR SALTER.

Member of British Economic Advisory Coun-
ell Author of 'Recovery-A Second Attempt
r ONDON, June 24-The World
Economic Conference this week
has suffered a serious setback
IL equal in Importance to the en-
couraging forward impetus it re-
ceived last week. In both cases the
principal cause was outside the confer
ence itself and arose out of America S
position and policy.
The war debt negotiations were taken
as an indication that President Roose-
welt was still strongly supporting the
conference. The first memorandum
regarding tariffs. circulated at the re-
quest of Secretary of State Hull, pointed
in the same direction. The converse
tions among the heads of the central
banks were at first understood to give
good prospects of an agreement tending
to reduce fluctuation of exchange
But since then the original tariff
memorandum has been withdrawn and
replaced after a statement by Senator
Pittman disclosing serious differences
within the American delegation; and
the American Government has rejected
the bankers proposals and indicated
that in its view even temporary stabili-
Eation Of exchanges is untimely now.
At first each rise or prospect of sta
blliZation of the dollar was attended by
a slump in Wall Street, and each fall by
bull speculation. These movements in
the securities markets seemed to reflect
the belief in America that American re-
covery must depend on the dollar being
deprecated and perhaps continuing to
oepreciate for long period
Conversations Unfortunate.
The prospects of the conference were
adversely affected and there was even
much talk. Of adjournment For tariff
negotiations, resumption of foreign
lending and the whole question of pri-
vate international Indebtedness all de-
pend on known and stable currency
values
The bankers conversations were in
some respects unfortunate. 1t was
right they should agree upon the mech
anlsm by which the currency authori-
ties could cooperate in reducing un-
necessary exchange fluctuations and
counteracting the impact of purely
temporary and speculative factors.
With such mechanism the currency
authorities on each side of the Atlantic
could be in daily contact and secret
consultation, and do much to iron out
the more violent fluctuations, feeling
their way as they went and not COM
mitted to any specific rate. Action of
this kind would have had a ca ming
effect on the exchanges and the mood
OF the conference
An attempt to fix and peg the actual
rates, however, presented great diff
cultieS because the right rates must be
dependent upon future monetary policy
in regard to raising prizes, on which the
discussions have only begun. The right
ratio between any two exchanges de-
pends in the last resort upon relative
price levels in the two countries, and
the right future rate between the dol
lar and pound cannot, therefore, be
estimated ultil it is known approx
mately how far present market prices
will be raised in America and Great
Britain.
The present market rates represent
not present prices, but an anticipation
that the American price level will be
raised much more than the British. The
fact is, when these two governments
say in almost identical terms that they
intend to pursue a policy of controlled
reflation-that is, increase prices by de-
lberate monetary and economic meas
ures until the disparity between prices
and costs is removed-the public be-
1ieves America will do much more than
it says and that Great Britain will do
much less.
See Higher Level As Aim.
The public believes President RooSe-
welt is aiming at a higher level than
Neville Chamberlain, British chancellor
of the exchequer, and that he may
net be able to stop even when he
wants to stop. 1t believes that Mr..
Chamberlain not only has lower level
in mind, but that he may not attach
to even that level the Bank OF Eng
land being suspected Of having a more
defationist outlook.
It is this uncertainty regarding mon
etary policy which explains the main
events of this week, the fall in the dol
lar corresponding to movements in Wall
Street and the Presidents reaction to