Evening star., 1935-06-16
BRITISH PRICES STABLE
DESPITE MONEY CHANGE
According to English People, There Is
No Fixed Relationship Between
Pound and Costs.

to re-export; this is the principal res-
son for the eminent position she holds
In international commerce.
But at this point a very fundamental
question Is forced upon our attention;
it is that the buyer creates prices under
certain circumstances, but not in every
case. He makes them, undeniably,
during periods of depression, when
every one wants to sell. when no one
wants to or can buy. This Is exactly
what has happened since 1881; We
have seen many arrogant buyers, and
most accommodating sellers, so polite
that they could be called obsequious.
Transactions payable IN sterling or
in money aff1liated with sterling prob
ably represent more than half Of the
total volume Of the worlds exchange.
Here Is a great body exercising an al
most irresistible force. For example,
the franc, which is a national cur
rency, and French importations, which
are an important factor in intercon-
tinental commerce, have in no sense
of word an analogous influence.
Under these conditions France-and
in a large measure all the countries
forming the gold bloc-have q passive
resistance to world prices, while
England, experience shows us, reacts
promptly. The fall Of world prices
would not have been 80 abrupt or so
marked If the pound had not left the
gold standard.
But this way of reasoning Is not
uniformly valid in every circumstance.
In reality, If the buyer is the one who
is effective in setting prices during a
depression, it is no longer he who
makes them during a period of re-
covery. Then the seller again be-
comes king, and we pass from a
buyers to sellers market.
War Experience Cited.
During the war and right after it
we saw one phase of this sequence.
Who does not remember how easy 1t
was to sell at that time and how Diff
cult to buy? Who does not remember
how arrogant the sellers were, how
timid the consumers?
When circumstances again favor the
seller, then England, an importing
country, will be in an entirely differ
ent position. The price level will then
be determined less by the British
capacity to buy than by the selling
countries-America, Asia, Africa and
Oceania-with their great powers of
production. It will be a different at
mosphere and we will have the i'm
preston of a piece of music played in
a different tone-we will have passed
from minor to a major key. The
dominant influence controlling prices
will be, as previously, the influence
of quantity; but instead of the con-
sumner, the one who supplies will be
in the saddle.
In looking at the problem Of costs
in this way, many worthwhile lessons
are to be learned.
It very clearly explains why the
monetary depreciation of 1881 in no
way exercised the same influence over
prices as the depression Of 1921, COM
ing at a time when raw materials
were scarce, or at least seemed scarce.
If We are at the moment facing an
international recovery, the reasons
which prevented the fall Of currencies
from having a repercussion on costs
will no longer hold.
This will be a proof of the wisdom
Of certain monetary policies. When
the rise of prices appears above the
horizon, the wise ones will be those
who know how to accept the chang
ing atmosphere and the conditions Of
the rising tide.