Evening star., 1935-06-16
BY ANDRE syEGFRIED.
Author Of "Ensiand's Crisis" America
Comes OF Age"

BY ANDRE syEGFRIED,
Author Of "Ensland's Crisis" America
Comes Of Age"
ON SEPTEMBER 81, 1891. when
4 the pound sterling became
I detached from the gold
~ standard and suddenly de-
preciated in value every one
expected a rapid rise in prices. Three
and q half years have passed and the
rise has not materialized. Indexing
the wholesale prices Of 1924 as 100,
in July, 1881, they were 59.7 and in
october, 1884, they were 62.7. Retail
prices passed from 80 to 82.5. salaries
from 96.5 to e425. During the same
period British currency deprecated
Al per cent.
Many people outside England are
ignorant or affect ignorance Of this
fact; they insist that prices there are
rising or will rise. In contrast, the
great majority Of the English people
believe, without the least doubt, that
prices in the British Isles will never
rise. According to them there is no
fixed relationship between the pound
and costs; sterling can depreciate in
its relation to gold without the Eng
lish consumer ever realizing it.
II there Is one thing stable in the
world, they declare in London, 1t is
the purchasing power Of the pound.
II it seems to be deprecated in its
relationship to gold, it is only an
illusion, they insist-what has really
happened, they feel, is that gold has
appreciated in its relationship to a
sterling which does not bulge.
Interesting Problem.
This divergence Of opinion brings
up a most interesting problem; that
Is, the way In which prices become
established. Who is right-the for
eigner, who very logically expects a
rise which never comes, or the Eng
lishman, who, unconsciously perhaps,
does not believe that a rise would
ever come? A very intelligent article,
full Of acute observation on this whole
subject, appeared in the Revue
dEconomie Politique of November and
December, 1894. under the signature
Of Robert Wolff
Failure Of British prices to rise has
often been explained by the fact that
since 1881 world prices, as expressed
in gold, have diminished approx
mately 36 per cent. theoretically a
monetary depreciation should be fol-
lowed by a rise in prices, but the
lowering Of world prices exercised a
compensatory influence, and in the
end the price Of sterling remained
where it was. There is a valid reason
for this at least sufficient to explain it.
But Wolff adds judicial thought
when he questions whether the Eng
lish prices are not in the majority
of cases q different thing entirely
from world prices themselves. But il
this is so they constitute a separate
body and are independent of the
value Of the pound in its relation
to gold.
Under these conditions the problem
is inverted: it is no longer case o!
world prices exercising an influence
over the price of sterling, but the latter
influencing world prices. From thii
point of view, the Englishman who
claims that the pound has not dimin'
iShed, but gold has mounted, is no
expressing such an absurd idea aftel
all. The experience Of these last few
years has in fact taught US that i
international prices have been lowered
1t is largely due to the fall of sterling
Forced Reduction in Prices.
When the English, who are th'
principal international buyers, bu!
less, they force reduction of prices
The directing element of prices unde
such circumstances is the purchasing
power of the chief consumer. Besides
we should also remark that Englant
not only imports to consume, but ais