Detroit evening times. (Detroit, Mich) 1921-1958, 1943-05-14

In iaCt,- Lord Keynes suggests
that his plan might form the
basis Of a future economic gov
eminent of the world; might
help finance postwar relief, re-
Mobilization and reconstruction;
might provide an excellent ma
chinery for the enforcement of
financial blockadcS; might help
finance international commodity
control projects; might be ASSOC
Ciated with a board for interna-
tiOnal investment and might be
used To maintain. stability of
prices and 10 control the trade
cycle.
The first question. then. that
would have 10 be considered in
the current discussions in Wash
ington has 10 do with all aspects
of the problem of sovereignty.
In addition 10 those difficult
problems involving sovereign
rights, nations must of necessity
give careful consideration 10
certain economic implications
of the two plans. A fundamental
point is whether an overall cX-
ternal sterilization Of currencles
can be effected before internal
sterilization Of Currencies can
effected before internal stabillza-
ton has taken place.
IN THE past internal StabillZa-
L ton has been regarded as the
prerequisite for the Sterilization
Of internal foreign exchanges.
The sequence has been from
the balancing of internal budgets
and the checking of initiation,
the removal OF price and ration
ing controls, and the reintroduc-
ton of some form Of the gold
standard 10 the sterilization Of
foreign exchange rates.
Only by following such policies
can the internal purchasing
power Of a currency be deter
mined. and only when the inter-
nal purchasing power is deter
mined will it be possible TO fix
rates Of foreign exchange
To be enduring. the StabiliZa-
ton of exchange rates must rest
on the firm basis of sound in
ternal fiscal and monetary poll
cies. We cannot erect a none
tary superstructure until we
have built a firm base. The
soundnesS of that base will de-
pend upon our willingness 10
adopt appropriate internal meas
ures of fiscal, credit and none
tary reform.
An overall sterilization of eX-
change rates would seem 10 rep
resent an unrealiStic approach
10 the problem. Each nation
must, as it did after the last
war. painfully retrace its steps
TO monetary stability. The road
back cannot be made easier by
the establishment of a stabiliZa-
ton fund or clearing union.
There is no short cut TO cur
rency sterilization.
STILL another question having
~ 10 do with economic implica-
tons of the two plans concerns
their relationship TO the prob
lem of foreign exchange control.
The question is whether the
adoption of either the American
or British proposals would help
10 eliminate foreign exchange
controls on current account, or
whether the plans. in actual OPP
Grafton. would tend to perpetu-
ate such controls.
Although it is the avowed
objective of each plan TO elimi-
nate foreign exchange controls
on current account, l doubt If
this would result in practice. 1t
seems to me that both plans
could function satisfactorily
only if the foreign exchanges on
current account were controlled
as completely and fully as IS
contemplated for the control of
the foreign exchanges on cap
ital account.
In the last analysis, the two
plans might tend TO perpetuate
those very controls over the for
eign exchanges and trade, which