5 SEPTEMBER 1931, Page 14

Letters to the Editor

[In view of the length of many of the letters which we receive, we would remind correspondents that we often cannot give space for lone letters and that short ones are generally read with more attention. The length which we consider

most suitable is aboUt that of one of our paragraphs on " News of the Week."—Ed. SPECTATOR.]

THE FINANCIAL SITUATION

[To the Editor of the SPECTATOR.] SIR,—May I venture to put before you a point of view which seems so far to have been overlooked ?

• The value of the pound sterling must always be based upon the productive power of the nation, and the trouble since the War has been that the b ilk of British currency has been held by the non-producing section of the nation (sheltered industries, the professions, retailers, &c., &c.), with the result that the pound sterling has very rarely during that period been worth its face value from a production point of view. The consequence has been that in order to maintain the Gold Standard the Bank of England has been forced from time to time to sell gold for less than its value, and this must continue so long as our present monetary policy is pursued.

The whole of our present troubles date from the day in 1920 when a drastic policy of deflation was decided upon. This deflationary policy has been applied entirely to the unsheltered industries, with the result that we see to-day. Inflation occurs when money which has never produced real wealth—i.e., commodities—is put into circulation. Our present currency on the Gold Standard is neither inflated nor-deflated as a whole, but applying the production test to it, it will be readily seen that a very large proportion of it is wholly inflated. We are, in fact, suffering from suppressed inflation.

It has been wisely said that all classes of the community must be prepared to make sacrifices in the present emergency, and these classes must include the financial ones. It is imperative that the pound sterling should be put at its proper value, as the first preliminary to any scheme of financial reform and industrial rehabilitation.

In conclusion, to illustrate what I have said, supposing the gold content of the pound sterling were reduced to a monetary value of eighteen shillings, and at the same time it were enacted that all Government and municipal salaries, wages, &c., were to be kept at their present level ; this would mean a saving of 10 per cent. right through all national expenditure, whether public or private, and fairly and evenly distributed amongst all classes. The saving thus made would become available for the re-establishment of our stricken industries.—

I am, Sir, &c., D. E. DELVES BROUGHTON. Webberton Cottage, Dunchideock, Nr. Exeter.

[There may perhaps be some immediate and temporary advan- tages in a devaluation of the Z. But the Government, the bankers and the whole country have now to strive their utmost to re- establish confidence in sterling and to maintain its value. No momentary gain can be weighed against this purpose.—En. Spectator.]