THE BANK RATE.
[To. the Editor of the SPECTATOR.] SIR,—As one who for the past twenty'years has drawn atten- tion by every means in his power to the danger to this nation of the international gold standard, I welcome with infinite satisfaction the attention that has- been• drawn to the subject by your article under -the above heading. 1- entirely agree with what I gather is your opinion, that our bankers are honour- able men who believe -that ins acting in their own interests they are also studying the interests of the nation. This makes the position all the more dangerous; because the bulk of the nation think that. "high finance " is something that they themselves cannot understand, whereas the question is really largely .one of hard thinking and common sense.
If it be true as -you state in your- article, The Banker& Threat," that " in goods -alone Can we pay the American or any other debt " (as I am convinced -it -is, as even if we pay in gold goods must be given to obtain the gold), then surely the nation should ask itself why it needs what would, in effect, be international money in order to conduct its= foreign, trade. Those who are only concerned with importing goods into this country, and even exporters who do not think the matter out would no doubt reply that a fluctuating exchange hampers business, and that therefore- it Must be- advantageous to commeree -to have the element of stability in trade which the international gold standard would introduce; all of which is correct enough on the surface, except as to the method by which it is suggested the stability should be obtained. To understand why the latter is wrong,. it is necessary to keep clearly in mind how ." exchange " arises.
As long as the British exporter is content to purchase
foreign goods with the foreign money he receives for them and to import the goods here, no " rate of exchange " is set up. If, however, he confines himself to exporting goods, without importing, he must find a would-be importer who will buy the foreign money froth him, and as long as. there is no connexion between the money of the two countries, no import can be made on their own account by British importers (apart from foreign credits) without a previous export by British exporters. The supply of and detnand for exporters' drafts therefore determine the " rate of exchange " at which the exporter can sell and the importer can . buy foreign currencies, and the variations in the rate under such conditions regulate the trade between the countries concerned, Anyone who under- stands this will appreciate why- Mr. Darling, writing, in your issue of July 5th, states that every instinct in him calls out
caution " over any attempt to stabilize the exchange with America at present.
It must be !t- mystery to him, as it is to me, how, it comes about that our people do not see how the adverse " dollar " exchange acts to discourage us from buying American goods if the same class can be obtained from the Empire or elsewhere —tends therefore te enable us to pay off the debt so much more quickly, while increasing the purchasing power of those who are eager to take our goods. Can they not see, to take but one instance, how in the case of dried fruits, it would act as a natural Preferenee for Australia and South Africa, bringing in its turn a natural Preference for British exports ?
. Let this country. be put back upon.the gold standard, and all this would • be -changed. Importers would then have the- opportunity of exporting gold instead of buying_ exporters' drafts, the •"- rake of exchange "for which could then never rise much- beyond gold. paint, and British wage-earners, manufacturers, and export merchants would be at the mercy of every country which could produce cheaper for gold than they could. I congratulate you, Sir, on your endeavour to arouse the nation to a consciousness of its danger, which would not be measured merely by the possible downfall of its com-
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