A MANAGED CURRENCY
[To the Editor of the SPECTATOR.] S111,—The suitability of the expression " a managed currency " seems to depend upon the meaning given to the word " cur- rency."
Sir Arthur Salter evidently takes it to mean notes issued by a public authority and token coinage, for he says that the authority
"should maintain a stable value in relation to commodities by issuing just so many notes, and no more, as will keep the ratio .between the supply and demand for them constant " (page 56 of
Recovery).
But in this country people cannot be made to absorb any more of such currency than they need individually, nor be con- tent with any less provided they have bank credit to buy it with ; so that the supply of such currency is autonudic and not controllable by a public authority ; if it is supplied in excess of requirements it will not circulate, and if restricted below them, it will merely cause inconvenience without helping at all A good many people seem to think that we have only to increase the volume of inconvertible paper notes to raise prices or restrict it to lower them.
How do they propose to get the increase into circulation ? or to withdraw notes already in circulation without merely causing inconvenience, to no purpose ?
Surely what has to be managed and must be managed is credit in all its forms, and nothing else ; I refer, of course, to
* Mr. W. A. Shaw's Currency, Credit and the Exchanges. this country with its inconvertible currency and its laws and methods of business. What we do with our gold holding is another matter altogether ; we may buy foreign exchange with it as required or deemed advisable ; but that does not come into the scope of these observations.—I am, Sir. &e.,
E. IL B.
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