of weighing advantages. It is not that there are no advantages on the other side, but rather that a return to our pre-war system does not offer sufficient advantage to outweigh the factors I have emphasised.

We come next to a further most interesting question. Assuming that we want to reform our currency, what is the right way to do it? There is a certain difference of opinion between Mr. Hawtrey and myself, though I should be perfectly ready to accept his system if it turned out to be practicable. Mr. Hawtrey wants to placate a good deal of feeling that exists in the world by pretending that he keeps gold standard, whereas in fact he establishes a commodity standard. He proposes to erect a façade of gold and then to regulate its value on the same principles as would be adopted by those who aim at the stabilisation of general prices. In monetary affairs there is a great deal to be said in favour of placating prejudice. I do not underrate any of those advantages. And Mr. Hawtrey may be right, that this is the best way to do it. But I should like to point out two important disadvantages in his plan. First of all, there is the question who is going to bear the expense of maintaining the value of gold. On his system there would still be mined, I suppose, about as much gold as is mined now. There is also the problem of existing stocks. At present the United States is bearing the expense of that, both in maintaining stocks and in absorbing new supplies. Mr. Hawtrey's system would mean a very difficult debate on the question how expenses should be shared in the future, and presumably we in this country would have to bear some reasonable proportion of them. We should have to consider, therefore, how many millions a year it was worth wasting in order to maintain this façade. We should also be embarking on a system which would become more and more artificial and indefensible as time went on, and would, therefore, be inevitably unstable in the long run. It would be too absurd to go on indefinitely mining gold out of the earth with great labour, in order that certain countries should bury it again after having met the expenses of mining. Sooner or later the world would see that no sufficient advantages accrued from it, and every one would seek to escape from the burden of spending a certain number of millions a year in maintaining the value of gold.

It is, perhaps, a more fundamental objection against this proposal that it involves very far-reaching agreements between a number of Central Banks. Mr. Hawtrey and I have both had a certain experience of international conferences, but they seem to

have left him more optimistic than they have left me. My feeling is that for some years to come we shall never secure a binding agreement of that kind. Putting all other countries on one side, I think it would not be easy even for the Bank of England and the Federal Reserve Board of the United States to arrive at any binding agreement. It would be very difficult to decide how, when there was a difference of opinion, the matter was to be settled. Moreover, I believe that any such agreement would weaken the hands of the Federal Reserve Board in the United States. There is difficulty enough in any case in pursuing a sound policy, and if the Board was open to the suggestion that they were not acting solely in American interests but at the dictation of the Bank of England, they would be in a much weaker position than they are in now, when no one can possibly accuse them of being governed by any other motive than American interests. I should prefer, therefore, that we should enter into no binding agreement as to the relation between the British standard of value and the American standard of value, but rather that each country separately should aim at stability, and in addition co-operate by the exchange of information and in all other possible ways. If this co-operation were to be successful, then we should also have a policy of a stable dollar exchange, and we and the United States between us could probably manage the rest of the world. It would require no international conference or binding agreement of any kind, and we could gradually improve our methods as experience showed us the way. The only disadvantage it could have might be, that, since we should not accept gold into our mints here unless we wanted it, America herself would probably get tired of the burden of absorbing the world's gold, and that she too would close her mints to gold, with the result that the value of gold itself would fall. Nevertheless it would be better, I think, to face the opposition of the goldmining interests rather than to embark upon the very costly and difficult path of trying to stabilise the value of gold itself by means of a binding agreement between ourselves and the United States.

In conclusion, let me turn to the matter of immediate policy which Mr. Hawtrey also dealt with. What ought we to do at once? I suggest, as he also suggested, there is room at the moment for a considerable measure of agreement even if we differ for the future. I am afraid there is no room for agreement between us and Sir Charles Addis, if Sir Charles insists on immediate deflation. On that matter the Government, I think, are in

a contradictory position, both this and the previous Governments, when they state that their object is to get back to a gold standard as soon as possible, yet also at times admit in public, as Mr. Baldwin did, that the policy of deflation has been definitely reversed. The Government think it wise to placate Sir Charles Addis by stating that their intention is to return to the gold standard. But fortunately they are not so foolish as to take any active steps in that direction. They have, in fact, no clear policy, but so far as they have one at all they seem to aim at some measure of stability for the present and, as Mr. Hawtrey suggested, have postponed making up their minds any further, until they see what happens to exchange, hoping that the natural course of events will bring sterling to its parity with gold without any degree of deflation. I agree that this expectation may very well be realised, that a further fall of prices in America is not very likely, being indeed wholly unnecessary from any point of view, and that sooner or later the Federal Reserve Board is likely to be overwhelmed by the incoming tides of gold, with the result that a sufficient depreciation of the dollar will take place to bring our own exchange to par-though that this may require a depreciation in the value of the dollar amounting to more than 10 per cent. is also likely, since prices here, in the event of this policy being adopted, would follow dollar prices to a certain extent. Thus it is certainly quite possible that we shall return to our former parity of exchange without resorting to deflation. I should like to point out, however, that the policy of waiting for that to happen and thereafter depending on the Federal Reserve Board to prevent any further depreciation of the dollar seems to assume that the Federal Reserve Board is going to be overwhelmed to precisely that degree which it pleases us should occur, and that when that has happened they are not going to be overwhelmed a scrap further, but are going to retain their pricelevel at just that figure which happens to suit us at the present time. A nice balance is assumed between skill and want of skill on the part of the Federal Reserve Board. This policy requires that the Federal Reserve Board should lose control of their own situation and should then begin again to exercise skill just at the time that our policy requires that they should. I am not confident that this is a coincidence we can rely upon.

At any rate, let us suppose that this is the position, that the Government is disinclined to take any further steps towards deflation, and also that the underlying facts of the situation may quite likely bring sterling back to par. What is our right course?

Well, we have a golden opportunity for making on an adequate scale precisely the experiment that I want. Why should we not aim for the present at keeping our own price-level steady and, in order to please other parties, postpone any final decision until our exchange has reached parity. The arguments of all the speakers seem to me really to imply that at one stage or another the price-level is under our control. No one wants to diminish the value of our money. If, then, we do not want to increase the value of our money, which would mean deflation, why should we not spend the next few years in keeping prices steady, and seeing if we can do it, meanwhile learning, perhaps, how to do it without exciting prejudice? If after having done this successfully for a few years we reached our old parity, I myself would have a great deal of confidence that the success of the method would justify its continuance, that after having kept prices steady without the use of gold for some appreciable time, we should be rather loth to abandon it and to follow a tide of involuntary inflation by linking ourselves once more to gold, which by hypothesis would have just been depreciating substantially. I believe that currency reformers will experience much less prejudice and hostility when it is a question of letting sterling go above its old gold value rather than of keeping sterling below it. I believe many people in the City of London have much more feeling about the return to parity than they have about sticking there, when it is once attained and not going above it. For instance, Sweden, it has been reported, in the last week or two has decided upon a new policy of convertibility by which the krone will not be allowed to fall below the old gold parity, but with no provision, however, to prevent its rising above it. This is a return to the gold standard in its most harmless form. To undertake that the value of the currency shall not fall below its old parity, whilst allowing the value of the currency to rise above it, is quite possibly the most practicable solution. It would be sound policy in the United States at this moment to maintain convertibility, but at the same time to close the mints to further foreign gold. A plan of maintaining convertibility into gold at a fixed ratio, but of not accepting further gold into the mints when gold is redundant and depreciating, may prove the right compromise between old and new wisdom. If we return to the old gold parity, I would prefer that compromise to the plan which Mr. Hawtrey suggests. I do not suggest that his would not be an improvement, if it came into operation, on what we have had in the past. But the practical difficulties operating

How far they would go it is difficult to say until they begin the discussion. On this side Sir Charles Addis expressed approval of the same scheme in the speech to which I referred before, in which he argued so emphatically that we should return to gold standard. It is encouraging to find that such high authorities recognise the enormous advantages of stabilising purchasing power with relation to an index-number.

SIR CHARLES ADDIS

Whatever our opinion of stabilisation may be, we are all in favour of stability-stability of policy as well as stability of prices. Instability of policy is no less dangerous than instability of price. Nothing can be worse than uncertainty. Better a defective policy which is fixed than a complete one which is uncertain. It is of the first importance in currency matters to know the goal at which we aim. We must know where we are and whither we are bound. The pronouncement of Mr. Baldwin last July in favour of stabilisation at the level of that time and, it must be added, the hesitating and equivocal utterances of some of our bank chairmen, left the public at home, and, what was more serious, our customers abroad, in some doubt as to what our monetary policy really was, whether indeed England could be said to have any definite monetary policy at all. All this uncertainty and obscurity have happily been dispelled by the timely statement of the present Prime Minister. All the world knows now that the official policy of this country is directed quite definitely to the restoration as soon as possible of the pre-war gold standard. The countries of Europe know it. Our ally Japan knows it, and, with Holland, Scandinavia, Switzerland, etc., is believed to be only waiting for our lead to get back to gold.

The British Dominions overseas know it and welcome the official confirmation of the early return to the gold standard contemplated in the unanimous report of the committee on currency at the Imperial Economic Conference. The country stands definitely pledged to return as soon as possible to the gold standard which prevailed before the war. It is no wonder if the sound money party is encouraged by this unanimity. It might be different if other countries formerly on a gold basis were disposed to discard it in favour of a paper currency, but of that there is no sign. The unanimity is complete. Every country which has ever possessed a gold standard, whether for good or evil, seeks or professes to seek a return to the gold