Courtesy Reuters

Stabilization: Why? How? When?

PROBABLY no subject provokes more divergent opinions than that of the future stabilization of currencies. Each country necessarily considers it from its own peculiar standpoint; and even within a particular country there is usually a great divergence of views with regard to the method and the time for reëstablishing some kind of international standard. I shall attempt here to present the present British view with regard to the desirability of stabilization, as well as the method to be employed and the time when it should be initiated. Though the view I emphasize is the British one, I think it fair to point out that because of London's long participation in international finance it does endeavor, though not always with success, to take something more than an insular view of these matters.

Some British authorities consider the present moment ripe for international stabilization, and among these are some who insist Great Britain should promptly take a strong lead. Yet I cannot help thinking that those who dogmatize on this question do not take sufficient account of the events of the past twenty years which have led to the present monetary situation. Before we consider the question of why, how, and when there should be a stabilization of international currencies, it is desirable that we obtain a clear view of some of the changes which have resulted from the World War.

I. RETROSPECT

Before 1914 the currencies of most countries were established upon the gold standard. But Great Britain and the United States, with their free gold markets, were probably alone in fulfilling all the requirements for the smooth working of an international gold standard. Both countries were dominant in their respective spheres. Great Britain, by reason of her outstanding position as a leading creditor country and as the banker of the world, was able to maintain her position with comparatively small holdings of gold. The United States in some respects was in a less favored position and at periods was actually financed

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