112 SECTIONAL ADDRESSES 
To the question ‘ when’ the answer at first sight appears to be de- 
finitive—not until there is a general state of equilibrium between the price 
levels of the important commercial countries of the world. As long as 
sterling is undervalued as regards the currencies still on gold and uncertain, 
probably overvalued, as regards the dollar, stabilisation is undesirable. 
It would merely repeat the disastrous consequences of the mistake of 
1925. But here there is a vicious circle. It is uncertainty with regard 
to the futures of currencies and, predominantly, of sterling which is the 
main cause of the lack of harmony between foreign exchange rates and the 
price relationships of the leading countries. Until there is assurance 
concerning the future gold basis of sterling equilibrium between price 
levels is unlikely to ensue merely as a consequence of market fluctuations 
in rates of exchange. Rather than rely, therefore, on price levels, which 
are so much the playthings of doubts, alarms and apprehensions, to bring 
exchange rates into harmony with one another it would appear the better 
course partly to reverse the process, stabilise sterling on a gold basis 
tentatively, and by maintenance of steady sterling exchange rates look 
forward to internal prices elsewhere adjusting themselves to the new 
situation thus created. There is little to be gained by waiting on further 
developments before initiating such a plan. On the contrary, delay is 
adding to the difficulties that will be encountered whenever stabilisation 
on any basis is ultimately attempted ; for the present downward trend 
in sterling creates trouble for countries financially weaker than Great 
Britain, encourages competitive currency depreciation and further curtails 
the volume and value of international trade. — 
If the case for early stabilisation, then, be granted, the implementing 
of the policy calls for a very careful, gradual and tentative approach. 
Anything in the way of a full and immediate restoration of the gold 
standard is impracticable ; but the preliminary steps required should not 
present serious difficulties. It is not proposed now to enter upon a 
detailed examination of those steps or of the further steps involved, and 
the degree of co-operation which may be needed from the central banks of 
the United States of America and the leading gold countries in Europe. 
Neither is it necessary to discuss the part which might conceivably be 
played by that recent addition to the machinery of the London Money 
Market, the Exchange Equalisation Account, in consolidating and main- 
taining the new situation when a de facto becomes a de jure stabilisation. 
It is sufficient to register the conclusion that until this task is performed 
there will be continued encouragement to ill-timed attempts to attain and 
maintain economic self-sufficiency, to the detriment of full recovery in 
international trade throughout the world. 
