P2. Monetary Policy [2]

[Letter to The Economist, 18 June 1932, p. 1358]

18 June 1932

Sir,--In view of some (unintentionally) misleading glosses on my letter, [1] which occur in your current issue, may I be permitted to make the following additional comments? I should be entirely opposed to the raising of a foreign loan. I am also opposed in general to all attempts by the authorities to secure for us, in present conditions of world distress, a more favourable balance of trade, and, in particular, to the attempt to secure it by depressing the external value of sterling to an unnaturally low level. Our gold and the resources of the exchange equalisation fund, which should be increased if necessary, should be used to maintain the external value of sterling against sudden short-period alarums and excursions. Ultimately internal reflation might entail a further reduction in its external value, but the internal reflation must be made to come first; and, if it did come first, its reviving effect on other countries might lead to price recovery there, in which case a further external fall in sterling might not prove necessary. (Probably there would be some fall vis-à-vis gold, but not vis-à-vis most other currencies.)

What this country needs is a leader of sufficient intellect and personality to understand the policy and to carry it through. [2] Owing to our unitary constitution, both political and financial, England gives a specially favourable field for the operation of a definite policy. If such a man appeared, the difficulties about public confidence would be speedily solved. England is also uniquely placed for giving an international lead. Instead, we wait for a Conference, [3] at which we shall either have no policy or, at best, endeavour to persuade others to do that which we lack the initiative, though not the opportunity, to do ourselves now.--I am, etc.,

R. F. Harrod

Christ Church, Oxford. June 13, 1932.

  1. 1. Harrod, "Monetary Policy" (1), 1932:2 , reproduced as press item 1 . Refers to Frederick Geidt's and especially ÆRobbins's comments, printed in the 11 June issue of The Economist, pp. 1294-95.

    2. Harrod had probably in mind ÆWalter Runciman, the President of the Board of Trade: he expressed such a feeling in letter 240 to Runciman of 10 June 1932, [jump to page] and [jump to page] , and later sent Runciman a cutting of this letter to The Economist suggesting him to read the last paragraph (letter 240 of 22 June 1932, [jump to page] ).

    3. Refers to the Imperial Economic Conference at Ottawa, to be held between 21 July and October 1932. For Harrod's suggested policy on Ottawa see letter 249 to Runciman of 6 July 1932, [jump to page] .


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