Ill

THE RETURN TO GOLD

231

but there is no clear indication that they haveany steady or considered policy. It may bethat misplaced sympathy with our efforts toraise the sterling exchange will be a factortending to postpone action on their part; andif they delay much longer, boom conditionsmay become definitely established. In thisevent we need have no difficulty in raisingsterling to pre-war parity. A firm monetarypolicy, designed to check a sympathetic riseof sterling prices, ought, without any positiveDeflation, to do the trick. But it does notfollow that the embargo should, therefore, beremoved. To link sterling prices to dollarprices at a moment in the credit cycle when thelatter were near their peak as the result of aboom which we had not fully shared would askfor trouble. For when the American boombroke we should bear the full force of theslump. The conditions in which we can linksterling prices to dollar prices without im-mediate risk to our own welfare will only existwhen the mean level of dollar prices appears tobe stabilised at a somewhat higher level than inrecent times.

The removal of the embargo amounts to anannouncement that sterling is at parity with thedollar and will remain so. I suggest that theright order of procedure is to establish the factfirst and to announce it afterwards, rather thanto make the announcement first and to chancethe fact. Thus the removal of the embargoshould be the last stage in the restoration of