CURRENCY FUSION.

Auckland Star, Volume LX, Issue 19, 23 January 1929, Page 4

CURRENCY FUSION.

BANK PRESIDENT'S VIEWS. Speaking to the London Institution of Bankers, of which he is president, Frederick Hyde, joint managing director of the Midland Bank, pointed out that the present year will be memorable : in the history of English banking as the! year of the new Currency and Bank Notes Act. This Act, he stated, "is modelled strictly on the lines recommended in 1918 in the report of the Cunliffe committee, which included a recommendation that another inquiry should be made after a period of not more than ten years. The Government, however, has decided than an inquiry would serve no useful purpose and the new Act has come into operation. "Bankers will watch with keen interest the working of the Act under the changed conditions, and will be able to form an opinion as to whether the system which throws the whole weight of gold movements, probably of much greater magnitude than formerly, on to a relatively small proportion of the stock of gold held by the Bank of England is the one best suited to the country's needs. Under our present system, which is continued by the new Act, the gold which can be withdrawn for export is that represented by the notes in reserve amounting to about fifty millions, the balance of about one hundred J and fifteen millions, or much the larger j part, being held as cover for notes in circulation. This latter part of the gold can be drawn upon only in the event of an abnormal contraction in the circulation, and the conditions which would make such a contraction possible would at the "same time tend to turn the foreign exchanges in our favour and so render an export of gold unprofitable.

"It. is. therefore, worth while considering whether it is wise to lock up the major Portion of our gold to meet an emergency which in practice would not occur and, in doing so, suffer the inconvenience of the unduly high rates that might have to be enforced to keep the remainder, which W unprotected, at a sufficiently high figure to maintain confidence both at home and abroad.