CABINET ACTION.

Auckland Star, Volume LXII, Issue 223, 21 September 1931, Page 7

CABINET ACTION.

SIGN OF STRENGTH.

Stop Unscrupulous Exploiting of

Troubled Conditions,

SPEEDY STEPS TAKEN.

(United P.A.—Electric Telegraph—Copyright)

(Received 2.30 p.m.)

LONDON, September 20,

"Bank Rate Six Per Cent. Britain oft Gold Standard," were the momentous tidings briefly ticked on the tape machines early in the evening as an explanation of , the all-day consultations at Downing Street, followed by a two-hour Cabinet meeting at whieh the decision was unanimous. Never before in British history has the bulwark of the nation's, finances been buttressed on a Sunday.

Emphasis is laid on the fact that it was not a sign of the distress of the National Government, but, on the contrary, is a sign of strength and determination to prevent unscrupulous exploitation of troublous conditions.

When Mr. Mac Donald went to Chequers on Friday afternoon, everything suggested a normal exchange during the day, but before seven in the evening lie was informed that the day's loss, was over £17,000.000. He immediately consulted the representatives of the Bank of England and the Treasury, and was told the Bank had reached the decision that It could not save sterling on its gold basis, but desired an opportunity to test the market on Saturday, which was only a half day for business.

Mr. Mac Donald returned to Downing Street, where he stayed the night. He summoned his colleagues on Saturday and consulted financial and other authorities, and was-later informed of a marked loss of £10,000,000.

It was then that Cabinet decided that action was imperative.

STOCK SLUMPS.

Gloomiest Conditions for Years

In London.

CAUSED ON CONTINENT,

LONDON, September 20.

Yesterday is likely to be known among members of the Stock Exchange as Black Saturday, for the first Saturday opening since April 24, 1917, witnessed the gloomiest conditions for many years.

For the last few days prices oh the markets were steadily falling. On Friday they slumped badly, mainly as a result of selling from Amsterdam, Berlin, Paris, Brussels and New York owing to" financial troubles in those centres.

The last straw came when the Brazilian Government announced that it was unable to purchase sufficient exchange to provide all the interest due on October I on the external debt.

There was further selling on Saturday from the Continent, with declines ranging from one to two points in the 5 per cent War Loan, 1929-47, the 3£ per cent Conversion Loan, and the 4 per cent Funding Loan, 1900-90, but the market was steadier later, and closed at above the'' worst quotations.

Australian stocks shared in the general collapse, and although there were only a few sales prices were lowered all round. A contributory factor in the weakness was rumours of the proposed conversion of Commonwealth stocks in Britain.

There was also a further serious marking down in the prices of mining shares

The Prime Minister, Mr. Mac Donald, unexpectedly returned to London from Chequers on Friday night and conferred with a representative of the Bank of EnglancJ.

Mr. Mac Donald's return was due to the financial problems, especially the speculators' attack on sterling in New York.

NEW YORK PRICES.

LEADING STOCKS DECLINE

NEW YORK, September 20.

British Government bonds and the pound sterling were subjected to sharp pressure on Friday on the financial markets, when stocks suffered another fall. United Kingdom 5£ per cent, 1937 stock dropped by more than 50 dollars (£10) per bond of 1000 dollars' (£200) par value.

The sterling exchange dropped to 4 dollars 84*] cents. Cable transfers fell one cent from Friday. Efforts were made to sell sterling short, but the banks declined to accept short sales.

Some future offerings, at lower than 4 dollars 75 cents, have been reported. It is believed that the selling reflected the growing uncertainty over Britain's ability to maintain the current gold parity of 4 dollars BG§ cents. .

With all the markets approaching a selling crisis, the London influence and general "bear" sentiment continued to drive prices down in all fields. Saturday marked the second anniversary of the collapse of the "Coolidge" market. Since then the total value of all listed stocks has fallen 60 per cent, a loss of 50,000,000,000 dollars.

United States Steel, which is a pivotal issue, closed at 75i, representing a loss of 186J points within two years. The foreign bond market yesterday was all but demoralised. Large losses generally were recorded in British, Danish and Argentinian issues. The hardest hit were Buenos Ayres, 1960, which lost 38£ points.

The Brazilian Government's announcement that the partial moratorium of the foreign debt payment had been made complete pending an agreement with creditors helped to depress the bond market.