War Debts and Gold

Dominion, Volume 27, Issue 37, 7 November 1933, Page 11

War Debts and Gold

Sir, —I notice in to-day’s "Dominion” that Mr, J. Hislop is reported to have quoted Britain's war debt payments as a precedent for. the Government’s proposal to take over the banks' gold at book value. He is reported as having said: “After England had gone off the gold standard she still had to pay.her debt.to the United States ,in gold. Instead .of- buying it at the high market price, they obtained it from the Bank of England at the book value.” This cannot be considered as analogous to the present position here, particularly as the transaction (e.g.-. the £19,500.000 gold payment on December 15 last) did not end with the payment of the book value of the gold by the British Government. The manner in which this payment was arranged is as under: (a) £l9 J millions of gold (book value) were received from the issue department of the Bank of England ; a corresponding total in notes was taken out of the banking department and replaced by Treasury bills, (b) But the sterling value of this amount of gold was some £29 J millions. and this difference between the book value and the market value (i.e., £lO millions) was- paid by the Government to the Exchange-Equalisation Account. I may mention that the Bank of England, notwithstanding legislation empowering it to purchase gold at par, pays the market price in practice, thus recognising file proprietary rights of existing holders. —I am. etc., FORUM. Wellington, November 6.