EXCHANGE LEGISLATION

Evening Star, Issue 22687, 29 June 1937, Page 9

EXCHANGE LEGISLATION

BRITISH GOVERNMENT'S ACCOUNT CHANCELLOR EXPLAINS POSITION (British Official Wireless.) Press Association —By Telegraph—Copyright "RUGBY, June 28. (Received June 29, at noon.) In moving the resolution relating to the proposal to increase the amount that may he issued to the exchange equalisation account from £350,000,000 to £550,000,000, Sir John Simon said there could Jie no doubt that the existence of the operation of this account had been instrumental .in promoting and maintaining steady recovery. Contemporary operation of the account must be conducted with the most complete secrecy 7 , because anything like contemporary disclosure of what it was doing would bo a heaven-sent opportunity for currency speculators, and would thus amplify the very undulations which the fund was engaged in reducing. An additional need for the fund had lately been created by the deliberate shifting of large quantities of gold capital from one centre to another. Under the gold standard regime gold movements took place mostly for tho purpose of settling international trading balances, but now they had large masses of capital moving from_ one country to another for quite a different reason, and unless the bad effects of this in causing violent fluctuations in currency exchanges as far as may he were neutralised, the result would ho exactly the same—namely, obstruction to trade and loss of business confidence, against which the account was originally directed. Thus the exchange account in th 6 present circumstances must he prepared to add to the holding of gold, for that was what was necessary to avoid frequent and wide fluctuations in exchange rates when new gold was coming and also later on when foreign owners called for tho return of certain quantities of it. Tho Government, therefore, concluded it prudent and timely to add £200,000,000 to the existing borrowing powers. Its line of policy accorded with that of tho United States.

The Chancellor, in discussing the question of secrecy, said there would be no harm in indicating to tho committee at a date after the event the amount of gold held hy account over six months, the information being made to the public three months in arrear. Accordingly, he informed the House of the following factsOn March 30, tho gold held in account was 26,674,000 fine ounces. On the same date there was also gold held by the issue department of the Bank of England amounting to 73,842,000 fine ounces, making a total of 100,516,000 fine ounces, which, at £7 per ounce, represented little more than £700,000,000. Tho exchange equalisation account at that date did not hold more than a trifling amount of foreign currency. That was the sort of statement that would be made every •six months. He was ready to agree that tho state of tho account annually as at March 31 should bo available to the Comptroller and Auditor-General. Also, it would confidentially bo communicated to tho Public Accounts Committee by January 31 following. There would bo on such account an indication as to whether the result was a profit or a loss.