GOLD STANDARD’S RETURN

Greymouth Evening Star, 30 April 1925, Page 5

GOLD STANDARD’S RETURN

ANGLO-AMERICAN CO-OPERATION V- ■ J ... ./■ -. . ?■ DOMINIONS CONCUR. ■ — (Australian and N.Z, Cable Association.) LONDO^,'Xpril 28. Nir Churchill, in his Budget'speech, said that further steps had beeiv recommended by the committe re the gold standard as for example an amalgamation of the Bank of England and tne Treasury notes. / These would be deferred, as the,, Committee had recomniended, until )Ve had"' siiflicient experience of the. working of .a free international gold'market on a gold reserve of approximately pile hundred and fifty millions. AV hep th*e Government decided to return to the gold standard,' many months ‘ago, the Treasury began discreetly to accumulate dollars, and it had now accumulated the whole 165 million dollars required for the , June and December payments of Britain’s American 'itebt, and all of our. other, American debt obligations this year. " ' ■ / . - . Finally, said'Mr Churchill, although he believed were strong enough to achieve this important change from oiir own resources,’ he had arranged as' a further protection to obtain,'• if required,' Credits ' from the United States of not less tliaii three hundred million dollars'Ayith a possible expansion, if necessary. He said that the Government, in returning to the gold- standard, was not moving -alone) The United States and Germany were either on, or related to, international gold exchange. Sweden was. on gold exchange. .Austria Hungary’ had been'"bas'ed oii gold, or on sterling,’ which was now equivalent to gold. He ' had good, reason ,to fcnow. Chat Holland and the Dutch Indies werA very important factors in the world’s fortunes and they would act simultaneously’ with Britain to-day.. So far as the Dominions were concerned, there would be complete xinity of action. Canada already was on a gold stanejard. South Africa had notified its intention to, revert to gold as from the first of July. Australia and New Zealand were aool< ishing the restrictions on the export of gold from to-day. He believed that the establishment of this great area of common arrangement would facilitate a revival of international

and inter-imperial trade. The report of the Currency Committee, to which Air ChurcliilL referred expressed the opinion "that the domestic circulation of gold was a luxury which was dispensable. Britain was not likely fo afford it for a few years, but the established national, habit of using paper currency would be sufficient to prevent; the absorption of an appreciable quantity of into domestic 'birculatioii. If there were such a risk, the Committee is of .opinion‘that legislation wijl be essential, to prevent y the abnormal circulation of gold till the' gold standard is' firmly established. The coinage of half sovereigns in any case should not be resuined. Hie • Committee recommends that, as .soon as parity is restored, the Bank of England be authorised to prepare for printing its own notes. The experience necessary to enable the- amount of the fiduciary issue to be ' fixed should have been gained by the end of 1927, and the transfer of note issue could be.effected early in 1928, or perhaps before.

GREAT RESULTS EXPECTED. LONDON, April 29. The return. to the gold standard is featured by the newspapers as . the most important aspect of the Budget from the viewpoint of world iinaiice, It is calculated to facilitate the stability of prices, restore the confidence of traders) . and encourage business dealings all over the. world. The '“Morning Post’s” city editor expresses the opinion that it will be difficult to determine how the money market may be .effected. , For the next few days it may. easily witness violent movements iii American exchange on London, according to tho extent to which the present developments have been preceded by speculative operations in sterling; but shortly thipgs will settle down, and sooner or later, Exchange must be affected by financial and. economic developments, whether expressed in ordinary trade movements,, or by buying, or selling securities. He holus therefore that unless it is shown that our economic position is sufficiently strong to maintain American exchange dearer money might have to be resorted to for a while. Hie importance of the protective measures m the shape of reserve dollar credits in the United States is recognised. »Such credits may be regarded as constituting a reserve which : is u'i*!ikely to be encroached upon. • The “Financial Times” says, that the fact that the whole "Empire will a<‘t simultaneously, apart from the adhesion of foreign countries, who will follow suit, is a remarkable achievement. ; The decision is the best thing that'could have happened in th« interests of British credit and prestige. Behind the gold reserves stands the credit which the GoyeriF ment has obtained from the United States, recourse to which, the paper is confident, need not be frequent or extensive.

Immediately the Budget details were known, sterling on the London market reached 484 and closed at evening only a trifle lower.

WELCOMED BY U.S.A. NEW YORK, April 2.. The Stock Market has hailed the British announcement of the return to geld as the most far-reaching step toward stabilisation since the acceptance of the Dawes Plans, and this sentiment is reflected in, a. generally improved tone in the finance and / tlic commodity markets, while the depression following on the Gorman elections has been completely forgotten. Following on sterling gains, almost all the European exchanges advanced while stocks showed a relief from persistent progressional pressure,, 'which has recently kept them in an unsettled state. The financial enthusiastically claiming that the British action means that good money will predominate throughout the. world, thus enabling business men - everywhere to cany on operations with an assurance that no erratic movement of the exchanges will throw their calculations out of joint, thus causing big losses. Confidence has entirely been restored, and it is anticipated that the international markets for raw mafhrials and foodstuffs, will immediately improve. Ilcgard'iig Mr Churchill’s statement that three hundred million. dollars, 'credit has been arranged with’ the United States, if necessary, the ’Secre-

t tary of the Treasury, Mr Mellon, believes that such' not:actuary ,‘needed, but that it affords an adcittiional’ security. . ,M.r. ppniipn lis that sterling lias been getting istr’onger thibugh. the growth of forleign trade, and that, even if the gold (embargo had nbt been.-. :• lifted, the jpotlnd would have retunied to par, land rema'ified there--through economic jconllitiohs.. ; . . i ’ ; ' The attitude of Mr Mellon and .of •other high Treasury’ officials is that I any tiling : that. may. be done by.Rnt■ain to "establish the" gold .basis and.-to stabilise the '. purrency, is ' (lesirable 1 from ‘a. general, economic 'standpoint, and is favourable to the interests pt ,the United States. '-.Ti'i.the nipan;tiine)K(the. Morgan Company, .whose. ;house is. expected to handle the Ui'it'. lish'.- credit);'if it is macle,' has declared I that comment would jie withheld penciling direct' advices from’ the British, .Treasury. ' ! .

? HOLLAND FOLLOWS , SUIT, ; ‘ 'THE HA!»W April 28. i T.fie Government has announced that it is re-establishing the gold, standard (to-morrow. ; ; • ■ p ' STERLING STILL .RfSiING. . NE,W YORK, April 29. Sterling, closed at 484 U AUSTRALIAN COMMENT. :/' SYDNEY, April 30. Following . the announcement of the return to a-gold standard, an informal meeting of' representatives of' ciatecj bank's, held to discus’s the position. A'formal meeting has been called in.,Melbourne to-day or to-mor-row, to consider further the situation. It is expected that one outcome will be a. considerable' alteration in exchange rates at an early it was known that the Commonwealth Bank Board had advised the Federal Government' to remove all'restrictions on the export of gold as from May 1, the decision of the Government; to fall into line with' the British Government from yesterday, came as' somewhat of'a surprise- to bankers? .Some demand wds made at the banks yesterday,'for lor notes, but it was not large.- ; The “Herald” comments : “The return to geld is a matter for congratulation. AVe now enjoy stable currency and exchange, which will fluctuate oil]y slightly more than before the war. Certainty is the health of .the commerce of the world. Trade, should ‘ iinprove, and it will be possible now to take a long view in commerce, prepare for future development, and not be forced to be content with the subsistence of the Imonth,. A rectification of exchange rates should be before the week closes.”.

EFFECTS IN DOAUNJON. (Special to “Star.T) .. CHRISTCHURCH, April 29. . ’So far the managers of the Banks in Christchurch liAve not been advised officially .of the restoration of the gold standard in Britain and Australia, as announced in the Imperial budget, although several of the Banks operating in the City are Australian concerns, nor hive they .any irifprina-tion as to the actifi.n contemplated in'tli'o Dornin, ion, but they , are keenly interested in tfie cabled news, i)oi- the chiijige should the-effect of stabilisipg 'exchange rate's. The annbunceineut• p,idfiably Is the most important financial development that has occurred for years, and its effects aie far-reaching, though the changes'may net come all at once. A-“ Sun” an an, who saw several Bank managers concerning .the sitmition, found them reluctant to express’ an opinion. They said, however, that if' the balances could be shipped frorii London to' the Dominion, it would help matters enormously. It would mean that'the Ranks could.lend more money in the Dominion. ' .

‘AVill this assist in breaking down the present high interest rates on overdrafts?” onv man was a l ske’d.__ For a moment he hesitated. Then he said : “It is problematical. Well (musingly) of course it would, tend that way. Mina you, cneap irioney would lead to speculation. . High' i'ates have been a good thing, arid we have had to pay heavy taxation. If we reduce the interest rates we may not-bo able to pay so much for deposits, arid if our deposits fall off, the consequences would be bad.” . •' ■" '• '' Tnis man said that the conversion rate of the sterling with America was; 4.78 dollars. America now bad too much gdld, for, of course England had been compelled to pay . adverse, trade balances in gold, liieed, the United States was now exporting gold to Australia, whereas during the .war. h was Australia that was exporting to America.. Ameri ;a favoured the releas-. ing.of gofil beyond the necessary sumsheld for security, for such money was not earning, or rather was'not being utilised f&r earning. . The' reporter asked one manager it the Banks in New Zealand, under nor. mal conditions, would object- to converting notes into coin. He smiled at. this and was inclined to be diplomatic. “Well you know,” he said, ‘‘’so far as our gold reserves in New Zealand are concerned, we are no worse off now" than wo wei/e. before The war.”