GOLD STANDARD

Hawera Star, Volume XLV, 6 May 1925, Page 5

GOLD STANDARD

CREDITS FROM AMERICA. REPLY TO LABOUR CRITICISM. THE, CHANCELLOR SUMS UP. BY CABLE- PRESS ASSOCIATION—COPYRIGHT LONDON, May 4. In 11 10 House oi Commons Mr WaL ter Guinness (Financial Secretary to viie Treasury), in moving the second reading of vne Gold Standard Bill, pointed out in connection with the proposal that tne Bank of England was oound to self gold in bars. Each bar would be wortn about £I7OO, and the size of the bar none would prevent tins proposal being used to . bring back gold into general use, and limit the possible drawing of gold for export. The clause of the Bill empowering the Treasury to borrow for exchange operations did not increase the total amount of money which might be borrowed. Any sums raised under these powers must come out of the usual provision for borrowing up to tlie total supply services for the year voted yearly ill the Appropriation Act. Two credits had already been conditionally negotiated under this head. One was tne f ederal Reserve Bank at New York, which gave the Bank of England a revolving credit of 200,000,000 dollars for two. years from May 10. The second was with a syndicate I leaded by J. P. Morgan to His Majesty’s Government direct for a revolving credit for 100,000,000 dollars, also for two years, interest in each ease payable when the credit was drawn upon, at 1 per cent above the Federal Reserve discount rate, with a minimum of 4 per cent, and a maximum of 6 per cent; or, if the Federal Reserve rate exceed 6 per cent,, at the Federal discount rate. “If we do not vise the credits no .nterest will be payable,” Mr Guinness explained. “There will merely be a very small commission on the right of call on the money.” He hoped in view of its urgency, the House would pass the Bill without delay. He did not fear a rise in the bank rate or higher prices. The Government believed the country had reached the stage of purchasing power being at parity, and that in the long run the producer would have more to gain from the security of the , gold standard than the banking interest. Mr Philip Snowden moved a Labour amendment refusing to assent to the Bill, which by providing for the return to the gold standard with undue precipitancy, might aggravate the existing grave conditions of unemployment and trade depression. Mr Snowden emphasised that he was not opposed to the return to the gold standard, but he protested against the Government’s undue precipitancy. The Labour Party, by the amendment, dissociated themselves from the disastrous consequences which might follow. Mr-,Snowden declined to accept the statement of the Chancellor of the Exchequer (Mr Winston Churchill) regarding the existence of a practical parity- between prices in Britain and the United States. Mr Snowden thought the difference amounted to 5 per cent. The Government should have waited a little longer in the hope of the parity of gold lev-el prices being reachable by the normal operation of trade. Mr Churchill denied that the decision to return to the gold standard could be described as one of precipitancy-. On the contrary; they had acted on the finest expert financial advice, in the world. The Government had taken every precaution which- forethought, patience and long preparation could suggest. He mentioned the; disadvantage of giving loii" notice of the return to gold, and pointed out that, if we waited -for the Act to expire at the end of the year, everyone could, under the existing law, have withdrawn and hoarded gold against the date of free export, namely, January, when the normal demand" for bullion would be high. He insisted that no country in the world was less able to afford to diverge from economic facts than Britain.

! As regards the allegation that the decision would shackle them to America, the Chancel’or said it would certainly shackle them to reality for good or ill. He personally believed it was the only basis offering permanent security. .Referring to the necessity for Imperial. unity regarding the gold basis, he said that bad we shown ourselves incapable of taking any decision, the self-governing Dominions might have adopted golcß and they would have traded together, leaving the Mother Country to pursue a different policy. They would have traded with the United States on a. gold basis, hut with the 'eft out that would have been a disastrous state of affairs from our viewpoint. Mr Churchill knew nothing which would have justified an increase in the bank, rate in the immediate future. Indeed the situation was stable, and everything tended to show that the transition to gold had hitherto been effected with success. He declared that Britain was not only the financin' centre of the world : she was the centre of a wide empire. If we detached onrse'ves from their movements, we ran the great risk of becoming isolated and loosening the bond which was indispensable to our well-being. The Chancellor scouted the suggestion that we might he unable to hold our own against strong trans-Atlantic influences, and pointed out that Britain still controlled a. vast amount of the world’s business. She had magnificent credits; also £3,000,000.000 of foreign investments. She held .C1*53.000,000 in gold and the Dominions held £107,000,000. 'Hie Empire supplied 70 per cent, of the world’s gold. He cited instances of pre-war discrepancies in the British and American price levels, and their normal and timely readjustment in order to disprove that the absolute equation of prices was essential to the restoration of the gold standard. f Mr Churchill concluded by stating that the Dominions united were an enormous power. They were great, intricate. and comprehensive enough to exist side by side in an amicable association with an even larger economic financial nower without their own essential independence being prejudicially affected. The Bill was read a second time without division.