BRITAIN’S STANDING

King Country Chronicle, Volume XXVI, Issue 3442, 12 March 1932, Page 2 (Supplement)

BRITAIN’S STANDING

THE ELECTION AFTERMATH. REACTIONS ON WORLD FINANCE. (By Norman Crump, in the London Sunday Times.)

The general effect in foreign financial centres of the Bntish election has undoubtedly been good. The victory of the National Government is regarded as a victory for political and economic stability, and, above all, as a victory for sound finance. This is highly welcome in these very critical days.

Such is the faith abroad in British common sense, indeed, that the victory had been generally accepted. There had been a fair amount of foreign speculative buying of sterling during the campaign, and profit-tak-ing by such speculators partly explains the reaction in sterling after the declaration of the poll. Ancfther cause of the weakness lies in the increased imports of foreign goods. These are clearly traceable to fears of a tariff, and pressure of this kind upon the pound is obviously a point to be watched. THE TRADE BALANCE. In this connection it is highly likely that the temporary effect of the suspension of the gold standard will be to increase the adverse trade balance. Imports of goods ordered before the suspension are still coming in, and where the contract is on a foreign currency basis they now cost more in sterling as the result of the depreciation of the pound. Again, the initial effect of the October revival in home activity must be increased imports of raw materials, ibr it is impossible to substitute home or empire for foreign sources of supply all at once, even if it were possible or desirable in the long run It is true that our export trade has received a stimulus, but several weeks or months must elapse before this is reflected in increased deliveries of British goods, and in the meantime our export returns will not improve, and so our trade balance will become more unfavourable. TARIFF PROSPECT. On the prospects of a British tariff foreign financial opinion is naturally more dubious. It is influenced by the likely loss of the British market at a time when financial stringency and industrial depression are rif© all over the Continent. Again, to countries such as Germany, Austria, and Hungary, to mention no others, an export surplus is a vital necessity, for they ar© faced with the terrible problem of meeting within a few months’ time their huge burden of short-term indebtedness.

This problem hangs like a cloud over debtor and creditor alike, for on the creditor side bankers in all countries rank these short-term debts as part of their assets, and if they have to write them off as a loss the effect upon their position will in some cases be serious. Hence the anxiety in Holland and Switzerland, to go no further. STABILISATION OF THE POUND. The National Government comes before the world with new and immense prestige at a time when matters have reached a deadlock and the world is looking eagerly for a lead in several directions. First, it wants to know where and when the pound is to be stabilised. The depreciation of the pound has had many serious consequences abroad. Foreign banks have lost heavily on their sterling holdings. Many countries operated the “ gold exchange standard,” whereby their notes were backed partly by gold and partly by “ gold exchange ” —that is, bills and balances in foreign currencies exchangeable into gold, including sterling. Our defection from the gold standard has let them down and caused them to abandon the gold exchange standard in a hurry and to sell their foreign bills and balances for gold. Hence the gold*,withdrawals by these countries from New York. Furthermore, the huge volume of world trade which is conducted in sterling has suddenly lost its basis, and much confusion and dislocation have followed. The world recognises that we cannot stabilise at once, for we rnuslj first be certain of holding the new rate Again, the world does not expect us to go back to par. Still, it is hoped that we will not delay too long or stabilise below the present level. • MR HOOVER’S MISTAKES.

Finally, the world feels keen disappointment at the meagre results of the Hoover-Laval conversations.

Last June Mr Hoover left France out of account, and the result was wellnigh fatal. This October he has forgotten Germany, and this may prove equally serious. Time presses, for the German stand-still agreement ex : pires next February, and it is essential that Germany’s short-term indebtedness should be funded before then. If this is to be done it is just as essential that the burden of reparations should be lightened first, and it is still more important) that Germany and France should be brought into full accord with each other. Mr Hoover has twice had his chance to do so, and has missed it. The world is now looking to Mr MacDonald, backed as he is by the whole British nation, to step successfully into the breach. WORLD TRUSTS IN THE GOVERNMENT. The chance of any reduction in the bank rate here, even after the Government’s victory, marks the serious state of world affairs. Mr MacDonald’s triumph is rightly ' hailed for what it is, namely, a definite stage on the road away from world ruin and towards world recovery. Yet there is much still to be done, and the world is looking to the British Government to do it. This means that the Government must get down to its job, restrain the extremists among its supporters, and weld the huge mass of its followers into a coherent whole. Mr MacDonald and his colleagues possess the world’s trust It is no exaggeration to say that the future of the civilised world depends upon the way in which they discharge their duty.