BRITISH MONETARY SYSTEM

Nelson Evening Mail, Volume LXXII, 28 January 1939, Page 9

BRITISH MONETARY SYSTEM

SOUNDNESS EMPHASISED FITTED TO COPE WITH NATIONAL NECESSITIES THE BUSINESS OUTLOOK (Uritisb Official WireleMl RUGBY. 26th Januayr. Speaking at the annual meeting of the Midland Bank to-day, Mr Reginald McKenna said that the British monetary system and practice were fitted to cope with the great demands imposed by national necessities. Britain was far stronger than ever before to face any possibilities of financial disturbance that might arise from developments abroad. The financial authorities were now better equipped for the management of the currency, in which they acquired by experience a rising standard of skill. Under the guiding hand of the Treasury, a high degree of co-ordina-tion was being attained between the two major elements in the monetary system—the Bank of England and the commercial bonks “The business outlook.” went on Mr McKenna, “is still overshadowed by international anxieties, but, just as we have experienced sudden turns fof the worse in foreign affairs, so we may yet experience an equally sudden change for the better. ‘lf this should happily take place, there would be little doubt as to the probability of a marked recovery in business during the coming year. Even as things are I think we may reasonably look for some modest improvement. “In external trade the Anglo-Ameri-can agreement and the arrangements associated with it mark a big step forward in the direction of a larger volume of free interchange of goods over a greater part of the world. In domestic trade we are probably far from having felt the full effect of the rearmament programme in stimulating output and employment.” TWO ALTERNATIVES Discussing the financial aspect of the rearmament programme, Mr McKenna said that the choice lay between additional taxation and borrowing, or something of each. Additional expenditure by the Government ought, if possible, to be so financed as to bring into productivity activity men and women now out of employment. Taxation would not help in this respect. Borrowing on the other hand under existing conditions would stimulate employment, and, as the demand for labour grew, the industrialists would be forced ultimately to draw from the pool of the unemployed. The limit to this policy would obviously be reached when all labour employable at a profit at the current rates of wages was fully engaged, but he considered that they were a 'ong way from that condition at the present. “If it should become clear that re- | armament is causing true inflation, as ' indicated by overemployment and an all-round rise in costs, it will, I think, be probable that restrictive measures will have to become a matter of urgency, but I see no sign of a near approach to that condition.” concluded Mr McKenna.