FINANCE AND INDUSTRY.

New Zealand Herald, Volume LXVIII, Issue 20925, 15 July 1931, Page 11

FINANCE AND INDUSTRY.

REPORT OF * COMMITTEE. BRITISH MONETARY SYSTEM. VARIOUS RECOMMENDATIONS. GENERAL WORLD POLICY. Bv Telegraph—Press Association—Copyright. (Received July 14, 0.45 p.m.) British Wireless. RUGBY. July 13. The report of the fommittee, on Finance and Industry, over which Lord MacMillan presided, was , published to-day. The report is signed by all I lie members except Lord Bradbury, who represents a reasoned memorandum of dissent. After reviewing the main economic and financial developments since the'return to the gold standard in 1925, the report; concludes: "The economic difficulties of the post-war decade were primarily clue, not to any wanton misbehaviour in the monetary factors, but to the unusually large and rapid changes ,in non-monetary phenomena, for instance, unusual instability in demand for capital, war debts, rapidity' of. technics.! changes in manufacture and agriculture, rigidity of rates of wages, growth of tariffs, embarrassments of budgets, and violent changes in speculative activity in New York and elsewhere. Britain's Difficulties. " Britain's own domestic difficulties were increased by the relative over-valua-tion of the pound .sterling on the return to gold, and the subsequent undervaluation by France and Belgium." The broad aims of a. world monetary policy arc laid down by the committee as follows: — The central banks'of the world would adopt,tho objective of raising the price level, to avoid if possible the stabilisation of prices near the present level, which would be disastrous for all countries. When the point conies at which prices are appropriate to the then existing levels of salaries and wages, the. monetary policy .should endeavour lo keep prices as stable as possible. The monetary system of Britain should be a managed, not, an automatic, system, with a view to assisting in reaching objectives which cannot be reached by a single country, but depend on international agreement, i Need of Concerted Policy. Concerning proposals to meet the present emergency, the committee believes the first step necessary is greater willingness on the part of the creditor countries to buy and lend. A concerted policy is needed between the central banks and the issuing institutions in Britain, France, and the United States, arid everything should be done to remove legislative hindrances on foreign lending, and toward permitting such a volume of domestic credit as would encourage the market to take up attractive foreign loans. Something might bo done by the banking systems to break the depression, if the banks pursued a policy Of purchasing securities and driving down the general rate of interest on long-term borrowing, thus bringing a revival of new enterprise. The report stresses that such a policy can only be pursued if adopted by all the central banks. Otherwise the only result will be the loss of the gold reserves. Passing from questions which can be dealt with only internationally the committee's recommendations*on the British internal system are limited and technical in character. The interests of Britain require her to adhere to the gold standard. Bank of England Note Issue. The committee unhesitatingly rejects the suggestion that sterling be devalued. It-recommends that'tlie Bank of England be empowered to issue notes, lo a maximum of £400,000,000, accompanied by powers/of temporary expansion, and that ths minimum gold reserve be fixed by law at £75,000,000, with power to drop below this figure temporarily. Tho report does not favour any reduction in the bank's normal stock oi' gold, but, on tho contrary, stresses the case for increasing both the gold holding and holdings of foreign exchange, in view of London's large liabilities as an international banking centre. As to methods of raising long-term capital for hone and industrial purposes, the committee proposes that tho banks and the State and the banking houses should co-operate in setting up one or more institutions to act as financial advisers and to carry out all types of financing business, and to develop continuous relations with industries. The terms .of reference of the Committee of Inquiry into Finance and Industry were stated in the House of Commons on November 4, 1929, by the Chancellor of the Exchequer, Mr. P. Snowden. They were " to inquire into banking, finance and credit, paying regard to the factors both internal and international which govern their operation, and to make recommendations calculated to enable these agencies to promote the development of trade and commerce and the employment of labour." The members were Mr. H. P. (now Lord) MacMillan (chairman), Sir Thomas Allen, Mr. Ernest Bevin, Lord Bradbury, Mr. It. 11. Brand, Professor T. E. Gregory, Mr, J. M. Keynes, Mr, Lennox Lee, Mr. Cecil Lubbock, Mr. Reginald McKenna, Mr. J. ,T.' Walton Newbold, Sir i . Walter Paine, Mr. J. Fralcr Taylor and Mr. A. A. G. Tulloch.