AIR OF EXPECTANCY

Otago Daily Times, Issue 26543, 19 August 1947, Page 5

AIR OF EXPECTANCY

Developments in Economic Crisis CLOSE AMERICAN INTEREST Rec. 11 p.m. LONDON, Aug. 18. The sense of urgency conveyed by the sudden recall of Cabinet Ministers from their holidays is not entirely dispelled by a statement Issued from Downing street after a meeting of Ministers last night, says the parliamentary correspondent of The Times, who added that the domestic part of the Government plan to meet the economic crisis was already in hand—negotiations on the extension of working hours were well advanced; the Minister of Agriculture will place his proposals for increasing home food production before the industry on Thursday; while October 1 has been chosen as the effective date for a number of cuts and restrictions. The pace of developments in conferences being held in Europe and the United States brings constantly shifting emphasis to bear on the plans for reducing dollar expenditure and increasing British exports. The Paris conference has received reports from technical committees for correlation, so that a general picture of Europe’s economic needs can be formed. The Ruhr coal conference in Washington is a week old, and the British delegation to-day will begin talks on the terms of the United States loan agreement. I The inter-relation of these conferences has been emphasised by the Government’s decision to increase exports at the expense of the home market, and to cut food imports from dollar countries by £12,000,000 a pionth. Further measures, such as the film tax, the cut in petrol imports and such questions as reducing British dollar obligations in Germany, must add their weight to the urgency with which the British econorhic crisis is considered in Washington. The correspondent added that it is known that Washington is showing close interest in the plans for reducing food imports from dollar countries and in the proposals for finding alternative sources in non-dollar areas, particularly the dominions.

While there is no official indication yet about the nature of Cabinet’s further instructions to the Washington mission, it is responsibly understood that there are only two alternatives: First, maintaining convertibility of sterling at a lower or unpegged exchange rate, and secondly, maintaining the exchange rate and restricting convertibility, , says Reuter’s financial correspondent. There have been reports from Washington that the United States Government would have agreed to the latter even before July 15, if Britain had asked. This may be a clue to the hurry. If convertibility is to be restricted, and if, as the British Ministers have stated, Britain refuses to throw away gold stocks, convertibility must be suspended before the last of the loan is used because some dollars must be kept in hand to honour sterling already,in American hands. With the loan running out fast, the deadline for this decision might be only a few days. Mr Cameron • Cobbold’s hurried departure for Washington is further 'in-

dication that the crisis is coming to a head. Mr Cobbold, the deputy-gov-ernor of the Bank of England, is widely regarded as the “ brains ” of the bank, which is in charge of the convertibility of sterling and sterling exchange. The restricting of the convertibility of sterling would in theory violate all 48 sterling convertibility agreements, which Britain made with various countries in the past year, though any contract is automatically frustrated if and when fulfilment becomes impossible. But this conversion of dollars in New York has always been regarded in London as a policy and not an obligation under any agreement. The restricting of convertibility still seems the more probable choice, but if Britain decided on the other course, Mr Cobbold would be entitled to do it out of hand. It appears that unless Washington could provide the resources to enable convertibility to be maintained. a decision on either the restricting of convertibility or allowing sterling to depreciate might only be a matter of days.