Poverty Bay Herald. PUBLISHED EVERY EVENING WEDNESDAY, AUGUST 14, 1929. A WORLD BANK

Poverty Bay Herald, Volume LV, Issue 17029, 14 August 1929, Page 6

Poverty Bay Herald. PUBLISHED EVERY EVENING WEDNESDAY, AUGUST 14, 1929. A WORLD BANK

Arising out of the reparations settlement recently effected has come a proposal for the establishment of a world bank which is attracting a good deal of attention amongst international financiers and statesmen. In so far as the leaders have spoken they have been markedly noncommittal, states the London Daily Telegraph. Yet .there; is a fairly general recognition of the truth that, the plan may prove to* be the most important contribution to the cause of practical international co-operation since the armistice. The proposal figures prominently in the report of the Committee of Experts on Reparations, which was composed of men of the highest standing* in the financial world, and the tact that they have given sanction to tin' plan carries the conviction that it must have the gen eral support of the Bank of England as well as that if the other great central banks of Europe. The World Bank would consist of governor's of the central banks all over the world, meeting "somewhere in Europe," and devising measures for international stability and the encouragement of trade. As planned by the experts there will be 25 directors representing 16 nationalities. In the ten years since the Versailles Treaty was signed there has grown up in Europe, states the Daily Telegraph, a complicated series of official bodies charged with a variety of functions,

linanciflJ, commercial and even industrial functions of a strictly business character which arose from and aro mixed up with the controls and restraints placed upon Germany and German economic life by the reparation clauses of the Treaty of Versailles, up to and including the different bodies constituted in connection with the Dawes plan. Nearly all those bodies are governmental or semi-governmental in character and composition, and largely subject to the directions, sometimes contradictory, of the various Governments interested in Gorman reparations. It is not difficult to see that an immense step will have been taken if all these official organs are swept away and replaced by a bank constituted on business lines, to conduct business operations in a businesslike way. Irrespective of optional functions which may hereafter be extended to it, such as exchange operations in connection with the whole body of inter-Allied war debts and the provision of clearinghouse facilities for the central banks of tho world, the administration of the German reparations annuity, involving exchange transactions in connection with payments by Germany at the rate of from £7,000,000 to £8,500,000 a month on the average, naturally suggested that the authority entrusted ■vith this administration should lie constituted in the form of a bank. The need for a banking institution was reinforced by considerations connected with the experts' plans for "mobilisation" and "commercialisation" of the reparation annuity. It is not merely a epiestion of converting reiehsmarks into the currencies of the various creditor countries in order to make, payment to the creditor Governments. The procedure proposed by the experts for dealing with deliveries in kind for the ten years during which this form of payment by Germany is still to be tolerated, involves the provision of credit facilities which only a bank can ■oiler if big contracts aro to be financed, and which facilities seem the only method of solving the tangled problem of reparations and extricating it from the vortex of national political passions, ambitions, and selfishness. The Finance Committee of the League of Nations has given some study to the question, and has recommended the setting up of a special fact-finding committee. Under rhc leadership of the Governor of the Bank of England, informal action has been taken in many directions to promote consultation,and co-operation between central banks. An important aspect of the propositi is the control that would be exercised over currency.

'' If," >s ays the Telegraph article, "the potential dangers of a gold famine are to be minimised, if the volume of world production and world consumption and world interchange of goods and services is to measure up to the necessities of Germany and of her creditors in accepting a final German obligation to pa\' tin annuity of the magnitude proposed under the Young plan, without disastrous reactions upon Germany and the creditor countries alike, a great world central bank, to facilitate the control of world credit, is an addition of potentially enormous value to the instruments which the world is building up to liquidate the war, and to organise itself for peaceful advance in the new conditions of post-war economic life."