BIG INCREASE

Southland Times, Issue 22008, 6 May 1933, Page 5

BIG INCREASE

EXCHANGE FUND ADDITION OF £200,000,000 APPROVED POWERFUL POSITION (British Official Wireless). (Rec. 5.5 p.m.) Rugby, May 4. In accordance with his intention announced in the Budget statement, the Chancellor of the Exchequer, Mr Neville Chamberlain to-day moved in the House of Commons a resolution increasing the amount of the Exchange Equalization Account from £150,000,000 to £350,000,000. He repeated with great emphasis that the increase had nothing whatever to do with the circumstance that the United States had gone off gold. In any case, he said, the purpose for which the addition to the account was required was not one which could be used—as had been alleged in some American journals—to force down the value of the pound relative to that of the dollar. The truth was that the purpose of the fund was not directed at all to any permanent alteration in the relative exchange value of the pound. It arose out of the experience of working the account since last June. Mr Chamberlain mentioned a new phenomenon he described as refugee capital—capital which came to Britain because its owners were alarmed at the conditions in their own country and thought it would be safer in London than in any other place. The Government, ho said, could not count on its remaining, and its withdrawal might have a disturbing effect on the exchanges unless they had special machinery to meet such eventuality. Why Fund is Required. The Exchange Equalization Fund, said the Chancellor, was required for smoothing out exchange operations because there were three stages of. the phenomenon—seasonal fluctuations, operations of speculators to increase these seasonal fluctuations, and the special flight of capital from other countries for the sake of finding safety in London for a time. He claimed that the fund had benefited trade by preserving exchange stability. It was impossible to be certain that they had reached the end of unexpected movements that might happen in the disturbed conditions of the world and which affected exchange movements, but he believed the addition of £200,000,000 to the fund would give them an adequate margin. • Mr Chamberlain said that the question of profit and loss in the Equalization Fund did not arise till the fund was finally wound up. A valuation of the fund recently made showed that if wound up it would balance on the right side, showing the skill with which the operations were conducted. But the House must not fall into the error of thinking the question of profit and loss was the one object kept in mind. The object was to prevent the exchange moving rapidly either up or down. These operations had been conducted for a whole year without loss to the Exchequer. The House ought, therefore, to trust the Government to deal with the larger sum now sought. Undesirable Capital. Sir Stafford Cripps (Labour) said he presumed it was proposed to increase the fund in order to counteract floating money which had been going about the world since currencies went off gold, thereby injuring national currencies. Mr Chamberlain might have taxed this undesirable capital. America having followed France in paying off gold bonds in paper currency, it was hopeless to think of returning to a system which, though primarily intended to pay international debts by the transhipment of metal, had now become a question of hoarding. use of the additional £200,000,000 would bring no inflation to industry. It might have been more advantageously used for the benefit of the people. Mr Arthur M. Samuel (Conservative) said they seemed to be going on an uncharted sea. It was preposterous to vote £200,000,000 to help America to keep up her new currency. She might take the opposite course of establishing a stabilization fund for the purpose of keeping down the dollar as part of her policy of inflation. Mr Chamberlain: I stated emphatically that there was no intention of using the fund to support the dollar. Mr Samuel said it was to be used to iron out inequalities in the dollar. Nobody could control the exchanges. The only way to set commerce going was by lowering tariffs with an undertaking by France and America to make the gold standard work. Mr Chamberlain, replying, admitted that it was anomalous that this was the only fund where information was not riven to the Public Accounts Committee. The Government was quite willing to do so if the information stopped there and did not reach the whole world, but the principal object was to counteract speculation, and the publication of the state of the fund at different times would only furnish the speculator with valuable information. The resolution was carried without a division. ACTION COMMENDED DETERRENT TO SPECULATORS. (United Press Assn.—Telegraph Copyright.) (Rec. 7.30 p.m.) London, May 5. The statements by the Prime Minister and the Chancellor in the House of Commons naturally give a serious tone to the morning newspapers. Both open a wide field of discussion. The whole City is behind the Chancellor in increasing the Equalization Fund. The impressive magnitude of the figure will itself act as a very formidable deterrent to speculators. The authorities are now in a very powerful position both to checkmate speculators and even stamp out any big fluctuations resulting from sudden movements of capital. Mr Chamberlain mentioned that the amount of short-term, capital in this country at the beginning of 1933 had reached the amazing total of £2,000,000,000. How much “refugee or bad money may be here in the next twelve months is uncertain, but it is agreed on all hands that the Chancellor was wise in providing an additional £200,000,000 to deal with any emergency. Mr MacDonald’s statement is regarded as showing that his mission was productive of good results in the improvement of relations between the two countries and a better understanding between the two Governments.