EXCHANGE EQUALISATION

Stratford Evening Post, Volume II, Issue 236, 6 May 1933, Page 6

EXCHANGE EQUALISATION

Support for Chancellor

Press Association. —Copyright. London, May 5

The statements of the Prime Minister and the Chancellor of the Exchequer in the House of Commons to-day naturally gave a serious tone to the morning newspapers. Both statements opened a wide field of discussion. The whole city is behind! 'he Chancellor in increasing the exchange equalisation fund. The impressive magnitude of the figures 'will itself act as' a very formidable deterrent to speculators. The authorities are now in a very powerful position to both checkmate speculators and stamp out big fluctuations result from a sudden wave of movements of capital. Mr. Chamberlain mentioned that the amount of short-term capital in Britain at the beginning of 1933 . reached the amazing total of £2,000,000,000. How much "refugee or bad" money may be here in the next 12 months is uncertain, but it is agreed on all hands that the Chancellor was wise in providing the additional £200,000,000 to deal with any emergency. .... " Mr. MacDonald's rtatcment is regarded as showing his mission was productive of good results and an improvement in the relations of the two countries and a better understanding between the two Governments.

Nothing to Do With U.S.A. Action

(British Official Wireless.) Rugby, May 4. In accordance with his intention announced in his Budget statement, the Chancellor of the Exchequer, Mr. Neville Chamberlain, to-day moved in the House of Commons for authority to increase the amount of the exchange equalisation account from £150,000,000 to £350.000,000. Mr. Chamberlain repeated with great emphasis that the increase had nothing whatever to do with the circumstance that the United States had gone off the gold standard. In any case, 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 experience of working the account since last June. Mr. Chamberlain mentioned a new phenomenon, which he described as "refugee capital'—capital which came to Britain because its owners were alarmed at the conditions in their own countries, and thought it would be safer in London than in any other place. The Government could not count on its remaining, and its withdrawal might have a disturbing effect on exchanges unless it had special machinery to meet such an eventuality.

Smoothing Out Operations The exchange equalisation fund was required for smoothing out exchange operations, because there ware three stages of the phenomenon—seasonal fluctuations, the 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. The Chancellor 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 which affected exchange movements, but he believed the addition of £200,000,000 to the fund would give them an adequate margin. The question of profit and loss on the equalisation fund would not arise until the fund was finally wound up. The 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 had been conducted, but the House must not fall into the error of thinking that the question of profit and loss was the one ob* ject kept in mind. The object was to prevent 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. Sir Stafford Cripps (Labour) said he presumed it was proposed to increase the fund in order to counteract the floating money which had been going about the world since the currencies went off the gold standard, 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 the 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. Sir Arthur Samuel (Con.) . said they seemed to be going on an uncharted sea. It was preposterous to vote £200,000,000 to help America keep up her new currency. She might take the opposite course of establishing a stabilisation fund for the purpose of keeping down the dollar as part of the policy of inflation. Mr. Chamberlain: I stated emphatically that there was no intention of using the fund to support the dollar. Nobody could control exchanges, continued Sir Arthur. 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, in reply, admitted it was anomalous that this was the only fund where information was not given 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.