INTERNATIONAL BANK

Taranaki Daily News, 9 July 1930, Page 7

INTERNATIONAL BANK

ECONOMY IN USE OF GOLD BRITISH EXPORT CREDITS. GUARANTEE SCHEME EXTENDED. (Special Correspondent.) Wellington, July 5. The Bank of International Settlements, or 8.1.5. as it will be more familiarly known, formally opened its doors on May 17, and on the same day the financial payments under the Dawes plan were made by the Agent-General of Reparations. The shares of the 8.1.5. were issued on May 20. The

French quota of 16,000 shares .was offered to the public, the issue being, enormously over-subscribed, applications for more than 2} million shares being lodged with the Bank of France. The total amount of application money was £63,000,000. The Belgium quota of 16,000,000 shares was also offered to the public, and was over-subscribed twelve times. The Central Banks of other countries participating in the issue refrained from making public issues, though in some cases the shares may be placed privately. In an exposition of the functions .and scope of the 8.1.5. Sir Charles Audis, a director of the’ National Bank, said that in the present day need of economy in the use of gold the bank could come to the help of the Central Banks. It could hold balances for its. reserves for its note issues, or deposit liabilities, which might be regarded as the equivalent of gold,' since it was on ly i Q g°hi currencies that the bank would deal. It was for that reason that the bank was not required to hold any gold reserve of its own. It had no currency of its own to protect, and its deposits would, in fact, be covered, not by 40 or 60, but by 100 per cent, or more of liquid assets. The. bank had no, poyver of note issue and could only redis trib-

ute existing credit. It could not by 'itself create credit, but it could do so through the central banks. It might be objected that thia might lead to inflation, but there need bo ' no fear - of inflation being carried too far in the hands of the governors of the central banks on the board of the Bank of • International Settlements. As regards the future one might be ■ allowed to imagine a financial Utopia, when the cumbersome and costly physi- ■ cal transfer of gold would no longer be ■ necessary. A debit and credit entry in - the books of the bank would be all that ' was required. It was also theoretically ■ possible that a time might come when, • the elements of freights and insurances havino' been eliminated, the gold points of export and import, between which the rates of exchange oscillated around . parity, would tend to draw more closelv together, until they, finally merged ■ in an international unit, not of money ■ but of account. Following on the recommendation con- ■ tained in the report last December of a committee of three, including Sir Otto Niemeyer, a high official of the Bank of England, who is on his way to Aus-. ■ tralia to consult with Commonwealth authorities on the exchange position, the • period of operation of the British ex- ■ port credits guarantee scheme has been . extended. The scheme,; in approximately . its present form, came into active ■ operation in the autumn of 1923, and has • proved increasingly popular. For the 1 last financial year, ended May 31, the contracts entered. into by the. Export Credits Guarantee Department amounted to £5,661,000. compared with £4,283,000 in 1929, and £2,400,000 « 1928. Under the Overseas Trade Acts, 1920-29, the Board of Trade has been authorised to make arrangements not exceedinn' £26,000,000 in connection with the export of goods wholly _or partially manufactured in the United Kingdom, but it has been provided that such guarantee shall be given before September 8 1931/ and that they shall not remain iii force later than September 8, 1936. . Appointed.in 1928, the committee re- ' commended that the period in which guarantee facilities could be granted , Should be extended for a further period of three years to September, 1934. By the Government’s resolutic.i new guarantees may now be given up to March 31 1935, and they may remain in force up to March’ 31, 1940, the maximum limit .remaining at £26,000,000. Since - August last the scheme has been available in connection with goods to Russia, and up to March 31 last contracts .had been concluded covering .transactions with that country amounting to £l,305,000 air on short term. Credit in■6urance as applied to the export trade ‘is of comparatively recent origin, and it is still regarded as in the experimental stage. It is understood that its possibilities as a means of developing British . trade are being increasingly appreciated.