REASONS FOR DECISION

Taranaki Daily News, 22 September 1931, Page 9

REASONS FOR DECISION

i.ARGE'GOLD WITHDRAWALS Foldings about normal INTERNAL POSITION SOUND British Wireless. Rugby, Sept. 20. In an explanation of the Cabinet e de vision the statement continues: * . "The reasons which have led to this decision are that since the middle of July funds amounting to' more than £200,000,000 have been withdrawn from the London market. The withdrawals have been met partly from gold and ioreign currency held by the Bank of England, partly from the proceeds of the credit of £50,000,000, which shortly matures, secured by the Bank of England from New York and Paris, and partly from proceeds of the French and American credits amounting to £BO,000,000 recently obtained by the Government. “During the last few days the withdrawals of foreign balances accelerated bo sharply that the Government. felt bound to take the decision mentioned above. This decision will, of course, not affect the obligations of the Government or the Bank of England which are payable in foreign currencies. The gold holding of the Bank of England amounts to £130,000,000 and, having regard to contingencies which may have to be met, it is inadvisable to allow thia reserve to be further reduced. There will bo no interruption of ordinary banking business. The banks will open as usual for the convenience of their customers, and there is no reason why sterling transactions should’ be affected in any ■way. It has been arranged that the Stock Exchange shall not be opened on Monday, the day on which Parliament is passing the necessary legislation. This will not, however, interfere with the business of the current settlement on the Stock Exchanges, which will be carried through as usual. WARNING TO CITIZENS. “The Government hae no reason to believe that the present difficulties are due to any substantial extent to the export of capital by British nationals. Undoubtedly the bulk of the withdrawals has been for foreign account. The Government desires, however, to repeat emphatically the warning given by the Chancellor of the Exchequer that any British citizen who increases the strain on exchanges by purchasing foreign eecuritiee himself, or assisting others to do so, is deliberately adding to the country’s difficulties. “The banks have undertaken to cooperate in restricting purchases by British citizens of foreign exchange, except those required for the actual needs of trade or for meeting existing contracts, and should further measures prove necessary the Government will not hesitate to take them. “The Government arrived at this decision with the greatest reluctance but, during the last few days the international financial markets have become demoralised and have been liquidating . their sterling assets regardless of their intrinsic worth. In the circumstances there was no alternative but to protect the financial position of the country by the only means at our disposal. “The Government is securing a balanced Budget and the internal position of the country is eound. This position must be maintained. It is one thing t® go off the gold standard with au unbalanced Budget and uncontrolled inflation and quite another thing to take this Bieftfiure, not because of internal finan-

cial difficulties, but because of excessive withdrawals of borrowed capital. The ultimate resources of the country are enormous and there is no doubt that the present exchange difficulties will prove only temporary.” WILL WATCH PRICES. During the crisis of the last 48'hours the Prime Minister remained in the closest touch with his advisers. He proceeded to Chequers on Friday afternoon in the belief that everything was running normally. Shortly after he left London information was received regarding the events in other capitals and the situation, thus revealed. He returned immediately from Chequers to Downing Street, and throughout Saturday and Sunday members of the Cabinet, when not actually in session, remained in the closest touch. The Prince of IVales, who returned from his holiday yesterday, flying home from Paris to Windsor, lunched with the Prime Minister to-day and, on receiving information regarding the course of events, decided not to proceed to. Scotland as arranged, but to remain in London. In view of the disquieting unpublished rumours in political circles last week, not unconnected with Mr. MacDonald’s phrase “Tight belts,” significant mention was made to-night that the present gold stocks in Britain were fortunately about normal, but that the Government intended most closely to watch prices. It is authoritatively stated that there will not be a steep slide in the value of the pound and that there is no need for a sharp appreciation in prices. The Daily Herald declares that the departure from the gold standard, which the present Government was formed to prevent, ends for the time being the possibility of an early election. Mr. Henderson says: "The situation calls for steadiness, not panic. The fundamental strength of the nation is not impaired. If it only remains calm and resolute we shall more speedily and successfully surmount our difficulties? The Observer’s city editor says yesterday: “The week’s substantial gold withdrawals for Amsterdam are by no means a flight from the pound, but an attempt by Dutch bankers to extricate themselves from the serious position due to troubles in Germany and Austria.”