RETURN TO GOLD STANDARD.

Timaru Herald, Volume XCVIII, 6 May 1925, Page 9

RETURN TO GOLD STANDARD.

Government’s Proposals

Outlined.

SOCIALIST AMENDMENT MOVED.

By Cable—Pres* Amu.-iation—Copyrig-1 Iteusor’s Teiegxame.

(Received May 5, 7.45 p.m.) LONDON, May 4,

In the House of Commons, LieuoCoionel Et, lien. W. IS. Guinness (Financial Secretary to the Treasury), moving the second reading of tho Coin Standard Bill, pointed out in connection with the proposal that tho Bunk of England was bound to sell gold m amounts not less than 400 ounces troy weight and in© gold in barj that each bar would be worth about £I7OO, and the size of the bar alone, would prevent this proposal being used to bring back gold into general use and limit the possible drawing of gold for export. A clause of the Bill empowering the Treasury to borrow for exchange operations, did not increase the total amount of money which might bo borrowed. Any sums raised under these powers must come out oi the usual provision for borrowing up to the total supply services for the year voted yearly in the Appropriation Act. Two credits had already been conditionally negotiated under this head. One with the Federal Reserve Bank of New York, who gave the Bank of England a revolving credit of 200 million dollars for two years, from 10th May; the second with a, syndicate headed by J. P. Morgan, to His Majesty’s Government direct, for a revolving credit for 100 million dollars, also for two years. Interest in each case was payable when the credit was drawn upon, at one per cent, above the Federal Reserve Discount rate, with a minimum of four per centum, and a maximum of six per centum, or if the Federal Reserve rate exceeded six per cent, at the Federal discount rate. “If we do not use the credits, no interest will be payable,” Mr Guinness explained. “There will merely be a very small commission on the right ol call on the money.” He hoped, in view of its urgency, the House would pass the Bill without delay. He did not fear a rise in the Bank rate, or higher prices. The Government believed the country had reached the stage of tho purchasing power being at '•parity, and that, in the long run, tho producer would have more gain from the security of the gold standard than the banking interests. Labour’s Challenge. Mi- Philip Snowden (Chancellor ol the Exchequer in the Labour Cabinet) moved tho Labour amendment refusing to assent to the Bill, which by providing for the return to the gold standard with undue precipitancy might aggravate the existing grade conditions of unemployment and trade depression. Mi: Snowden emphasised that he was not opposed to the return to the gold standard, but protested against the Government’s undue precipitancy. The Labour Party, by their amendment, dissociated themselves from the disastrous consequences which might follow.” Mr Snowden said he declined to accept Mr Churchill’! statement of existence of a practical parity between the prices in Britain and the United States. He thought the difference amounted to five per cent. The Government should have waited a little longer in the hope of the parity gold level of prices being reachable by’ the normal operation of trade.

The Chancellor’s Reply

Mr Churchill denied that the decision to return to the gold standard could be described as one of precipitancy. On the contrary they had acted on the finest expert financial advice in the world. The Government had taken every precaution which forethought, patience and long preparation could suggest. He mentioned the disadvantages of giving long notice of a return to gold, and pointed out that if Britain had waited for the Act to expire at the end of the year, everyone could, under the existing law, have withdrawn and hoarded gold against the date of free export, namely January, when the normal demand for bullion would be high. He insisted that no country in the world was less able to afford to divergp from economic facts than Britain.

As regards the allegation that the decision would shackle them to America, the Chancellor said it would certainly shackle them to reality for good or ill. Ho personally believed it was the only basis offering permanent security. Referring to the necessity for imperial unity, regarding the gold basis, he said had we shown ourselves incapable of taking any decision, the self-governing Dominions might have adopted gold, and they would have traded together, leaving the Mother Country to pursue a different policy. They would have traded with the United States on a gold basis, but with the sterling left out. That would have been a disastrous state of affairs, from mu viewpoint. He knew nothing which would justify an increase in the bank rate in the immediate future. Indeed the situation was stable, and everything tended to show that the transition to gold hitherto was effected with success. He declared that Britain was not only the financial centre of the world; she was the centre of a wide Empire. If Britain detached herself from their movements, she would run the great risk of becoming isolated, and loosening the bonds, whereas the fortification of these bonds was indispensable to Britain’s well-being. Mr Churchill scouted the sugges tion that Britain might be unable to hold own own against strong transAtlantic influences, and pointed out that Britain still controlled a vast amount of the world’s business. She

had magnificent credits, also £300,000,000 of foreign investments. She held £153,000,000 in gold, and the Dominions held £107,000,000. The Empire supplied 70 per cent, of the world’s gold. He cited instances of pre-war discrepancies in British and American price levels, and their normal timely readjustment, in order to disprove that absolute equation of prices was essential to the restoration of gold standard. He concluded that the Dominions in unity were an enormous power. They were great, intricate and comprehensive enough to exist side by side in an amicable association with even a iarger economic and financial power, without their own essential independence being prejudicially affected.

The Bill was read a second time, Without division.

CONSULTING DOMINIONS

IMPORTANCE OF EMPIRE-WIDE CO-OPERATION.

By Cahlo—Press Association—Copyright, AU*«raii',n oud N.Z. Cable Association

LONDON, May 4. In tho House of Commons, asked about communications from tho Dominion authorities with regard to the restoration of the gold standard, the lit. Hon. W. E. Guinness (financial secretary to tho Treasury), recalled Mr Churchill’s Budget- speech, anent the collaboration of tho Dominions. He added that it is understood from press reports that the return to tho gold standard had’ been widely approved by thei Dominions.

EXCHANGE RATE,

AUSTRALIAN SETTLEMENT WITH

LONDON

By liable—Press Association —Copyright.

Australian and N.Z. Cable Association,

SYDNEY, May 5. The “Morning Herald” says that negotiations between the banks arc satisfactorily progressing towards settling the exchange rates on London. There is every likelihood of a compromise being reached betweau the two proposals —one for a steep fall, the other for making the fail by c-asy steps The margin between the Imying and selling rate is also being negotiated ami a compromise is likely between tho advocates of an initial margin of ss, widening with the lengthening of the usance, and the advocates of tho present 20s margin.