EMPIRE’S MONEY.

Star (Christchurch), Volume XLIV, Issue 521, 2 August 1932, Page 1

EMPIRE’S MONEY.

No Solution of Problem Indicated. DISCUSSIONS AT OTTAWA. United Press Assn.—By Electric Telegraph—Copyright. (Received August 2, 11.30 a.m.) OTTAWA, August 1. While there is no official indication of a probable solution of the monetary problem, there is a general feeling that the policy of the British Government and the Bank of England during the past three months has been absolutely right, everybody in Conference circles cordially agreeing with it. Several months after Britain left the gold standard, apparently neither tha British Government nor the Bank of England had a definite future policy; thus interest rates remained at 5 to 6 per cent, which meant dearer money. During the past thrAe months, however, the Bank of England, with the obvious concurrence of the Government, has pursued a policy of reducing the discount rate, which is now the lowest in history, meaning cheap money.

The second factor in the situation which is also regarded with the utmost approbation in Conference circles is Britain’s conversion of her £2,000,000,000 5 per cent War Loan to 3} per cent. Thus the low bank rate means a cheap interest rate for short-term securities and the lower War Loan brings a cheaper rate for first-class long-term securities.

The third factor is the establishment of the £150,000,000 Exchange Equalisation Fund, which was announced in the British Budget, which represents the Government’s definite determination to prevent speculators interfering with the exchange position. There is a tremendous amount of international shortterm money, which under other conditions would have been directed to long-term investment avenues. This involves the movement of vast volumes of international money from one country to another, causing violent exchange fluctuations and upsetting the equilibrium by heavy flooding, or equally heavj r withdrawals. Britain has suffered twice during the past year by reverse processes. Whereas the withdrawal of a large amount of short-term money from Britain was a big factor in forcing her off the gold standard, she has equally been embarrassed during the past few months by the inflow of a great volume of international short-term money. The fluctuations in exchange have been caused more by the movement of this short-term money than by the actual balances of trade between countries Whether the stabilisation fund of £150,000,000 is sufficient has not yet been demonstrated, but nevertheless it will be a big factor in checking the instability of the sterling exchange in relation to the gold dollar. The question is being discussed in Conference circles whether Britain will indicate with sufficient definiteness whether this recent policy will be steadfastly pursued, whatever happens, and also whether Britain can do anything more. OTTAWA GUESS-WORK.

Mischievous Statements Made in America.

OTTAWA, July 31. Some remarkable and sometimes mischievous guess-work in regard to the Empire Conference has been noted in articles appearing in American newspapers, notably the suggestion that Britain instead of extending preferences will cancel portions of the Dominions’ indebtedness. How such a plan could assist the primary producer to sell his goods profitably it is impossible to see. Besides, apart from the war debts owed to the British Government, all the Dominion loans represent debts to private lenders in the London money market. Indeed, if all the Dominion loans were suddenly wiped out it would not be a remedy, and could not be compared with the effectiveness of the provision of preferences in enabling the primary producer to evade the complete ruin whither he has been descending in the past two years. Another suggestion which has been given harmful prominence in New York is that the dominions are asking Britain to reduce her imports of Argentine chilled beef by 45 per cent. The dominions’ meat proposals certainly include a quota, but do not specify any hard and fast figure, or what should be taken off Argentine imports. They merely express the desire that the dominions be given a better chance of securing payable prices in what is now a saturated market. There is a suggestion, however, that Britain should reduce her imports of foreign frozen meat by 37} per cent, which it is calculated will afford Australia and New Zealand infinitely more favourable marketing conditions. Opinion is veering to the view that the Conference, in spite of the early rapid progress, cannot finish before the end of August. It is unlikely that the Englishmen will be able to occupy the berths they have booked, leaving Montreal on August 26 by the luxurious liner Empress of Britain. It is feared, however, that if the Conference lasted 1 much be3 r ond that date it would almost i be an admission of failure, but it is ' doubtful whether, within three weeks, ■ the monetary problem now seen as the paramount item can be solved or taken J to a stage where postponement to a I wider conference would be agreeable to ; the Empire delegations. The Australians going to London in- j elude Mr and Mrs Bruce, Mrs Gullett, Messrs M'Dougall, Tout, Riddle, Mel- j ville, Duffy, Osborne and Mills. All the New Zealanders, except j Messrs Forsyth and Davis, London representatives respectively of the j Meat and Dairy Boards, will return 1 home i after the Conference. |