“UNJUSTIFIABLE”

Star (Christchurch), Volume LXIV, Issue 935, 4 December 1933, Page 5

“UNJUSTIFIABLE”

Australian Opinion on N.Z. Gold Purchases. WARNING ISSUED. (Special to the “ Star.”) SYDNEY, November 23. Two headings taken from current I newspaper issues, “ A Dangerous Pro- > posal ” and “ Gold Grab for New Zealand Reserve Bank,” may suffice to show that the New Zealand Government’s proposal to take over the gold • i reserves from the various banks tradj ing in the Dominion at the original - | Mint rate of £3 17s lOid per standard ! ounce is not approved here. As the ■ i sovereign is worth about 38s—as bul- | lion—to-day, the banks in question j would be compelled to surrender their gold assets, amounting to £4,500,000. : j for about £1,800,000 less than their mar- ‘ j ket value. j In Melbourne, the four banks in j question—Union, Australasia, New South Wales and Commercial Bank of ■ j Australia—are gravely concerned and j are protesting against the proposed step as 11 sheer confiscation.” Feeling in Sydney. In Sydney, the general feeling seems to be fairly well expressed in a special article which appeared this week in the financial columns of the “ Sydney Morning Herald.” It traverses at length the argument put forward by Mr Coates that the gold, being part of the banks’ reserve for the redemption of notes, cannot be regarded as free specie but must be taken over as it stands for the benefit of the note-holders—in this case the people of New Zealand; that the gold cannot be exported because of the embargo operating since the war, and that., therefore, any profit that accrues from these assets subsequently should go to the State. Against this, the writer in the “ Sydney Morning Herald ” contends that the banks took this gold to New Zea-1

land: it is their property; and if it is taken from them it should be taken I at “ the market price of the day.” The writer quotes with approval Sir Francis Bell’s opinion that the embargo on export cannot be held to affect the value of this gold reserve, which should be determined not by an interested party but by reference to some external arbitrator. The “ Sydney Morning Herald ” further points out that when the Australian banks handed over their gold for shipment to London, through the ' Commonwealth Bank, in 1929, it was ■ | sold and valued at current market > j rates. Also, the Commonwealth Bank . has followed the market rate for gold i ever since, purchasing sovereigns not ' j at their nominal value but at current specie value. I Again, in 1931, when Britain went i off the gold standard, the Bank of Eng- | land began to purchase gold at current j market rates, and has followed the ! fluctuations in price ever since. For j these reasons, the “ Sydney Morning • j Herald ” regards the claim of the New Zealand Government as unjustifiable; | and it adds the warning that it might i well prove a very dangerous precedent, I j which others “ may be only too willing j to follow in acquiring property other | j rhan gold by force of law.