EQUALISING EXCHANGE

Wanganui Chronicle, Volume 76, Issue 105, 6 May 1933, Page 7

EQUALISING EXCHANGE

BRITAIN S SPECIAL FUND HOUSE VOTES AN INCREASE MEETING “REFUGEE” CAPITAL A BARRIER TO SPECULATORS. [ British Offcial Wireless.] Received May 5, 8.45 p.m. RUGBY, May 5. In accordance with his intention announced in the Budget statement, the Chancellor of the Exchequer (Mr. Neville Chamberlain) to-day moved the resolution increasing the amount of the Exchange Equalisation account from £150,000,000 to £350,000,000.

He repeated, with great emphasis, that the increase had nothing whatever to do with the circumstances that the United States had gone off gold. In any case, the purpose for which the addition to the account was required was not one which could be used, as had been alleged in some American journals, to force down the value of the pound in relation to that of the dollar. The truth was that the purpose of the fund was not directed at all to any permanent alteration in the relative exchange value of the pound. It arose out of the experience of working the account since last June.

He mentioned a new phenomenon, which he described as “refugee capital”—capital which came to Britain because its owners were alarmed at the conditions in their own country and thought it would be safer in London than in any other place. The Government could not count on its remaining and its withdrawal might have a disturbing effect on the exchanges unless they had special machinery to meet such an eventuality. The Exchange Equalisation Fund was required for smoothing out exchange operations, because there were three stages of the phenomenon seasonal fluctuations, operations of speculators to increase these seasonal fluctuations, and the special flight of capita) from other countries for the sake of finding safety in London for a time. He claimed that the fund had benefited trade by preserving exchange stability. It was impossible to be certain that they had reached the end of the unexpected movements that might happen in the disturbed conditions of the world, and which affected the exchange movements, but he believed tht the addition of £200,000,000 to the fund would give them an adequate margin.

Mr. Chamberlain said the question of the profit and loss in the Equalisation Fund did not arise till the fund was finally wound up. A valuation of the fund recently made showed that if it was wound up it would balance on the right side, showing the skill with which the operations had been conducted, but the House must not fall into the error of thinking that the question of profit loss was the one object kept in mind. The object was to prevent the exchange moving rapidiy either up or down. These operations had been conducted over the whole year without loss to the Exchequer. Tho House ought, therefore, to trust the Government to deal with the larger sum now sought. Sir C. Cripps said that he presumed it was proposed to increase the fund in order to counteract the floating money which had been going about the world since the currencies went off gold, thereby injuring national currencies. Mr. Chamberlain might have taxed this undesirable capital. America having followed France in paying off gold bonds in paper currency, it was hopeless to think of returning to a system which, though primarily intended to pay international debts by transhipment of metal, had now become a question of hoading. The use of an additional two hundred millions would bring no inflation to industry. It might have been more advantageously used for the benefit of people.

Sir Arthur Samuel said Britain seemed to be going on an unchartercd sea. It was preposterous to vote two hundred millions to help America to keep up her new currency. She might take the opposite course, establishing a stabilisation fund for the purpose of keeping down the dollar as part of a policy of inflation. Mr. Chamberlain: I stated emphatically that there was no intention of using the fund to support the dollar. Sir A. Samuel: It was to be used to iron out the inequalities of the dollar. Nobody could control the exchanges. The only way to set commerce going was a lowering of tariffs with an undertaking by France and America to make the gold standard work.

Mr. Chamberlain, replying, admitted thta it was anomalous. This was the only fund where information was not given to the Public Accounts Committee. The Government was quite willing to do so if the information stopped there and did not reach the whole world; but the principle object was to counteract speculation and the publication of the state of the fund at different times would only furnish speculators with valuable information. The resolution was carried.