CURRENCY PROBLEMS

Wanganui Chronicle, Volume 80, Issue 254, 26 October 1937, Page 11

CURRENCY PROBLEMS

EMPIRE' STABILITY VIEWS OF SIR WILLIAM HUNT. The problems of currency and exchange, on the solution of which depended the commercial and financial stability of the Empire, were outlined by Sir William Hunt, who has recently returned from a visit to London, at the annual meeting of the Canterbury Employers’ Association on Wednesday evening (reports the Star-Sun). Except in the depressed areas business in England was.good, said Sir William. Everyone agreed that the re-armament programme had something to do with it, but no two people agreed on how much effect re-arma-ment had. Some thought that business would have recovered in any case, others that the re-armament programme was the pricipal factor. Europe was in a turmoil, however, and there were continual financial scares which kept people “on edge.” Owing to a belief that America was going to reduce the price of gold and England would have to follow suit, people began recently to sell gold and hoard Bank of England notes, but the news that the Government had addea £2,000,000 to the Equalisation Fund calmed the panic immediately. England’s support of the gold standard was the best insurance of business stability, just as her re-armament was the best guarantee of peace. Currency problems were the most serious drag on progress, said Sir William. The gold standard was actually only a short-lived experiment lasting from 1880 to 1914. It had disadvantages as well as advantages. Currency values remained stable in respect to one another, but difficulties arose owing to fluctuations in the supply of gold. As soon as war came, the system broke down, and experts were trying to And a new system, with nothing to guide them. Equallstion Funds. In 1932, Great Britain established an Equalisation Fund, which now totalled £575,000,000. America and subsequently many other countries followed suit. The operations of these funds were secret, but it was believed that most of them were invested in gold. ' The reason for the flow of gold to America and England was the general desire of people to invest in currencies that were likely to remain stable. The American dollar and the British pound sterling were the only currencies in which had confidence, and therefore gold flowed to those countries. It was estimated that that there was £700,000,000 worth of gold in England, of which £8,000,000 or £9,000,000 was “refugee money” from other countries. There was also about £250,000,000 of gold reserves of the Dominions. As there might be a call for that money at any time, England had to maintain a reserve out of which to pay it. Money for Investment. Both Great Britain and America risked loss if “refugee money” was recalled, unless the price of gold was mantained. England, for example had accepted £9,000,000 of "refugee money on the basis of £7 an ounce for gold. Were the price to drop to £6 an ounce, the loss would be enormous. Another problem that was troubling England was that of overseas investments. In pre-war days, there was always a surplus of money for overseas investment, amounting to about £200,000,000, and the interest on these loans added to the value oi her visible exports, maintained the balance of trade in her favour. Latterly, however, there had been little money available for this purpose, ant. the Treasury was very reluctant to permit foreign loans, as this meant export of capital. Thus practicall , the only overseas lending now done lin London was the renewal of existing loans.