BRITISH CONVERSION

Evening Post, Volume CXIV, Issue 89, 12 October 1932, Page 7

BRITISH CONVERSION

Stamps explanation

AID TO INDUSTRY

.'.We are greasing the wheels for a real industrial revival as soon as people ' believe it is possible," said Sir Josiab ! Stamp, director of the Bank of England, chairman of the London Midland and Scottish Bailway, and one "of the foremost economists of Great Britain recently. Sir Josiah was speaking from London under the auspices of the International Badio iPorunii His address was re-broadcast in the United States and Canada over a National Broadcasting Company network; says the "New York Times." ■ ' ■ The British financier asserted that conversion of the national debt on such an enormous scale requirod leadership of the highest lorder. He explained that the advantages of converting the 5 per cent, loan to 3 i per cent, had been impressed upon the investors through an appeal to mass psychology, just as war loans were floated. . ; After paying. a tribute to Georgo Washington as "V supreme example of the value of leadership," Sir Josiah pointed out that the British nation had "just had a great opportunity of following a lead, following it without question,-even though it seems to-many to be hard or disappointing." He wont on, to .explain the conversion of the national debt. . ■ ... "Our total national debt of some £7,400,000,000 is made up of various parts, borrowed at different rates of interest and repayable, at different times; t?b'ut it includes one enormous section of £2,000,000,000 called, the 5 per cent."war loan, which the Government had no power to rdpay until 1929, and since that year every one has been eagerly looking for the lead by our Treasury and financial authorities in substituting a new loan or loans at a low,er rate of interest. "Some were for -doing^ a part of it as soon'as money could be borrowed for a good period at 4$ per cent.; others wanted to wait until a much lower rate was possible, but few had the courage to'suggest that the whole amount might be attempted at once. "It is spread over 2,600,000 holders, many of them very reluctant to take a reduction in their incomes, and it was felt that if the plunge were, taken, a large number might want their money in full so.that they could find some other investment for it without reduction of interest. : ; ' "This would involve the Government in borrowing a lot of new money to pay them off, and if the sum so. required were considerable, then they might find that they would have to pay as much as they were paying ■on the old loan, or even more. "If they avoided going to the public for this new money and borrowed it from the central bank, this might involve considerable inflation. A conversion operation for £2,000,000,000 therefore required,1 first, courage, for there were various risks of failure; second judgment as to the Tight moment to act,, and third, real leadership in popular sentiment and psychology. APPEAL TO PATRIOTISM, "Few who have not seen British newspapers could form an idea of the extent arid character ■of the mass attack on people's minds, couched in many different forms, striking many different chords, and dealing with many different prejudices. , ' '' They compare only with the most striking war-time appeals to patriotism and have* created a feeling everywhere that to convert one's war loans from 5 per cent, to 3$ per cent, voluntarily and not ask for one's money back is the only thing that a Briton who wishes his country well can possibly do. "Within a limited time, if he converted he obtained specially good terms. He might, if he wished, elect to get his money back and try his luck €or something better in the money market, with the risk of getting something not so; good as the 3J per cent, now offered. If he took no action at all by September, .then his war loan ia automatically converted in December. "By this means the British Government has been got on to a 3i per cent, level with all that this means' "What consequences do we expect? First, £20,000,000 direct saving in taxation and a redirection of spending power. Also, further saving as other i Government loans are converted, Second, a reduction in taxation with its stimulus 'to enterprise. Third, a great fillip to business, for the genera] rate' of interest at which bonds can be floated or even short period money raised. They should now be materially lower. , "Fourth, renewed sane borrowing by municipalities, cities, and Dominions at lower Tates, reducing local expenditures and, so far as borrowing proceeds from abroad, encouragement to our export trade. Iv other words, we are greasing the wheels for a real industrial revival as soon as people believe it is possible. "Fifth, an exhibition to many Governments abroad that good government credit is worth working for and can be only had by public economy and balanced budgets and undivided political leadership. "If the'now converted loan, can

change the interest fashion in London, London, is still highly important in the financial world and can help to change the rate for the world." PROBLEMS FOR WORLD. Sir Josiah asserted that some of the things to be done to prepare the way for an economic revival ■were domestic, others international. Speaking' of the latter he said: — "But still more has to be done internationally, and we set our hopes upon the forthcoming finaaicial conference, when the courage for leadership and the sense to follo^y leadership in the international field will be given its severest trial. How can we act together without losing confidence in each other as nations, to le-cstablish international credit, to make the world's supply of gold effective, to raise international prices, and, by raising | prices in countries with large money i debts to pay and sufficient produce t» pay them: if prices are not, too low, once more lift from them the shadow of bankruptcy and stop a general stampede to the desperate refuge of repudiation? That is our problem—novel, I perplexing in theory, still more in practice. "Is it possible for our two peoples to join in a bold leadership, in this j new field of finance? We have so much j more in common than we have apart, I and in the world of finance and money jwe share the same ideas. The Fqderal i Beserve System was a human creation, 1 a deliberate trust in theory, in response jto a great need. On the other hand, it took over a hundred years for the :Bank of England to become the bank- ! ers' bank, but the lesson .from both is j that some new ideas of international action may evolve from the crying need and may be created by human ingenuity. "The Bank for International Settlements already offers some scope for new duties. The world ciisis calls fpr our leadership, sense and care in choosing the leaders, and then a real enthusiasm in following them. Let us sink all national prides and jealousies and join in saving the world frorii the common peril."