The Guardian And Evening Star, with which is incorporated the West Coast Times. THURSDAY, AUGUST 6, 1931. BRITAIN'S FINANCE.

Hokitika Guardian, 6 August 1931, Page 4

The Guardian And Evening Star, with which is incorporated the West Coast Times. THURSDAY, AUGUST 6, 1931. BRITAIN'S FINANCE.

Mn MacDonald has taken the opportunity afforded by his visit to Berlin, notes u northern paper, to assure the German public, andi through them the world at large, that there is nothing seriously the matter with. Britain’s financial system. The heavy demand for gold which London has had to meet within tlie past few days has been due chiefly to the disturbance of the world’s finances through the run on German credits and the anxiety of France to secure her own financial position. The Bank of England has had to readjust itself to meet this emergency but by raising its discount 'rate and purchasing some millions of ■lf reach cledlts which otherwise mrgfit have required to be liquidated in goad, it, has checked the “foreign drain” and lias restored the Money Market to something like normal condition. The Bank and the Money Market have successfully withstood one of the severest test applied to their stability since the war, and Mr MacDonald is justified in his patriotic ' boast that “safe as tlie Bank of England is as j true to-day as it was twenty or thirty years ago.” It must he constantly borne in mind that these foreign demands for gold, with all the risks and dangers that they entail, are essential i features of the British financial system land merely incidental to its working. I As a distinguished economic authority lias sqid: “London alone among the great financial centres has undertaken the task of meeting every legitimate demand in gold at all times and to any amount. No otherr hanking nation has ventured to face the risk of meeting not only tlie demands of its own depositors, hut of the world itself. Tf Germany lias to nay gold to Tin-key for a loan newly granted, she gets it from London; if New York wants gold she gets it from London ; if the Argentine or Egypt or India have had good liarvests and want gold, they get it from London.” This was written before the war. hut it is still v-'rtually true today. “Anvbodv in tlie world who keens mnnev in London, or can raise a creditor get an advance on London, can got gold from the Bank of England. Ai-v nation in a had wav and wanting gold can draw it from London if it has debts abroad that it can liquidate.” It is simnly because London is still “tlie world’s clearing-house” that the German crisis and the French demand for gold have reacted so strongly upon it and compelled tlie Bank to take such vigo'-ons stous to meet the critical situation thus created. But while the events of late prove that British finance is still proof against shocks that might- easily overthrow a weaker system, this does not jusify an unreservedly optimistic view of the position of Britain at the present time. Last week the cable columns contained a brief summary of ho opinions expressed by the “Times” in regard to the present financial and commercial system at Home; and even after allowance is made for political prejudice and the desire to make capital out of the embarrassments of tlie Labour Government, we must admit that it is a very depressing statement. The “Times” dwells at length on “tlie decline in oversea, investments, in the basic trades, and shipping,” and the growth of unemployment. Britain, says tlie “Times,” is “living beyond her means,” and nothing but tlie rigorous pruning down of public expenditure can enable her to weather the storms now raging. Unfortunately, tiie policy dictated to the Government by the majority of its supporters is not compatible with the recommendations of the Unemployment and Economy Committees, and the enthusiasm for “social reform” and public expenditure on unemployment relief has been too strong for Air MacDonald and Mr Snowden to combat successfully. But if the national finance is to remain “sound as tlie Bank,” the Government’s policy will need to be modified very materially to avert the grave disasters which the Chancellor of the Exchequer has already descried looming in the distance.