Untitled

Hokitika Guardian, 7 August 1931, Page 4

The news that the Bank of France and the Federal Reserve Bank of New York have each arranged, to grant the Bank of England credits to the amount of £25,000,000 is open to ai certain amount of misconstruction, and care must be taken to interpret it correctly. In the first place, it does not mean that the Bank of England is so hard pressed that it has been forced to borrow twenty-five or fifty millions abroad. What it, does mean is that the great financial institutions of France and America recognise that London, through its unique position as the world’s one free market for gold, is always liable to sudden demands for large quantities of gold which cannot be met at short notice without deranging the British financial system and indirectly disturbing the whole world’s financial equilibrium as well. Hitherto, when such exigencies have arisen, the Bank of England has attracted more gold to London by raising its discount rate and by borrowing extensively abroad. Thus during the great crisis caused by the collapse of Baring Brothers thirty years ago, the Bank borrowed six millions in gold within a fortnight from France and Russia, without in any way impairing its prestige or its solvency. But such hand-to-mouth expedients are unsatisfactory, and the plan now arranged between France, Britain and the United States is an attempt to assure the maintenance of financial stability throughout the whole region of international finance on sound and scientific lines.' The Bank of England may never have to make use of these credits, but the knowledge that, in the last resort, material help from France and America will be available in any crisis, should help to steady the situation whenever the financial barometer in-

dioates stormy weather ahead. But this scheme is far less important a s a safeguard for the Bank of England, than as a proof that tlie great financial centres of the world are prepared to co-operate in the general interest of internatiorfal finance. As Sir Robert Kindersley has said, the fact that Paris and New Y’ork are ready to join hands and help each other and London in any great financial emergency is indeed a matter for satisfaction and congratulation, not only with respect to the world’s present difficulties, but in regard to the future, and it augurs well' for the prospects of international co-operation to deal with German finance ana the wider problems of world depression.