CURRENCY CRISIS

Hokitika Guardian, 22 September 1931, Page 5

CURRENCY CRISIS

CABINET STATEMENT. (United Press Association.—By Electric Telegraph.—Copyright.) LONDON, September 21. The Cabinet statement continues: “The reasons which have .ed to Jiis decision are that since the middle ot July funds amounting to more than *£250,000,000 h: cl been withdrawn from the London market. These withdrawn s have been met 'partly from the golu and foreign currency he'd by the Bank of England, partly from the proceeds of the credit' of £50,000,000 (which shortly nurtures) that was secured by the Lank of England from New York and Paris, and partly from the proceeds of the Frenc h-American credits (amounting to £80,000,000) recently obtained by the Government. During the last few days, the withdrawals of foreign balances were accelerated so sharply that the Government felt bound -o take the decision mentioned above.

“This decision wi 1, of course, not <; affect the obligations of the Government, or Bank of England, which n r e payab'e in foreign currencies. The gold holding by the Bank of England amounts to some £130,000,000, and

having regard to contingencies which may have to be met, it is advisable to al ow this reserve to be further reduced. There will be fio interruption in ordinary banking business. Banks will bo open as usual for the convenience of their customers, and their is no reason why sterling transactions shou’d be affected in any way.” It has been arranged that the Stock Exchange shall not be open on Monday, the day on which Parliament is passing the necessary legislation to suspend gold payments. This will not however, interfere with the business of the current settlement on the stock exchanges, which wi.l be carried through as usual. ■ “The Government have no reason to believe that 'the present difficulties are due to any substantial extent, to British nationals. Undoubtedly the

bulk' of the withdrawals have been / for foreign account. The Government desire, however, to repeat emphatically the warning given bv the Chan- / eellor of the Exchequer that any British citizen who increases the strain on exchanges by purchasing foreign securities himself or assisting others to do so, is deliberately adding to the V coiyatry’s difficulties. “The banks have undertaken to cooperate in the restricting of purchase by British citizens, of foreign exchange, except those required for the actual needs of trade, or for meeting existing contracts, and should furthe • measures prove advisable the Government will not hestitate to take them.” “The Government arrived at their decision tvltli- . the. greatest reluctance,

ibtit during the last few days, the in-

twrniitldual financial markets have be- - come demoralised ontU have ’ been liquidating 'their sterling oasots, regardless of their intrinsic worth. In the circumstances there is no alternative by to j protect the financial position of this country by the only means at our disposal. The Government are securing a balanced budget, and the internal position of the country is sound. This position must be maintained. It is one thing to go off the gold standard, with an unbalanced budget and uncontrolled inflation, and it is quite another thing to take this measure, not because of internal financial difficulties, but because of the excessive withdrawals of borrowed capital. The ultimate resources of the country are enoromus, and there is doubt the present exchange difficuties will prove only temporary.”

MORE CUTS. FOR PUBLIC SERVANTS. RUpB Y, September 19. Reductions are, annubnced in the pay of civil servants, other than the industrial staffs, whose salaries are not subject to automatic fluctuations in accordance, with the cost of living figures. The cuts take effect from October 1, and are five per cent, in the case of annual salaries, between £2OO and £SOO, 5i per cent, between £SOO and £IOOO, and 10 per cent, for £IOOO and over.

COST OF LIVING. > WILL NOW RISE. LONDON, September 21. The “News Chronicle” says editorially: “The fall in the pound sterling will automatically reduce Britain’s imports by . raising their price, and the cost of living is likely eventually .to increase.

WORLD PRICE QUESTION. LONDON, September 21. The “News Chronicle” says: “A silver lining to the financial cloud is that the very extent of the depression will compel, at last, international action to set' world trade on a firm foundation.” ' LLOYD GEOROE’S VIEWS. LONDON, September 21. Mr Lloyd George in a message. Bays: “If the nation remains steady a, r d united, wp shall pull through all right. Our resources are unite adequate to meet the situation, but a faction fight among ourselves at this' juncture would be unpatriotic lunacy. A mere threat has precipitated this second and graver crisis. British eommonsense, if given a chance, will, find ft way out.”.

CANADA’S DECISION

TO STICK TO GOLD STANDARD,

OTTAWA, September 20.

Mr Bennett, Premier of Canada, in a statement to-night, in reference to the news from London regarding Britain’s suspension of the Gold Itedemption Act, said: “The Canadian Government ptoposes to maintain, the gold .standard..”

EMERGENCY POWERS. LONDON, September 21. Sub-section I-'Three of to-morrow’s Act will give the Government the power to. take, during the next six months, any steps that it considers requisite to meet the new difficulties, but this will not he availed of if transactions continue to be legitimate. LONDON PRESS. VERY CONFLICTING COMMENTS. LONDON, September 21. The “Daily Express” in an article headed “Good News,” says: Nothing more heartening has happened in years than the fact that we are rid of the gold standard, and now all can proceed with plans for a self-supporting Empire. This is the beginning of are a 1 recovery.

The “Daily Telegraph” says: “It D certain that Britain will return to the gold standard when the gold is more normal. It is a moral certainty that Britain will not go off the gold standard alone. However, the consequences can be faced with fortitude and composure.” The “Daily Mail” says: “This temporary suspension of the gold standard —which may he a complete suspension --will be a blessing to British industry.” The “Financial News” says: “The decision is an unhappy one, but it was a necessity.” “THE TIMES” VIEWS LONDON, September 21. “The.. Times.” in a leading article, says: “The gold standard decision is a regrettable, but an unavoidable, one. It as long been evident.that events, especially abroad, have pointed to a temporary suspension of gold payments. An economic blizzard has been blowing throughout, the world for more than two years, and it has reached an intensity which has already driven most countries off the gold standard. The strain has especially been felt by Britain, which is more deeply concerned in international trade and finance. The fall in the price level has not only reduced the purchasing power of foreigners, but has made it impossible for them to maintain their debt payments to Britain. Every Continents! belligerent has scaled down its obligations by devaluating its Currency. Britain, alone, returned to the prewar gold parity, Ti we had not indulged in reckless Socialistic practices, and if .France and America had not accumulated three-quarters of the world's gold supplies, Britain would have succeeeded in remaining on the gold standard.”

FRENCH ASSISTANCE. TO MAINTAIN STERLING. PARIS, September 21. M. Flandin, Premier of France, interviewed, said: “‘Am essential feature of a panic-stricken world is the uncertainty spread abroad about the London market.” After explaining that France has intervened, because an attack on the pound sterlang would mean a universal disaster, he said: “It is now that we are seeing the real consequences of the war, which devour, ed an enormous amount of capital that had patiently been built up by the previous generations: The realisation of this cannot fail to fortify the desire for peace and tranquility.”

AMERICAN ASSISTANCE. NEW YORK, September 20. The heads of the leading financial organisations here, in a conference on Sunday, discussed the British financial question and also possible measures that might be taken to preserve equanimity here and, at the same time, cooperate in easing the situation abroad.

AN AVALANCHE. OF FOREIGN WITHDRAWALS. LONDON, September 21. Regarding the gold question, an unpleasant fact is that the naval trouble in the Atlantic Fleet has been mischievously magnified abroad, and also among .some of the sensational papers in England, and it thus has endangered a loss of faith in Britain. Prompt corrective appreciations of *. the position were published next day, but harm had been clone. An avalanche of gold withdrawals had to be checked, and the suspension of all gold’ exports has been the quickest way to' do it.

IT.S.A. VIEW. NEW YORK. September 21. Mr Carl Snyder, who is the Statistician to the Federal Reserve Bank, New York, declared : —“The whol 0 economic depression is due to the fact that gold is concentrated in a few countries.” MR SNOWDEN'S EXPLANATION. LONDON, September 21. The Chancellor of tin* Exchequer, Mr Philip Snowden, to-night broadcasts an explanation of the position. It is stated that the Cabinet is meeting daily this week,

DOLLAR’S VICTORY

MIGHT PROVE HOLLOW.

NEW YORK, September 21

In regard to Britain's departure from the gold standard, Doctor Eugene Agga.r, the noted economist, takes the view that the situation is now full ol serious implications. "The American dollar,” he says, “may gain as an international monetary unjt • but this wouid be an empty victory, because of a world trade dislocation caus-d by an unstable pound sterling.”

5 CANADIAN OPINIONS. : AWAITING CONSEQUENCES. ' MONTREAL, September 21. The Stock Exchange members here have decided to await the public reaction to the British developments before deciding on the advisability of closing the Stock Exchange. Sir Charles Gordon, of the Bank of Montreal, stated : “I do not anticipate any drastic consequences as far as Canada is concerned.” Mr T. B. McCanlay, the President of the Sun Life Assurance Coy., stated : "1 am convinced that it will prove a highly desirable move in the first step towards better times in the Old Country. The immediate effect will be a disturbance, but the long distance effect will be- good,” I Sir Herbert Holt, of the Royal Bank I of Canada, stated that Britain could not proceed in any way other than by 1 relinquishing .the gold standard, and she should now concentrate on balancing her Budget. LONDON STARTLED. LONDON, September 21. Like many other startling events of recent months, Britain’s retreat from the gold standard came during a weekend. The people, who had been enjoying a rare, glorious outdoor Sunday, awoke to-day to find the City of London placarded with the tidings. Regarding the gold standard pronouncement as a godsend, all of the newspapers emphasise that there is no need of alarm. Indeed the papers’ insistence on the “business as usual” motto was reminiscent of the early days of the war. STEP COMMENDED. BY LABOUR PAPER. LONDON, September 21. The “Daily Herald” says:—"The Government has taken a wise step, which should have been taken before. It will compel the French ‘and the American bankers and Governments to reconsider .the whole problem of the gold standard. The next move, obviously, is an international conference to Work out this, and kindred problems.’’ GERMAN OPINION, LONDON, September 21. The effects abroad of the dropping of the gold standard include a renewal in the speculation about the war debts, with a strong feeling at Geneva that President Hoover should consider the extending of the U.S.A. moratorium for a further three years. The President of the German Reichsbank, Dr Schacht, told a “Daily l\xpiess ’ correspondent at Berlin that an international revision of debts would be an inevitable outcome of tlie British crisis. Dr Schacht agreed with other German authorities that the collapse of the British gold standard involves a most serious danger to all of Europe. , Herr Dreyse, Vice-President of the ißeichs Bank, commenting on Britain's decision, says :— “Germany should not indulge in satisfaction at the crisis that has been reached in Britain. I hope that work for an international understanding will be undertaken without delay.” j NEW YORK BANKERS. NOT ALARMED. ; NEW YORK, September 21. The partial suspension of its gold payments by the Bank of England is applauded in high Wall Street banking circles, as being a constructive measure, which has been dictated by an emerg ncy situation.

On receiving word of the British financial crisis, the Wall Street bankers hurriedly broke their leisured week-end to return to the city to hold conferences and to determine bob* to protect the American markets.

The bankers asserted that, although the British difficulties are serious, they probably will not involve America . to the extent that the German crisis did, since the American investments m Britain are not particularly large. It is brlieved, however, that the principal effect of the British crisis here will be through its effect upon worldwide securities and commodities, rather than through the American loans to Britain.

AMERICAN PRICES. NEW YORK, September 21. . American bankers are considerably worried concerning further secessions in the commodity price level. Disturbances on American markets are expected, but it is generally felt that the American stocks have already undergone much deflation, and that last week’s severe declines have, to some degree at least, discounted the British news. GERMAN DECREE. BERLIN, September 21. The Berlin Bourse will close to-mor-row.

A decree, issued yesterday, places all of the German banks under Government control, also authorising a million sterling tax-free Joan for use on productive relief work.

U.S.A. government VIEW,

WASHINGTON, September 21

United States Government' officials refused to comment on the Bn€ish situation, though it was on the whole more expected than it was surprising tc them.

Some circles suggested a question a? to Britain's abil ty to maintain a gold basis on her foreign obi gations and to handle her domestic affairs on a suspended gold standard basis. The-crisis has also re-opened the question of debt agreements, ar.d o! Britain's capacity to pay.

It is also felt that, if American aid ptoves necessary, such will have to mine largely from American private bankers, but, on the whole, the Government circle*' indicated a oelief that the British move will have an eventual saultarv effect on world affairs. " 1

EFFECT IN AUSTRALIA. (Received this day at 10.15 a.m.) SYDNEY, September 22. Bankers are disinclined to discusi the possible effect of Britain’s abandonment of the gold standard, beyond admitting that the announcement did not come as a surprise, Mr Riddle, Governor of the Commonwealth Bank, said the effect on Australia would depend chiefly on the ability, of Britain to maintain its exchange. BUSINESS AS USUAL. CURRENCY DISCUSSED. (Received this day at 9.25 a.m) LONDON, September 21. The City. is taking things very quietly except for a crowd of curiousity. seekers watching groups of tempo! arily unemployed stockbrokers and clerks, discussing affairs. In Throngmoi'ton Street, everything appears perfectly normal. No one would imagine England was in the midst of a financial crisis.

The banks are carrying on .business quietly and calmly as usual, and little out of the ordinary is apparent, produce markets, although prices of many commodities showed advances, notably cotton of a farthing per pound, rubber seven sixteenths of a penny, also metals, sugar and wheat. Business on foreign exchange is practically at a standstill events in continental exchange. t is recognised in well-informed circles that some depreciation in value of the pound for the time being is inevitable but it i s unlikely that anything so great a s the falls which occurred on the Continent. No one is prepared to hazard till opinion as (r> what effect the gold standard w ill hRv« on .Australian • exchange. AustTalilL) bunking circles consider it too curly to suy. theoretical ly, of . course, the Aiistra’iur) pound should improve, but as tin Autr trillion banker said, you can’t depend on theories. FRENCH ADMIRATION. PARIS, September 21. Newspapers of all shades of opinion express admiration for the determined courage with which Britain is facing her danger.