AID FOR STERLING

Hokitika Guardian, 27 April 1932, Page 5

AID FOR STERLING

BRITISH FUND

WILL GIVE GOOD STABILITY.

(British Official Wireless.)

RUGBY, April 26. The main business in the House of Commons to-day was consideration of ■a resolution regarding the exchange equalisation account, the object of which is to provide for the establishment- of iv fund not exceeding £150,000,000 to strengthen the currency 'and check undue fluctuations in the exchange- value of sterling. Owing to the indisposition of Mr 'Neville Chamberlain, Major W. E. Elliott, Financial Secretary to the Treasury, introduced the resolution. The purpose of the fund 1 ., he explained, was to provide greater control over currency. The fund was to build up the old dollar exchange account. That gave them a nucleus of £2.5,000,000. Ju addition the Treasury sought power to borrow for the purpose of that fund a Bum not exceeding £150,000,000. It would be used to purchase- and hold foreign securities of all kinds. Although Itlrge it was Hot blit of scale with the gigantic movements of liquid capital during the last few months.' The liquid resources of the world had been setting towards London because of the confidence engendered by the speedy repayment of last year’s credit and 1 because of the balancing of -both last year’s and this year’s Budget. Sterling thereby had been strengthened, but recent fluctuation had proved an embarrassment, not merely to traders in Britain, but to traders in sterling in many other countries also. The new account was a capital account and would not be- drawn upon for revenue purposes.

Explaining how the Government proposal connected the issue department of the Bank of England and the new fund, Major Elliott said that the issue department held cover against the note issue, which amounted in all to £440,000,uOO. The management of that department was under the Bank of England, subject to notifying the Treasury of .securities payable and the profits of the note issue were paid to the Treasury. Their note issue bad been under the expert management of the Bank of England and so great was the confidence engendered throughout the world that country after country had joined what was called the sterling convoy and had followed the pilot light of these expert managers. Gold he’d by the issue department could only be valued at gold par. It wus not proposed to revalue gold, for that must await the restabilisation bf sterling. The effect of the proposals was thatthe issue department would be abstrJutely solvent in every contingency and the note issue would he covered by real assets.