GOLD STANDARD

Manawatu Standard, Volume XLV, Issue 125, 30 April 1925, Page 5

GOLD STANDARD

GREAT BRITAIN’S DECISION. RESTORING CONFIDENCE. (By Electric Telegraph.—Copyright.) Received April 30, 9.10 a.ni. LONDON, April 29. Tho return to the gold standard is feat tured by tho newspapers as tho most important aspect of the Budget. From the viewpoint of world finance it is calculated to facilitate the stability of prices, restore the confidence of traders and encourago business doalings all over the world. The Morning Post’s City editor expresses the opinion that it is difficult to determine how the money market may be affected for the next few days. “It may easily witness violent movements in the American exchange on London, according to the extent to which the present developments have been preceded by speculative operations in the sterling; but shortly things will settle down and sooner or later the exchange must bo affected by financial and economic developments whether expressed iu ordinary trade movements or in buying or selling the securities wo hold. Therefore, unless it i.s shown thut our economic jrosition is sufficiently strong to maintain tho American exchange, dear money rates might have to be restored for a while. Tito importance of protective measures in tho shape of reserve dollar credits in the United States is recognised, but such credits may bo regarded as constituting a reserve which is unlikely to be lightly encroached upon.” Tho Financial Time 3 says: “The fact that tho whole Empire will act simultaneously apart from the adhesion of foreign countries who will follow suit, is a remarkable achievement. The decision is the best thing that could have happoned in the interests of British credit and prestige. Behind gold reserves stands the credit which the Government has obtained from tho United States, recourse to which wo ure confident need not bo frequent or extensive.”

Immediately tho Budget details were known the sterling on tho London market reached 4.84 and closed in the evening only a trifle lower. —A. and N.Z. cable. COUNTRY’S SETTLED POLICY. AIOST FAVOURABLE MOMENT. LONDON, April 28. Mr Winston Churchill, in announcing the return of the gold standard, said that such return had long been the settled policy of tho country ; tho only question haci been tho difficult and delicate 0110 of how and when. The report of the Chamberlain committeo in that connection had convinced tho Government, which intended to follow tho committee’s recommendations in every respect. Air Churchill emphasised that this was tho most favourable moment to return to tho gold standard, in view of political economic stability on both sides of tho Atlantic. It would not bo necessary, 110 stated, to adopt a gold coinage. He appealed to all ■ classes to coils tinue to use notes, staling that he would introduce a bill, providing that, until otherwise provided by proclamation, Bank of England and Treasury notes would be convertible to gold only at tho option of the Bank of England, and tho right of tendering bullion at the mint to be coined would lie confined in futuro legally to the Bank of England, which would be required to sell'gold bullion in amounts of not less than 4CW ounces.

Further steps were recommended by the committee. For example, the .amalgamation of Bank of England and Treasury notes would be deferred, as the committee recommended until we had sufficient experience of the working of a free international gold market on a gold reserve of approximately £160,000,000. When the Government decided to return to the gold standard many montlis ago, the Treasury began discreetly to accumulate dollars and had now accumulated the whole of tho 166,000,000 dollars required for the June and December payments of tho American debt and all other American debt obligations this year. Finally, although he believed wo were strong enough to achieve this important change from our own resources, ho had arranged, as a further protection, to obtain if required, credits from the ' United States of not leas than 300,000,000 dollars, with a possible expansion if necessary. Tho Government, in returning to the gold standard, was not moving alone, stated the Chancellor. The United States and Germany were either on, or related to, the International Gold Exchange. Sweden was on the gold exchange; Austria and Hungary were already based on gold or sterling, which was now equivalent to gold. Air Churchill said he had good reason to know that Holland and the Dutch Indies were very important factors in the world’s fortunes and would act simultaneously with Britain. To-day, so far as the Dominions were concerned, there would be complete unity of action. Canada was already on a gold standard. South Africa had notified its intention to revert to gold a.s from July 1. Australia and New Zealand were abolishing restrictions on the export of gold from to-day. lie believed the establishment of this great area of common arrangement would facilitate the revival of international and inter-imperial trade. —A. and N.Z. cable.

THE AMERICAN CREDIT. NOT ACTUALLY NEEDED. NEW YORK, April 28. Following the announcement of Britain’s return to the gold standard, sterling closed ut 4.83 9-16, a new high level since 1915, and within two and a-hulf cents of par. Regarding Mr Churchill’s statement that a 300,000,000 dollar credit would he arranged with the United States, if necessary, tho Secretary of the United States Treasury, Mr Mellon, believes surh a credit is not actually needed, but affords additional security. Mr Mellon’s opinion is that sterling has been getting stronger through tho growth of foreign trade and even if the gold embargo had not been lifted the pound would have, returned to par, and remained there through economic conditions. The attitude of Mr Mellon and other high Treasury officials is that anything that may bo done by Britain to establish a go'd basis and stabilise currency is desirable from a general economic standpoint and favourable to the interests of the United States. In the meantime, the Aforgan Company, whose house is expected to handle the British credit, if made, declared that comment would he withheld, pending direct advices from tlio British Treasury. The Stock Market hailed the British announcement as the most, far-reaching step towards stabilisation since the acceptance of the Dawes plan, and this sentiment is reflected in the generally improved tone in the financo and commodity markets, whily. (he depression following the German election lias been completely forgotten. Wheat lias rallied five cents following sterling's guins, while stocks and almost all European exchanges showed relief from persistent professional pressure, which recently kept them in an unsettled state. Financial lenders are enthusiastically claiming that the British action means that good money will predominate throughout the world, enabling business men everywhere to carry on operations with assurance that no erratic movement of exchanges will throw their calculations out of joint with ensuing big losses. Confidence is entirely restored and it is anticipated that international markets for raw materials and foodstuffs will immediately improve.—A. and N.Z. cable.