AID TO RECOVERY

Manawatu Standard, Volume LVII, Issue 178, 29 June 1937, Page 7

AID TO RECOVERY

BRITISH EXCHANGE FUND. REASONS FOR INCREASE. STATEMENT BY CHANCELLOR. (United Press Association —By Electric Telegraph—Copy right.) (British Official Wireless.) Received June 29, 11.55 a.m. RUGBY, June 28. In moving, in the House of Commons, the resolution relating to the proposal to increase the amount that may be issued to the Exchange Equalisation Account from £3oO,ui)(J,bud to £6oU,UOU,UUU, the Chancellor of the Jtxcnequer (Sir John Simon; said that tnere could be no doubt that tne existence and operation ot this account had been instrumental m promoting and maintaining steady recovery. The contemporary operation ot the account must be conducted m the most complete secrecy because anything like a contemporary disclosure of wiiat it was doing would be a Heaven-sent opportunity for currency speculators and would thus amplify the very undulations which the fund was engaged in reducing. An additional need for the fund had lately been created by the deliberate shifting ot large quantities of gold capital from one centre to another, said Sir John. Under the gold standard regime gold movements took place mostly tor tne purpose of settling international trading balances, but now they had large masses of capital moving from one coutnry to another for quite a different reason, and unless the bad effects of this in causing violent fluctuations in the currency exchanges, as far as may be, were neutralised, the result would be exactly the same, namely, obstruction to trade and loss of business confidence, against which the account was originally directed.

Thus, the Exchange Account, in the present circumstances, must be prepared to add to its holding of gold, tor that was what was necessary to avoid frequent wide fluctuations in the exchange rates when gold was coming in, and also later on when foreign owners called for the return of certain quantities of it. The Government, therefore, had concluded that it was prudent anu timely to add £200,000,1,00 to the existing borrowing powers. Its line of policy accorded with that of the United States.

The Chancellor, discussing the question of secrecy, said that there would be no harm in indicating to the Committee at a date after the event the amount of gold held by the account over six months. The information was being made public three months in arrear. Accordingly, he informed the House of the following facts: On March 30 the gold held in the account was 26,674,000 fine ounces. On the same date there was also gold held in the issue department of J:he Bank of England amounting to 73,842,000 fine ounces, making a total of 100,516.000 fine ounces, which, at the price of £7 per ounce, represented a little more than £700.000,000. The Exchange Equalisation Account at that date did not hold more than a trifling amount of foreign currency. That was the" sort oi statement that would be made every six months. He was ready to agree that the state of the account annually as at March 31 should be available to the Comptroller and Auditor-General; also, it would confidentially be communicated to the Public Accounts Committee by the January 31 following. 'I here won d be in such an account an indication as to whether the result was a profit or a loss.