GOLD STANDARD

Nelson Evening Mail, Volume LVI, 6 May 1925, Page 5

GOLD STANDARD

BILL BEFORE COMMONS SECOND READING CARRIED WITHOUT A DIVISION (By Electric Telegraph.—Copyright.) (Keuter's Telegrams.) LONDON, May 4

In the House ut' Commons, Mr Guirfness, moving the second reading oi the Gold Standard Bill, pointed out in connection with the proposal that the Bank of England was bound to sell gold in amounts of not less than 400 ounces trtjjt weight, and fine gold in bars; that eaeli bar would he worth about £I7OO and the size of flic bar alone would prcthis’ proposal being used to bring back gold into general use and limit the possible drawing of gold for export. 'I he clause of the Bill empowering the treasury to borrow for exchange operations did not increase the total amount of money which might he borrowed. Any sums raised under these powers 'must come out of the usual provision for borrowing up to the total supply of the services for the year voted yearly in the Appropriation Act-. Two credits had already been conditionally negotiated under this head, one _ with the Federal Reserve Bank of New 1 ork who gave the Bank of England a revolving credit of 200,000.000 dollars for two years front 10th May, and the‘'second with a syndicate headed by .T. P. Morgan to His Majesty's Government- direct for a revolving credit for a hundred million dollars also for two years, interest in each case payable when the credit is drawn upon at one. per cent, above federal reserve discount- rate, with a minimum of four per cent, and a maximum of six per cent., or if the federal reserve rate exceeded six at- the. federal discount rate. “If we do not use the credits no interest will he payable,” Mr Guinness explained. “There, will merely be. a very small commission on the right ol call on the money.” He hoped in view of its urgency that the House would pass the Bill without delay. He did not- fear a rise in hank rate or higher prices. The Government believed the country had reached the stage, of purchasing power being at parity, and that in Ihe long run the producer would have more to gain from the security of the gold standard than the hanking interest. AT)' Snowden moved a Labour amendment refusing to assent to the Bill, which by providing for the return to the gold standard with undue precipitancy might aggravate existing grave conditions of unemployment and trade depression. Air Snowden emphasised that he was not opposed to : a return to the gold standard, but protested against the Government’s undue precipitancy. The Labour Party by the amendment dissociated themselves from the disastrous consequences which might follow. He declined to accept- Mr Church ill’s statement of the existence of practical parity between prices in Britain and the United States. Mr Snowden thought the difference amounted to 5 per cent. The Government should have waited a little longer in the hope that- parity of gold level prices was reachable ny the normal operation of trade.

Air Churchill denied that the decision to return to the gold standard could be described as one of precipitancy. On the contrary, they had acted on the finest expert- financial advice in the world. The Government had taken every precaution which forethought-, patience, and long preparation could suggest-. He mentioned the disadvantage of giving long notice of a- return togold, and pointed out- that if we waited for the Act to expire at the end of the year every one could under the existing law have withdrawn and hoarded gold against the date of free export, namely, January, when the normal demand for bullion would he high. He insisted that no country in the world was less able to afford to diverge from economic facts than Britain. As regards the allegation that the decision would shackle them to America, the Chancellor said it would certainly shackle them to reality for good or ill. He personally believed it was the only basis offering permanentsecurity. Referring to the necessity for Imperial unity regarding a gold Basis, lie said that had we shown ourselves incapable of taking any decision the selfgoverning colonies might have adopted gold and they would have traded together, leaving the Mother Country to pursue a different policy. They would have traded with the United States on a gold basis, hut with sterling left- out that would have been a disastrous state of affairs from our viewpoint. He knew of nothing which would justify an increase in the bank rate in the immediate future. The situation was stable and everything tended to show that the transition to gold had hitherto been effected with success. He declared that Britain was not the only financial centre of the world. She was the centre oi’ a wide Empire. If we detached ourself from their movements we ran a- great risk of becoming isolated and loosening the bond, whereas fortification thereof was indispensable to our well-being. He scouted the suggestion that- we might he unable to hold our own against strong trans-Atlantic influences, and pointed out that Britain still controlled a vast amount of the world’s business. She had magnificent credits, also £3,000,000,. 000 of foreign investments. She held £153,000,000 in gold and the dominions held £107.000,000. The Empire supplied 70 per cent, of the world’s gold. He cited instances of pre-war discrepancies in British and American price levels, and their a normal timely readjustment in order to disprove absolute equation of prices essential to the restoration of thegold standard. lie concluded that the dominions united were an enormous power. They were great, intricate and comprehensive enough -to exist side by side in amicable association with an even larger economic financial power without their own essential independence being prejudicially affected. The. Bill was read a second time without a division.