THE GoLD STANDARD

Otago Daily Times, Issue 19472, 6 May 1925, Page 7

THE GoLD STANDARD

QUESTION IN THE HOUSE OF COMMONS. VIEWS OF DOMINIONS. Pren Association — By Telegraph—Copyright LONDON, May 4. When asked in the House of Commons whether communications from the dominions had been received regarding the restoration of the gold standard, Mr W. E. Guinness (Financial Secretary to the Treasury) recalled Mr Churchill’s Budget speech orient collaboration with the dominions. Ho added that he understood from the press reports that the return to the gold standard had been widely approved by the dominions. —Reuter. EXCHANGE RATES. AUSTRALIAN BANKERS CONFER, SYDNEY, May 3. The Sydney Morning Herald says tnat negotiations between the banks are satisfactorily progressing towards a settlement of the exchange rates on London, and there is every likelihood of a compromise being reached between two proposals—one for a steep fall and the other for making a fall by easy steps in the margin between the buying and selling rates. A compromise is also likely between the adr vocates of an initial margin of 5s widening with the lengthening of the usance, and the advocates of the present 20s margin. 'bill in houseof commons QUESTION OF EXCHANGE OPERATIONS. FINANCIAL ASPECT EXPLAINED. OPPOSITION BY LABOUR PARTY. LONDON, May 4. (Received May 5, at 7.46 p.m.) In the House of Commons Mr W. EGuinness (Conservative), in moving the second reading of the Gold Standard Bill, pointed out m connection with the proposal the Bank of England Was bound sell gold in amounts of not less than 400 oz troy weight and fine gold in bar that each bar would b© worth about £I7OO, and the size of the bar alone would prevent this proposal being used to bring back gold into general use and limit the possible drawing of gold for export. The clause of the Bill empowering the Treasury to borrow for exchange operations did not increase the total amount of money which might be borrowed. Any sums raised under these powers must come out of the usual provision for borrowing up to the total of the supply 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 York, which gave the Bank of England a revolving credit of 200,000,000 dollars for two years from May 10, and the second with the syndicate headed by Mr J. P. Morgan to his Majesty’s Government direct for a revolving credit for 100,000,000 dollars; 'as well as for two years’ interest in each case, payable when the credit was drawn upon, at one per cent, above the Federal reserve discount rate, with a minimum of 4 per cent, and a maximum of 6 per cent., or if the ; Federal reserve rate exceeded 6 per cent, at the Federal discount rate. “If we do not use the credits no interest will bo payable,” Mr Guinness explained. “There would merely be a very small commission on the right of call on the money.” He hopfed in view of its urgency that the House would pass the Bill without delay. He did not fear a rise in the bank rate or higher prices. The Government believed the country had reached the stage of the purchasing power being at parity, and that in the long run the producer would have more to gain from the security of the gold standard than the banking interests. Mr Snowden moved a Labour amendment refusing assent to the Bill, which by providing for the return to the gold standard with, undue precipitancy might aggravate the existing grave, conditions of unemployment aad trade depression. Mr Snowden emphasised the fact that he was not opposed to a return to the gold standard, but he protested against the Government’s undue precipitancy. The Labour Party by his amendment dissociated itself from the disastrous consequences which might follow. He declined to accept Mr Churchill's statement of the existence of a practical parity between the prices in Britain and the United States. Mr Snowden said he thought the difference amounted to 5 per cent. The Government should have waited a little longer in the hope that the parity of gold and the level of prices would be reached by the normal operation of trade. ,Mr 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, patienGo, and long preparation could suggest. He mentioned the disadvantage of giving long notice of a return to gold, and pointed out that if they had waited for the Act to expire at the end of the year everyone 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 be 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 onlv basis offering a permanent security. Referring to the necessity for Imperial unity regarding a gold basis, he said that had they shown ■'themselves incapable of taking any decision the self-governing dominions 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, but with the sterling left out. That would have been disastrous to State affairs from their viewpoint. Ho knew nothing which would justify an increase in the bank rate in the immediate future. Indeed, 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 only the financial centre of the world—she was the centre of a wide empire. If they detached themselves from their movements, they ran a great ■ rsik of becoming isolated, and loosening the bond, whereas the fortification of the bond was indispensable to their wellbeing. He scouted the suggestion that they might be unable to hold their own against strong trans-Atlantic influences, and pointed ont that Britain still controlled a vast amount of the world’s business. She had magnificent credits and also £3,000,000,000 of foreign investments. She held £153,000,(XX) in gold, and the dominions held £107,000,000 in gold. 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 normal timely readjustment, in order to disprove that absolute equation of prices was essentia! to the restoration of the gold standard. He 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 aai even larger economic financial power, without their own essential independence being preiudicially affected. The Bill was read a second time without a division.—Reuter.