TO PROTECT STERLING

Rotorua Morning Post, Volume 1, Issue 208, 27 April 1932, Page 5

TO PROTECT STERLING

(British Official Wireless)

stabilisation fund WORLD'S LIQUID RESOURCES FLOWING TOWARD LONDON PURPOSE OF BRITISH BILL

Rec. April 26, 5.5 p.m. RUGBY, Monday. The mara business in the Hquso of Gommons to-day was the eonsideration of a resolution regarding the* exehange equalisation account, the object of which is to provide for the establishment of a fund not exceeding £150,000,000 to strengthen the eurreney and cheek undue fluctuations in the exehange value of sterling. Owing to the indisposition of Mr Neville Chamberlain, Chancellor of the Exehequer, Major W. E. Elliot (Financial Seeretary to the Treasury) introduced the resolution. The purpose of the fund, the Minister explained, was to provide greater control over the eurreney. The fund was to build up the old dollar lexchange account that gave them the nucleus of £250,000,000. In addition the Treasury sought power to borrow for the purpose of that fund a sum not exceeding £150,000,000. It would be used for the purchase and holding of foreign securities of all kinds. Although large, it was not out of scale with the gigantie movements of liquid capital during the last few months. The liquid resources of the world had been settling toward London because of the confidence engendered by the speedy repayment of last year's credit, and because of the balancing of both last year's and this year's budget. Sterling had thereby been strengthened, but the recent fluetuation had proved an embarassment, not merely to traders in Britain, but to traders in sterling in many other countries. The new account was a capital account and would not be drawn upon for revenue purposes. Explaining how the Government proposal was conneeted with the issue department of the Bank of England and the new fund, Major Elliot said the issue department held a cover against the note issue, which amounted in all to £400,000,000. The management of that department was under the Bank of England, subject to notifying the Treasury of the securities payable, and the profits of the note issue were to be paid to the Treasj ury. Their note issue had been under j the expert management of the Bank 5 of England, and so great was the con- ■ fidence engendered throughout the l world that country after country had t joined what was called the sterling s convoy and had followed the pilot : light of those expert managers. : The gold held by the issue depart- ; ment could only be valued at gold ' par. It was not proposed to revalue 1 gold, for that must await the restabiliI sation of sterling. The etfect of the I' proposals was that the issue depart- | ment would be absolutely solvent. In ? every contingency the note issue would ;! be covered by real assets.