MONETARY PROBLEM

Rotorua Morning Post, Volume 2, Issue 291, 3 August 1932, Page 5

MONETARY PROBLEM

(Press Assn.-

GREAT BRITAIN'S POLICY

— By Telegraph — Copyright)

OTTAWA, Tuesday. Mr. Stanley Bruce (Australia), ipent his boliday in preparing for :o-morrow's meeting of the currency sub-committee, whose report will probably be ready for the conference at the end of the week. While there is no official indication of the probable solution of the monetary probleni, there is a general f'eeling that the policy of the Britsih Government and the Bank of England during the past three months has been absolutely right, everybody in the conference circles cordially agreeing therewith. Several months after they had left the gold standard apparently neither the British Government nor the Bank of England had a definite futurie policy. Thus interest I'ates remained at 5 to 6 per cent., which meant dearer money. During the past three months the Bank of England, with the ohvious concurrence of the Government, has been pursuing a policy of reduction of the dxscount rate, which is now the lowest in history, xneaning cheap money. A second factor in the situation; which is also regarded with the utmost approbation In conference circles, is Britain's conversion of the £2,000,000,000 5 per cent. war loan to 3£ per cent. Thus the low bank rate rneans a cheap interest rate for short-term securities. The lower, war loan will bring a ch'eaper rate fof first-class long-term' securities. Movement of International Money A third factor is the establishment of £150,000,000 sterling exchange equalisation fund, announced in the British Budget, which represents the Government's definite determination to prevent speculators interfei-ing with the exchange p'osition. Ther4 is a tremendous amount of international short-term xnoney which, under other conditions, would haVe been directed to long-term investment avenues. This involves the movement of vast volumes of international money froxn one country to axxother, causing violent exchange fluctuations, and up'setting the equilibrium by beavy flooding or equally heavy withdrawals.