1e. British Government have Sept. 22, taken drastic action to cope: with the further drain on the wold reserves of the Bank of England. Their courage in itself is of good omen; the situation, obviously deteriorated la: week when in spite of the announcement of the new budge Proposals, heavy shipments of gold were, taken the "Continent may. be" vardy ment. is - uncertainty on attributable to a misunderstanding of the use put by the Bank of England to its reserves by drawing on them to meet the Present emergency. Continental financiers are apt to regard gold reserves as untouchable—almost as hoards. The English view is that reserves are meant te be used and practice is applied accordingly. Yet there is little doubt that the unexpected strength of the Labour secession Sh, from Afr. MacDonald, the sudden emergence of the tari issue and the signs of restiveness over the wages cuts have adversely Huenced British credit abroad, 'The Governments prompt action should do. much to restore condence, tt shows that. Great Britain is determined. to shirk none of the unpleasant facts of the' situation." now revealed, Better' still it gives practical proof of the confidence of the bation's present leaders in the Capacity amd readiness. of the people to tindergo retrenchment The relevant section of the Gold Standard. Act under which taken ig. Section Subsection (1) of which declares that the Bank of England is not bound to meet its notes in gold. Sitbseetion (li) runs:
So long a8 the preceding subsection vemala in fore, the Bank of England shall be bornd to sel to any person who males. demand in that behalf Head Ofiee of the Bank, doting the ofice hours of the Bask and Py, the pvchaie. ec nay tendo gold Bullion at the Bree of #3:178103 per or tres of Bold of the. standard of fineness Prescribed bythe. Calnago. Ace 1st, but only in the arm of bues containing approximately 400 troy of Ate gold 'Thus, in order to. put an end the drain which. had. set fu, the 'Bank of, Bugland "is now. able to refuse to. pay In' gold. To help. the em bungo the bank rate has been raised. 'This. thus creates what nay be called. an, artielal ex: change value for the sovereign, Ifthe world's. confidence British ability to. weather' the Storm is maintained this should not necessarily Tead to muck de-Dreciution of the The actual Effect is that. the pound. note buy. say 448. dollars, If the exchange weakens then the note in eivetlation, no longer Fedeemable in gold," may" buy only 4 dollars, "If there isa bad depreciation then the number of dollars will be less. The fall in the value of the pound wilt inevitably mean that the Feal value. of English money will fall, thas reinforcing con Siderably the effect of the cuts how being made in salaries and wages. 'The Bank's power ay in notes instead of gold does hot, however, involve adoption of the' wartime' expedient of printing more notes." There need not be inflation so the extent of the Gepreciation should not be alarming.
Neturally drastic measures of this kind bring vividly to attention the gravity of the crisis, TyAlthoush the history of the fal SSor'the Labour Cabinet, followed it was by the formation of ai Government on on unprecedented b Hines, should have prepared the public for that unpleasant reals lity. The truth is that it is not] easy for the public entirely to grasp such realities.
So. the shock now administered must be regarded as salutary. It may perhaps make even the trade unions realise the extreme folly, in their own interests, of bolstering up agitation which can have but one result: the weakening of {the confidence of the foreign invester, Alarm is not the right! note fo strike. The position is serious but its seriousness is not all due to British extravagance. The fundamentals of British credit remain unimpaired, if severely shaken, In brief the British nation is a3 a patient on whom 'a major operation has to be performed. The patient has sound constitution which been undermined by fast living. The operation is severe but the surgeons are the most expert in the world and can be trusted to Perform it with neatness, despatch and skill. There is no! need for panic or pessimism. Great Britain has been living' beyond her means. Some of her extravagances have been foolish!—the extension of a system unemployment insurance beyond the plane of contributory sound-to unregulated folly. Others been generously" plain lending to other distressed nations at long terms of money! she has been borrowing from other nations on short terms.
has had a succession of trade balances which have been partly, but cannot completely redressed, by her! invisible exports, dependent as! the latter ultimately are _on her prosperity abroad. She has to face what Australi: after hesitations, has had to face, That she will do so with success may be confidently expected by all who know the long! traditions behind her financial experience and the genius of the race. The Government's action! should, to some extent, temper! the enthusiasm of the tariff riffs are dangerous nts at such a time. For! the feeling of optimism which it might create within the country would be heavily counterbaianced by the gloss which it would place on the real financial facts, It would accentuate the uneasiness of the foreign markets. It would enormously complicate the task of rehabilitation. So long as Great Britain possesses, as she does, something like vestments which the now meeting can be regarded well within the nation's capacity to handle. There fs no justifica~ jon for exaggerated views of! the malady of which the gold! drain was a symptom, Provided the Government, with full na-al support, are able to establish their policy of severe, retrenchment and prudent hus-bandy of resources, the proce of recovery is 8 Tt will be slow and uncle
Text read from the printed page and cleaned; old type leaves the occasional error.