London, Feb, 23.
Addressing the annual meeting of the National Mutual Life Assurance Society to-day, Mr. J. M. Keynes, the well-known economist, in his capacity as Chairman, ascribed the decline in gilt-edged securities and Other markets during the first nine months of last year mainly to gold purchases by the Equalization Fund amounting to £190,000,000.
The purchases were not financed by the sale of Treasury Bills, the volume of which fell by £36,000,000.
Of that amount, £14,000,000 was raised by the re-sale of gold to the Bank of England, £104000,000 by receipts of long-term capital in the form of 2% per cent, fundings of National Defence Bonds, £12,000,000 fiom revenue surplus, while the balance was apparently provided from capital resources of Government Departments such as, for instance, Health Insurance and the Unemployment Fund.
Effects of "Hot Money"
Altogether, Mr. Keynes estimates that £176,000,000 in liquid resources were withdrawn by domestic holders and placed at the disposal of foreign interest, who did not invest the bulk of their "hot money" on the Stock Exchange but kept it liquid in the shape of deposits and Treasury Bills.
Domestic liquid assets were reckoned by the Chairman io have been reduced by between £100,000,- 000 and £150,000,000, Thus gilt-edged issues and other markets had to fall sufficiently to induce domestic holders to part with their liquid resources in exchange for less liquid assets. Surprise was expressed by Mr. Keynes that the prices of gilt-edged securities did not fall more.
If the Equalization Fund desires the ebb and flow of "hot money" to have the least possible effect on domestic credit, it must arránge for its liquid resources to be increased to the extent of any increase in demand by the holders of "hot money."
No explanation was ventured by the Chairman to account for the events since last September, but he thought the recent improvement in gilt-edged issues might be due to a cessation, if not reversal of the above forcés.—Reuter,
Text read from the printed page and cleaned; old type leaves the occasional error.