HC Deb 21 December 1932 vol 273 cc1154-217

I beg to move: That this House urges the Government to complete the good work which it commenced in September, 1931, when it abandoned the gold standard system in its international aspect, by repealing those enactments which still tie this country to that system in its national aspect; this House further resolves that a Select Committee of its Members may be appointed by the Government, with the following terms of reference: to hear evidence on and examine into the various proposals now being advocated for a reformed monetary system, and to make recommendations for a new monetary system which will ensure, in its national aspect, a stable internal general price level and, in its international aspect, stable exchanges and the elimination of international competition in the lowering of general price levels with a view to undercutting. 7.12 p.m.

A few years ago anybody rising to make a speech on the subject of monetary reform would have been looked upon as a. crank, but to-day what a change has taken place. The question of monetary reform is on the lips of almost everyone—the working man and the business man wherever they meet together, in trains and trains you find this subject under discussion. The high priests of the Gold Standard say, "You can either have a stable, internal, general price level and a fluctuating external change, or a stable external exchange and a fluctuating internal general price level, but you cannot have both." The Gold Standard followers admit that there are great evils in the Gold Standard system, but they do not come forward and say that there is anything better. They persist in saying that this is good enough. I do think it would be helpful if the Gold Standard followers were to try and submit some alternative. I think the reason that nothing is done is well expressed in the book recently published by Sir Basil Blackett—"Planned Money"—in words which I cannot better: The Gold Standard has become a religion for some of the Boards of Central Banks in Continental Europe, believed in with emotional fervour which makes them incapable of an unprejudiced and objective examination of possible alternatives. I hope to show how inefficient, how complicated and how dishonest, is the mechanism, and how dislocation and suffering have arisen under the Gold Standard system. I think it may well be described as a Heath Robinson contraption.

Notice taken that 40 Members were not present; House counted, and, 40 Members being present


Gold was supposed to be like water. It ran off the countries which had too high a price level on to countries with lower price levels, and this dislocation of gold has affected the currencies of both the receiving countries and the losing countries. The effect is that the countries which are losing gold are compelled to contract their currencies. That is deflation, similar to what we have suffered for the last 10 years. The country receiving the gold goes through a process of inflation, and that is rather like the case of the grocer who is not too prosperous in his industry, and who decides to manipulate the scales in such a way that he can give a smaller quantity of commodities for the same volume of money. In this case, it is the money which is tampered with and not the scales. It is a dishonest system and has created a great deal of injustice to both creditors and debtors. The general price level has for years been on the down grade, and this has caused a good deal of privation as between citizens within the various nations. I feel that in this country we have not yet realised the effects of this Gold Standard system.

I come to examine another vice of the system. It is clear that any nation which wishes to depress its general price level can do so in several ways. It may decide to lower the standard of living. Or it may be that some industry has introduced modern improvements which help to reduce the cost of production and by these methods a country is producing more goods than it can consume and is exporting goods to other countries. The exporting country goes into the exchange market and reduces the currencies of the countries to which it is exporting, and reduced currencies in turn produce a lower price level within those countries. So the process goes on. It is this external influence from other countries which is affecting our own country particularly at the present time. I propose to quote from a memorandum on monetary policy issued by the London Chamber of Commerce in June last the following pasage: We see on the one hand, Nature immensely bountiful; scientifically equipped factories capable of providing every human want and ready to raise the general standard of living of all human beings to an infinitely higher level; and on the other, millions of men all over the world without work, in great poverty and want; factories working at a loss to 25 per cent. to 50 per cent. of capacity, and the Governor of the Imperial Bank of India referring to the 'teeming millions of Africa and Asia' as 'half-starved and less than half-clad.' Instead of a great increase in the general standard of well-being there is a progressive decline. Our problem is to increase purchasing power, but on every hand to-day we find the reverse process taking place. Purchasing power is being destroyed. If we cut down prices other nations do precisely the same thing and the world has got into a vicious spiral. We are not content with engaging in international competition of this kind and progressively reducing the general price level by means of currency deflation, but nations now are reducing their own currencies and this process is causing considerable hardship throughout the world. I apologise to the House for reading another quotation, but I particularly wish to draw their attention to the resolution passed by the council of the London Chamber of Commerce at its meeting last June. This resolution which was submitted to the Government prior to the Ottawa Conference was in the following terms: That in the opinion of this Council monetary reform is of outstanding importance. The arrest of progressive deflatior is, in their view, the condition precedent to a restoration of world prosperity and no other measures which may be taken can prove effective substitutes. This Council cannot too strongly urge on His Majesty's Government that the opportunity which will be afforded by the Ottawa Conference should be seized to reach agreements with the other nations of the Empire upon this all-important matter, so that the Empire having itself agreed upon a constructive monetary policy may be in a position to give a lead to the other nations of the world and invite their co-operation. The Council venture to put forward the report of their special committee as a contribution to the reform of the monetary system and as a basis of discussion at Ottawa on the subject. We all know that the Monetary Committee at Ottawa did not prove successful. We know that the Lausanne Conference was equally unfortunate. It is a question if the World Conference, which ought to be sitting now and which probably may never sit at all, would be any more successful in dealing with this matter. Unless the Anglo-saxon peoples, with the other nations who have looked to this country for leadership, show a little courage and initiative in this matter, I can see no stopping place short of chaos. I frequently ask myself, and I have endeavoured by means of Questions in this House to find out, whether the Government have any monetary policy at all. I am inclined to think that they have, but I am sorry to say that my view of their policy is that they are prepared to sit on a fence and to see industries destroyed until the volume of production in industry has reached the level of the purchasing power of the country.

If I am right in that conclusion, I would impress on the Government that it is a very dangerous policy, and I feel that before it is completely successful, revolution will arise in this country. It is impossible to "touch rock bottom," as it is generally termed, by the destruction of agriculture and industry because as you destroy, first one industry and then another, you are decreasing your own purchasing power and it is this decrease of purchasing power which has been going on for some years. The process is one that is reminiscent of a little dog running round and round trying to catch its own tail. But it is impossible for us to get back to prosperity, so long as there is uncertainty as to the monetary position of this country and so long as the belief persists that the Government have no monetary policy at all.

It is no longer sufficient to rely upon the employing classes and those classes which have investments, to consume the production of this country. We have stepped into an age of mass production, and, with mass production, we must have mass consumption. It is interesting to note that in America no less than 85 per cent. of the production of the United States is consumed by people with less than £1,000 per annum. Therefore, I feel that there is one thing which we have seriously overlooked. We have made no provision for the wages of the machine. In the past when men produced by hand, wages were paid equivalent to that production. There was no machinery to compete with them, and the wages of one consumed the production of another. We have a serious gap to-day created by the introduction of machinery. Under the Gold Standard system it is impossible to fill that gap, caused by the enormous production which is now made possible by machinery. In other words, we have to provide wages for the machine, as we did for the man who produced by hand.

I congratulate the Government on having gone off the Gold Standard in September, 1931. It was quite time that we retired from the international scramble for gold. It is rather extraordinary to find that since we went off the Gold Standard the general price level of this country has been reasonably stable, but the countries which have remained on the Gold Standard have gone from bad to worse. In many cases they have got into a position in which it is impossible for them to pay for the exports which they buy from us, and they have caused the external value of our currency to fluctuate widely. But even now, although we have cut ourselves adrift from the Gold Standard, in its international aspect, we are still suffering internally from the indirect influences of that standard. Of what does our money consist? We have a paper issue to-day, having paid the American Debt, of something like £394,000,000, but the vast bulk of the money claim of the people is represented by bank money or credit which is transferred from account to account by cheque. Of the legal tender money of just over £394,000,000 to which I have referred, approximately only one-third is "covered" by gold—whatever that may mean. But this bank money is in theory convertible into paper money and paper money in turn is convertible into gold.

One has only to consider that sketch of the position to see how inadequate and how dishonest is the gold system. We understand that this money is convertible, but into what are we going to convert it? I think that to-day we have something like £122,000,000 of gold reserves. If we proceeded to convert all this money, we should only get a fraction of what we are supposed to possess. It is a point which I want to make to show how the Gold Standard system falls short, and how the use of gold in any monetary machine is preposterous. I think I am correct in saying that the monetary gold of the world is something just under £2,400,000,000. It has got its value because the Governments of the world passed legislation agreeing to a fixed price. I submit that if the Governments of the world were to pass legislation to say that tin, lead, or any other commodity should have a fixed price, it would never go below that value. If you removed that fixed price, what might be a reasonable value of gold? Probably not more than 5s. an ounce, and it is obvious that, the Governments of the world having fixed this price of gold, upon which the value of their currencies is based, and with the limitation of gold coming into the monetary machine, it is impossible to avoid these fluctuations, unemployment, and privations, not only in this country, but throughout the world.

I should like to remind the House that in 1925 we passed the Gold Standard Act, by which we suspended Sub-section (3) of Section 1 of the Currency and Bank Notes Act of 1914, and withdrew the right to convert money into gold except in quantities of £1,600 at a time. Nobody with any less amount than that could go to the Bank and demand to have his money converted. You see the futility of the proposal. How many people in this country have £1,600 available to go to the Bank to be converted? They might just as well have said that there should be no convertibility in perpetuity, because it really had that effect. The vast bulk of the population probably do not realise that there is machinery for conversion, and they are quite satisfied to have their paper money, so long as their grocer, or baker, or whoever it may be, is prepared to accept that; and he always will accept it, so long as it is legal tender. Therefore, the question of convertibility is really another preposterous argument in this Gold Standard question.

It is said that in a great crisis people would want to convert their paper money because they would lose confidence. Under the Gold Standard system, I am not surprised that that view may be held, but what is going to be the position should there be a large demand to convert, when you consider what I have previously said, that there is such a small reserve of gold that if we were all to demand conversion at once, we could only get a very small percentage of that to which we assume we are legally entitled? There have been moratoriums, of course. The Government have had to come to the assistance of the monetary machine on more than one occasion. They had to come to its assistance in 1847, 1857, 1866, 1914, and again in 1931; and, therefore, it is quite evident that the Gold Standard system is by no means infallible.

Again, it is said that there is a gold mentality. Up to a point, I agree, but where is that gold mentality? It is quite nice to feel that there are certain lumps of gold tucked away which may be of some use in one form or another some day, but for our monetary purposes I want to point out where that gold mentality rests. It rests, I submit, with the old men of the country. When it is realised that we in this country have paid wages since 1914 by paper, and have never used gold, and when it is realised that the men of military age who joined the Forces during the War and who to-day would be 35 years old have never used a golden sovereign to exchange for production, it will be seen that these men cannot have a gold mentality. How many young men in this House have ever used a golden sovereign or, perhaps, ever seen one? It is not these young men, it is not the rising generation, that can have a gold mentality, and I respectfully submit that we should legislate for the rising generation, not for the old men of this country. The question of what should be done, having regard to the payment of the American Debt, to help our monetary mechanism was, I think, very well put in a letter which was addressed by the London Chamber of Commerce to the Prime Minister on the 15th of this month. I attach so much importance to this letter that I shall ask the House to allow me to read it. It was signed by the president, Lord Leverhulme, by the chairman of the council, Sir Geoffrey R. Clarke, and by the secretary, Mr. A de V. Leigh. It reads: You will remember that on the 7th December we had the honour to send you, privately, a copy of the following Resolution, which was passed by the General Purposes Committee of this Chamber at its meeting on the previous afternoon: 'That the London Chamber of Commerce is of opinion that, should the United States, after considering the British Government's representations, insist upon receiving payment of the £19,750,000 due to her on the 15th December, payment should be made from the country's gold reserves. This Chamber strongly urges upon His Majesty's Government that no contraction of the currency, should take place as a result of this shipment, but that the present volume of currency should remain in issue, the £19,750,000 at present theoretically covered by the gold which would then be shipped being added to the £15,000,000 already in issue under Treasury Minute.' This Resolution has since been confirmed by the Council of this Chamber at its meeting on Tuesday last. The statement made by the Chancellor of the Exchequer in the House of Commons on the 14th December, during the Debate on the American Debt, that the fiduciary issue could only he raised by the Treasury on a representation from the Bank of England, that the Bank of England had made no such representation, and, further, that he would have been surprised if it had, is a matter of the utmost concern to the trade and industry of this country. If, in fact, such an application is not made, it will involve a contraction of currency by £19,750,000 and of Bank credit by £197,500,000. This further drastic deflation cannot fail to force down prices still further, with disastrous results, not only to the agriculture and industry of this country, but also to those suppliers of primary products throughout the world who, under conditions of intense competition, can alone find an outlet for their products in this market, whatever the price level may be. So far as the internal needs of this country are concerned, there cannot, we submit, be any justification for a further drastic curtailment of currency and credit, and such action would, in fact, be diametrically opposed to the undertaking given by the British Government delegates at Ottawa. So far as our external relations are concerned, the right of other nations to take gold from this country was suspended in September, 1931, and has not been restored, so that the contraction of currency and the forcing down of prices, which was the procedure followed by this country before that date, when it lost gold, with a view to preventing a further loss, is, it is submitted, quite inappropriate under present conditions, There is in that letter the very serious suggestion that the payment of the American War Debt will bring about a further deflation. That would be a very serious position for this country. Deflation has already gone too far. It is rather remarkable that immediately after the issue of that letter the Press generally were unanimous in contending that the £43,000,000 reserve, as it stood then, would not be affected by the withdrawal of the £19,750,000 in so far as the currency would continue to remain. If those conditions did exist, it would mean that the Bank of England would be satisfied to hold 6 per cent. only of the total note issue in reserve, instead of what it was a week ago, approximately 10 per cent. Hon. Members will realise that the City of London is concerned about that position, and I think that concern is reflected in the tender of Treasury bills which took place on the 16th December, when the discount rate was £1 5s. 6d., as compared with 16s. 5d. the week before. There is a lesson for this Government in the fact that within a very few days of that payment, owing to the nervousness in the City as to what the Government were going to do with their monetary policy, a higher rate of interest was demanded.

I think there is another fear. While, as I say, the Press were unanimous that it might be all right for the currency not to be contracted now, and to be satisfied with the 6 per cent. reserve, I feel that the City realise that after Christmas there will be a process of withdrawing currency from the market to build up this reserve again, and every £1 which is withdrawn from the banks means a loss of approximately £10 of credit for industry. I feel that that position is extremely dangerous. I would much rather, when the American Debt question was being discussed a week ago to-day that this most important matter had been debated than that the House should have entered into personalities in which an exasperated public are entirely uninterested. I feel that there can be no prosperity in the world until we adopt a system whereby we can get increased purchasing power. Nobody can deny that the avenues leading to and from and round about the temple of the gold fetish have been thoroughly and exhaustively explored. With what result? Now we have an expression from the high priest—I refer to the Governor of the Bank of England—as to what have been the results of this policy. He made a speech at the Mansion House dinner this year, and this is what he said: When it comes to the future, I hope that we may all see and approach the light at the end of the tunnel which some are already able to point out to us. I myself see it somewhat indistinctly and different directions are pointed out to us, all of which I hope will lead us where we wish to go, but I must admit for the moment that the way is not clear. We have not yet emerged from difficulties through which we have been passing. I like to believe we shall meet here again next year, that this will continue to be an annual gathering, and that then, as I believe is more than likely, we shall see clearly where we are going and be sensible of the rapid pace towards that goal at which we are proceeding. For the Governor of the Bank of England, a man who holds the destinies of this country in his hands, to make a speech which expresses such a hopeless future for the country is extremely alarming. Hardly more inspiring messages come from leaders of our own Government. The-Prime Minister, speaking of unemployment last November to the mayors, corporations and local bodies of the country, asked them to do something to organise work and to help in any direction that they could. Then shortly afterwards, the Government, through the Prime Minister, appealed to these people to economise and to cut down expenditure. What must these local bodies think of us here? One day we ask them to do one thing, and another day we ask them to do something else. What do we want? What we are doing is to create a good deal of dissatisfaction.

My reference to unemployment brings me to a statement made by the Chancellor of the Exchequer. I am going through these points to try and show that the Government have no hope. Because I feel that and see it so definitely expressed in the speeches of the leaders of the Government, I am taking the liberty to make reference to them. The Chancellor of the Exchequer, in the recent Debate on unemployment, made a, speech of which this is an extract: … while we will do all we can to help the unemployed to find employment in the immediate future, and while we have taken and are still taking steps that we think will give stimulus to industry and will increase the normal operations of trade, and thus gradually reduce the numbers of the unemployed, nevertheless we still have to face the fact that there are going to be a large number—a million or more—of persons for whom we cannot expect to find regular employment in their own trades either this winter or next winter or perhaps for many winters to come. If one faces up to things, that is the conclusion to which we are bound to come; and I submit that once we accept that conclusion, once we agree that, whatever efforts any of us may make, we are still going to have the unemployed with us in large numbers for a long period of time … "—[OFFICIAL REPORT, 8th November, 1932; col. 261, Vol. 270.] I entirely agree with the Chancellor of the Exchequer. We are going to have a large volume of unemployment with us for a long time—I will say for all time as long as this country adheres to the Gold Standard system. This is where the gold mentality of the older men to whom I have referred is so clearly expressed. We find this gold mentality coming up first in one direction and then in another. I endeavoured to put a question to the House a week ago on another subject which concerns me. When I banded in the question, I was told that because it referred to a private concern it could not be accepted as the Government bad no control over it. The question referred to the Bank of England, and, because I could not put the question in the House, I am now going to ask the Chancellor if he will give me information on three important points, because I feel that the replies to those points may have some bearing on the policy of deflation which this country has adopted and which is causing such privation and distress. My three questions are as follow: Who are the proprietors of the Bank of England? Is there any statutory provision which ensures that the majority voting power is in the hands of shareholders of British nationality, and, if not, whether, in fact, the majority voting power is so held at the present time? Whether there is any provision in the Charter of the Bank of England which makes it illegal to hold shares by proxy in such a way as to obscure the true ownership of the Bank?

I referred to the speech of the Chancellor of the Exchequer of the 14th December, when he stated that there could be no increase in the fiduciary issue except by the Treasury on the representation of the Bank of England. The Bank of England is a private concern, and instead of the monetary policy of the Government being in the hands of private individuals of whom none of us in the House can make any inquiries, I feel that the development of industry and the whole change of the circumstances of industry demand something different from a private central bank. I should like to see the Bank put on a footing similar to that of the Electricity Commissioners. I am not moving this Motion out of any hostility to the Government, but with a view to helping them. I want to get them out of this gold mentality. I congratulate them on the great work that they have done, but I feel that this magnificent work will be destroyed—in fact, it will never be allowed to mature and function—unless their monetary policy is one which will give purchasing power back to the people who deserve it.


I beg to second the Motion.

7.55 p.m.

May I say how glad I am that the House has, through the hon. Member for Southampton (Mr. Craven Ellis), been afforded an opportunity of discussing a matter of such great importance. It is a matter which I have had at heart for a great number of years. In fact, when I had the honour to represent the constituency for which an hon. Gentleman now sits, I used to speak of it on almost every occasion. Together with the Town Hall, the Bar Gate, the tolls on the Itchen bridges, a civic aerodrome, and a scientific tariff, it used to form my stock in trade on which I used to ring the changes whenever occasion occurred. It is a curious thing that, with the exception of this matter, all these things I have mentioned have either been completed or are in the course of completion. Even the Town Hall of Southampton, discussions about which began in the reign of King John and continued every year since, was opened the other day, and I should have been glad to go and see the ceremony but for the fact that I was told that there was still a wire fence across the civic aerodrome which made it awkward to land. Even the scientific tariff is almost an accomplished fact. Only this question of currency reform, about which we hoped so much, is still being left in abeyance, although if it be true that what the hon. Member's constituency of Southampton says to-day, Manchester will say tomorrow, we still have hopes that even this question may also be solved eventually.

What are the Government's views on this question? It has been raised on several occasions, especially with reference to silver and bimetallism in various Debates in this House and in another place, and I must confess that the arguments given by Members of the Government have not been in strict accordance with each other. I have here the view of the Secretary of State for Dominion Affairs on the question of silver. He says: The fall in the price of silver, which lowers purchasing power in the Far East, is, I am informed, a contributory cause of the present unemployment in the cotton industry of Lancashire, and it is one of the reasons for the recent increase in the number of persons recorded as unemployed." —[OFFICIAL REPORT, 11th February, 1930; col. 206, Vol. 235.] No bimetallist would find fault with that statement. I have only one fault to find with it. Why confine it to Manchester? Cannot we get away from Manchester for a moment? It is not only cotton that China can buy. During the boom years after the War, when silver was high, China was buying gramophones, motor cars, beef, wool, bicycles and aeroplanes, and China was an ever-increasing potential market with 400,000,000 people ready for the trade we could give to them. The same to a lesser extent may be said of India. What does the Chancellor of the Exchequer say? I think we hear a different voice. He says: I am not going to be dogmatic on that question, because I find it all very confusing and very difficult to be quite certain that any particular view is the last word on the subject; but I see difficulties in the way of accepting the theory that a rise in the price of silver would increase our trade with India and China. Again, he says: Without being dogmatic I am not convinced myself that a rise in the price of the value of silver would have this valuable effect upon the trade of Lancashire with China or India."—[OFFICIAL REPORT, 8th November, 1932; cols. 255–6, Vol. 270.] The Chancellor of the Exchequer does not appear to be quite happy or confident in his opinion. Perhaps he was expressing the views of the Treasury, and the sweet strains wafted down from Olympus, or the choruses that echo round Valhalla after a successful conversion loan, are not completely in harmony with this particular matter. In another place Lord Stanhope elaborated the same theme at much greater length. This appears to me to be a, strange line of country for the Government to take. Surely the main argument against bimetallism has always been that we should have the country flooded with silver, that silver would come in and drive gold out, under Gresham's law that bad metal drives out good. Now we are told that the output of silver is very small, only a wretched 200,000,000 ounces a year. In a speech he made not very long ago the Chancellor of the Exchequer said the annual production of 200,000,000 ounces would add little more than 4 per cent. to the existing currency reserve, and therefore would be a negligible factor in providing the necessary new currency to bring back the rise in prices demanded from all sides of the House and consequent prosperity.

In my own humble opinion, I think too little regard has been paid by these gentlemen to the rise in the price of silver which would be consequent on any form of its remonetisation, nor do I think they make sufficient allowance for the immense funds of idle silver not only in China and India but in Russia. I think the estimate given by the right hon. Member for Hillhead (Sir R. Home) on this point was certainly on a conservative basis. Further, I doubt whether sufficient allowance was made for the development in silver mining which would be bound to follow all over the world, including this country, in the event of a rise in the price of silver. In Derbyshire there are lead mines lying idle which would be put to work if there were a rise in the price of silver such as would make it worth while to produce both lead and silver; and an enormous amount of silver is produced as a by-product of mines which yield other metals. I doubt whether these factors were taken into consideration when the figures were given by the Chancellor of the Exchequer in this House and by Lord Stanhope in another place.

Bimetallism as a. theory has had a long run. It had a good run in the "hungry forties," and was defeated then by the supplies of gold from Australia and California. It had another run in the slump of the 'eighties, and was defeated then by the boom consequent on the gold strikes in the Klondyke, on the Rand in South Africa and in Western Australia. Possibly, as a result of the rise in prices resulting from that last gold strike, there would have been another era of prosperity—perhaps another 40 years this time, instead of the actual 15 years that it lasted—had it not been for that most unfortunate agitation about Chinese labour, which had the immediate effect of raising the cost of the production of gold. It seems impossible to us in this genera- tion that this country should really have been moved by an agitation got up as to whether Chinese coolies under an indentured labour system should be allowed to come into what is now one of our Dominions which looks after its own affairs. I wonder whether the right hon. Member for Carnarvon Boroughs (Mr. Lloyd George) or the right hon. Member for Epping (Mr. Churchill) thought for one minute, as they went about the country making most eloquent speeches on this subject, of the world-wide repercussions the Chinese labour election would have. If gold production had been kept low there would have been no unemployment problem in 1912, no threat of bankruptcy in Germany, Austria and Russia in 1914, and, possibly, no European and world-wide war. It is amazing how enormous developments may grow out of small matters, and it is a warning to democracy for all time.

I am not myself a bimetallist, I am a symmetalist. Like the Chancellor I do not want to be dogmatic and do not wish to weary the House with an explanation of the difference, but I would ask hon. Members who are interested to read that most excellent pamphlet on the subject produced by Lord Desborough. That would explain it in far better language than I could, but briefly the suggestions I would put to the Financial Secretary are these. We could have a managed currency—that would please the hon. Member who opened this Debate, and also the hon. Member for Dundee, if he were here—and we might call it sterling. I believe Lord Desborough calls it Rex, but I see no reason why it should not be called sterling. It must have a metallic backing, expressed by metal reserves in the Bank according to the credit of the country and according to the market price of the metals concerned. The pound sterling or Rex must, therefore, be backed by sufficient reserves at the Bank, and, in my opinion, it should be possible to coin in metal if required or as required.

I do not believe that with international action—and we can start with Imperial action—there should be any danger to the Exchequer by that process. It should be coined if required and as required; otherwise, in my opinion, the currency is a debased currency. I believe that our present currency is really debased, and with a debased currency Gresham's Law will come into operation and we shall drive the metal—in this case, as we are on gold, it will be gold—out of the country.

The only difference or the chief difference with this system is that the reserves need not be in gold only. I want gold, silver and, if necessary, platinum brought in. The amount of each held by the Bank would vary according to the price of the metal. If gold rises sell gold and buy silver; if silver rises act in the reverse way; and, if necessary, call in platinum to assist in equalising the exchange.

I see that an Amendment has been put down objecting to the appointment of a Select Committee to consider this matter. I do not very much care whether a committee is set up or not. I have no very great belief in the deliberations of what Mr. Punch calls the pundits. I have an idea that if Prince Charlie had not called a council of war at Derby he might have been crowned King of England—for a time at any rate. In my belief the Chancellor of the Exchequer is responsible, and it is for him to act on his own responsibility. Neither Gresham, Cromwell, Cavour, Bismarck, Lord Cromer or Mussolini called the pundits to their assistance when they successfully carried the countries of which they were in charge from financial chaos to prosperity; and I do not suppose any one of them could have passed a Civil Service "exam." Most of them were plain country squires or soldiers, with judgment and balance and a sufficient amount of determination to carry through their convictions; and they did it. The responsibility must rest on the man responsible, and it is for him to act. If Sir Montagu Norman says he cannot do it, it is for the right hon. Gentleman to say, "Aye" or "No."

This question is as old as the hills, as old as the Parable of the Talents, it is older than the fable of Midas. Unless nations take action the result is bound to be what it has always been. The creditor countries accumulate all the gold and get financial indigestion, and the debtor countries starve and pull in their belts, until as has been repeatedly the case in the past, somebody short of cash, but full of what our American cousins would call "pep," like Alexander or Titus, or Jenghiz Kahn or Drake comes in and takes the gold from where it has accumulated and spreads it about where it can be put to a more economic use. It would be a somewhat drastic way of dealing with the situation, but I am not sure, if matters are allowed to drift, that such a course of action may not again be followed. The fate of Persia, the fate of Jerusalem, the fate of Bagdad and the fate of Spain might quite easily befall the United States of America as a result of the accumulation of gold. There would be growing popular discontent, official supineness and corruption and racial hatreds, resulting in civil war and revolution, so weakening the country that their neighbours, whether they might be Mexico or Japan, or even Canada, in the future, might produce an Alexander or a Jenghiz Kahn who would right the situation—if civilisation had got to such a pitch of supineness that it was unable to find a more reasonable and a more economic way out. What has happened before will inevitably happen again.

I have no doubt the Government have excellent reasons for their inaction so far. I hope they will give us those reasons to-night, but even if they convince us that their reasons for inaction are right, and that perhaps new gold strikes in Australia, in South Africa, in West Africa, in Venezuela, New Zealand, and Canada may result in gold coming to the debtor countries in such quantity that there is no need to take alarm or indeed to take action, I still have one suggestion which I would like to put forward. The point is whether this is not the right moment and the opportunity for us to reorganise our existing system of currency. I believe it was established in 1816. Is there any reason why a system of currency that was good in 1816 should of necessity be good in 1932? I have many objections to it myself. It is not flexible enough; taking sterling at its present relation to gold, there is not enough silver to the pound sterling for the ordinary man and woman in the street to use it for making purchases. Further, multiples of 20 and 12 are exceedingly cumbrous in calculations, and when we get down to the lower ranges we get that insufferable creature, which gives headaches to all schoolboys, the vulgar fraction.

Finally, there is no unity in the Empire. Wherever the American flag flies a dollar is a dollar, and you know it. Wherever the French flag flies, in all the French colonies and possessions and mandated areas, the franc is the franc and nothing else. Wherever the British flag flies, or wherever the flags of her Dominions fly, there is the most amazing variety of currencies and coins. If we call the Empire the British Commonwealth of Nations, let us at least start by having a common source of wealth.

My suggestions, which I hope will not weary the House are not very original, and they are not in a way very revolutionary: If we have an Imperial currency, I cannot see any reason why we should not have it based on the system which prevails in Egypt. It would mean producing a new coin, worth 2½d., the equivalent of the Egyptian piastre. We might revive an old English name and call it a "groat." It would be a nickel coin, although at the present price of silver, it could quite well be coined in silver and, for that matter, called a "shilling." It would be interesting to note what ale effect would be upon the purchasing power of the public. I have spoken to many experts on the matter, and I have not had the same answer from any two of them. If, in order to avoid controversy, we presume a nickel coin such as they have in Egypt, and then you would have the pound worth 100 groats, with coins of five groats, 10 groats and 20 groats, which would be called "shillings," "florins" and "crowns," respectively. The one groat would be equal to 2½d., two and a half copper coins, or 10 farthings, and thus the money would maintain the decimal system—farthings, groats, florins and pounds—without in any way upsetting our accustomed coinage. The only difference would be the disappearance of the half-crown, and I am not sure that that would be an unmixed blessing, and of the threepenny bit, whose place would be taken by the groat. If there were an outcry in Scotland, as I hear an hon. Member suggest, I would remind the Scottish hon. Members who are present that the groat would be doing the work of the threepenny bit and that when they put it in the plate on Sunday they would save a halfpenny on it.

Another scheme, more revolutionary, would be to make the unit a coin called a "crown" which would be equal to the Canadian dollar. It would be worth a dollar, and it would be printed in bills or minted in coins say the size of a 4s. piece, with a little platinum alloy in to bring it up to its true worth. There would be five of them in the pound, and the pound would be of increased value. There would be 10 silver shillings in each crown and 10 pennies to each shilling. That is a far more upsetting and revolutionary scheme, which might never find favour in England, although possibly it would in Canada. I think that the first-mentioned scheme, if such schemes are possible, would in a very short time be acceptable all over the British Empire and would make calculations far more simple than they are.

These suggestions may sound silly. I have been a young man now for a number of years, and I have become accustomed to hearing my suggestions called silly. I have also become accustomed to seeing them brought into operation by one of my elders and betters usually after two years have elapsed. I do not mind who on earth get the credit so long as the job is done. But at any rate, in making these suggestions, I am responding to the appeal which was made by the Leader of the Opposition the night before last. I am not sure whether he was appealing to. me, to the hon. Member for West Bristol (Mr. Culverwell), the hon. Member for North Bristol (Mr. Burnays) or even to the hon. and learned Member for East Bristol (Sir S. Cripps). We all pass as young men, even though some of us, or, as the Attorney-General would say, all of us, are getting on in years. Still, I suppose we do pass as young men. I do not wish to lay too much stress on the value of youth. I know quite well that there can be young fools just as well as old fools. I will reply to the right hon. Gentleman's appeal by quoting a couplet from an old Gloucestershire Cavalier song called "George Riddler's Oven," which runs: Let each mon zing in his owen please, And as Jarge'e wur the elder brother, Twer roight as 'e should zing the hems.

8.21 p.m.


I rise to-night, fully conscious of the old saying that fools rush in where angels fear to tread. I fear that I am an amateur on this highly technical subject of currency and monetary system. We have had two most interesting speeches, one from the hon. Member for Southampton (Mr. Craven-Ellis) and the other from a past Member for Southampton, who has migrated as far as Bristol. I do not propose to keep the House any length of time, but I want, if I may, to say that I do not regard this question as one that should be left to the expert. It is the duty of everyone of us, to the best of our ability, to unravel for ourselves what the expert and the pundit endeavour to keep wrapped in mystery, and to remember, as one wit has put it, that an expert is a man who knows much too much about much too little.

These things should he regarded from the very widest aspect. I have tried to give as much study as possible in the last six months or so to these matters, ever since we heard eloquent speeches by former Chancellors of the Exchequer urging us to do so, and I have come definitely to the conclusion that any attempt whatever to revert in any form to the Gold Standard, either at the old parity or at any new parity, while the state of the world is as we find it at the present time, with high tariffs, high nationalist feelings, war and inter-governmental debts and obligations, would be a major disaster, not only to this country but to the whole world. In a Utopian world, where every person's state was equal and people were equally gifted, no doubt universal Free Trade and the universal Gold Standard system would be the best, but no one can suggest that we have achieved that Utopia in the state in which the world now is.

On Monday that admirable national newspaper the "Times," published on the leader page a long letter from the right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George) explaining what had been said or had not been said in 1922 by the hon. and learned Member for Hillhead (Sir R. Horne). I felt that that was something on a par with what Mr. Gladstone said in 1885 or 1866, in the interest it would have for the bulk of the community, or at any rate for myself. On a back page of that newspaper on the same day, one found what I might describe as a, most admirable and lucid letter on the subject of the Gold Standard signed under the nom de plume of "Peregrinus." He started with a statement of so telling a phrase that I would, with the permission of the House repeat it. The Gold Standard,"— he said, is the ghost of Free Trade sitting crowned on the ruins there-of. We have been driven by the force of circumstances, somewhat against the will of many of us, from our position as a Free Trade country. In the view of the overwhelming mass of opinion in this country, our Free Trade position was no longer tenable in the world as we found it. I maintain that we must now abandon entirely the use or recognition of gold as a measure of monetary backing, for it has proved to be nothing but a mockery when used as a measure since the war, and especially during the last three years. Personally, I advocate something in the form of a managed currency, but I do not wish to go into that question here and now; I am not sufficiently acquainted with all the details, and I have no doubt that there are many in the House who are more qualified than I am to do so. I would like, however, to place before the House one or two points with regard to the present state of gold in the world, which I think are not sufficiently emphasised.

We all know where the great bulk of the gold lies—dead and buried in the vaults of Paris and New York; but I do not think everybody realises that, on the top of the mad scramble for gold which is going on all over the world in all countries which are endeavouring to bolster up and maintain their currencies, there is a huge speculative field in monetary exchange backed by gold. To take advantage of this field, enormous short-term balances are kept in different countries on a gold basis. It is estimated that these balances would account for at least a third of the total gold available in the world, and they are withdrawable, for the most part, at one week's notice. Obviously, if one-third of the whole gold in the world can be shifted from country to country at a week's notice, any stability is impossible; and the essence of the value of gold as a measure of value is that it should be stable.

I may be accused of flogging a dead horse. I may be told that no one in his senses at present advocates any return to gold. I may be told that we have had an admirable example in the last 18 months since we went off gold and assumed the leadership of what the right hon. Gentleman the Member for Epping (Mr. Churchill) so aptly described as the Sterling Convoy. It will be pointed out how, since we went off gold, things in this country have improved in a marvellous manner as compared with gold countries, and how our prices have remained steady when their wholesale prices were falling. I may, as I have said, be accused of flogging a dead horse, but I am grievously alarmed lest the Government of the United States of America may, in the forthcoming debt conversations, insist, as one of their conditions of wiping off a large portion of our debt, that we should revert to a gold standard system.

I would ask the Chancellor of the Exchequer—I was going to ask the Financial Secretary, but I regret to see that he has just left his place—whether he would not be doing his duty to this House if he gave a pledge that no such proposal from the United States of America should be entertained or considered in the slightest degree without the House having first an opportunity of debating it. I believe that the chancellor made a great mistake when the opportunity was offered to him the other day, on our paying our debt instalment in gold, of breaking with gold altogether by bringing in a new fiduciary issue bill. It might have depressed the pound, and I believe it would have been a good thing if it had. I would much rather, from the point of view of trade and employment in this country see our pound sterling valued to-day at $3 than at $3.30. I believe that one of the great dangers to our trade at the present time is a too rapid rise, rather than a fall, in the value of the pound in terms of dollars.

I do not wish to detain the House any longer, but would only say that I support the plea of the hon. Member for Southampton that we should be modern and bold in our outlook. We are, as he said, fortunate enough to have in our Financial Secretary what is known as a young man—there has been a great deal of talk about young men. Our last Financial Secretary was another young man, and I believe that our Chancellor of the Exchequer is, except, perhaps, in years, a young man also. I would enter a plea that we should take such steps as are necessary to do what I believe to be perfectly feasible, and that is to shake off the shackles of all Victorian and earlier ideas about these matters of currency, and to insist that currency should be the servant of mankind, merely easing the exchange of goods between country and country and person and person, merely aiding the prosperity and comfort and greater enjoyment of the population of the whole world. Instead of that, we are allowing ourselves to be bound hand and foot by the shackles of what I might describe as that miserable old yellow mockery, gold.

8.34 p.m.


I was very pleased to see this Motion put down, because it gives us an opportunity to discuss a question which I think is uppermost in the minds of most people to-day. We have heard a very remarkable speech from my Noble Friend the Member for Central Bristol (Lord Apsley). I did not know that he was such a keen advocate of the silver question. It is my belief that not only is it essential to guard against deflation, but it is also most important to broaden our monetary basis. I was very sorry that we did not see fit to increase the fiduciary issue to offset the American Debt payment. I should prefer to see sterling depreciate against the dollar rather than see any deflationary process take place in this country, even if it is only temporary. The fortunes of the country during the past year have improved out of all recognition owing to the Measures that have been passed by the Government to help agriculture and industry, but, if we are to get true prosperity back, I believe we have to face up to this question of currency, just as we faced up to the question of free imports not so very long ago.

I think it will he agreed in nearly all parts of the House that the one way in which we can restore into occupation the vast numbers of our unemployed is by raising wholesale prices and I would ask the House to consider how this can best be done. To my mind there seems to be two alternatives. One is a very painful one and a very slow process, continuing bank- ruptcy, not only in this country but all over the world, and not only individuals and firms but countries going bankrupt on an ever-increasing scale. I believe this will go on until production falls and once again the world's available monetary supply balances production in terms of economic prices. That will be a slow and weary process. If this course is pursued, it indicates a belief that there is over-production. I hold the converse view. I believe there is under-consumption, not that the market is not there but that the machine in its progress has outstripped the system of exchange.

What is the other alternative? Surely it is to work out a system of increasing the purchasing power by a method of currency reform. Surely that is not a problem that is beyond solution in the present stage of our civilisation and our knowledge of banking and commerce. I suggest that the times need, as times of difficulty always do, bold measures and that, as an interim measure, while other avenues are still being explored, we should broaden our metallic base by the inclusion of silver. It has many advantages and, although many arguments have been raised against it, I still remain unconvinced. The one that meets one more often than any other is that silver will be over-produced if you raise the price of the metal. If you look over the past 400 years, you will see that the ratio of the production of gold to silver has always remained more or less the same, namely, 14 ounces of silver to an ounce of gold, and even when the price of silver went. up to 8s. an ounce the production of silver was only 15 ounces in ratio to an ounce of gold.

But surely, after all, the production of silver is divided into two categories. One-third is mined from silver mines and the other two-thirds is a by-product. To my mind, the argument that you can get an over-production of silver is rather an incentive to include it in the monetary system, because, owing to two-thirds of it being a by-product, the more trade there was going on in the world, and the more base metal we could demand, the greater would be the increase in the production of silver just at the time when you wanted it to finance trade and industry. After all, it is a medium of exchange which is understood by the peoples of the East, as gold is not. I always thought it was one of the most retrograde steps when India broke that alliance with the metal which it had for generations in the past, and before the Commission which inquired and finally settled the matter evidence was given by no less a person than the present Governor of the Bank of England, who said it would be a very disastrous thing if that should happen which did happen after the findings of that Commission.

I was glad my Noble Friend referred to what was said by the Secretary of State for Dominion Affairs, that the trade of Lancashire had fallen owing to the fall in the price of silver and the decreased purchasing power of India. If we could only include silver in the monetary system merely as a temporary expedient to meet the difficult times that we are faced with to-day, we should see an increase in the price of that metal fixed at, say, half-a-crown an ounce, and at once you would stimulate purchasing power in the East. After all, if you can get the stream of trade flowing in any direction, it is a thing well worth doing, and I hope the Government will reconsider the matter. I know it has been a very thorny question in currency discussions in the past, and I am afraid the Government are not too sympathetically inclined, but I believe, if we take a bold line and do this, we should not be the only ones and we should be giving a lead to other countries.

8.45 p.m.

Lieut.-Colonel CHARLES KERR

I propose to deal with this question in rather a different way than that of former speakers, and, taking into consideration the very wide area that the question of monetary reform covers, I trust that I shall be in order in the points I am about to raise. I was very pleased that on rather an academic subject there should be a little joke brought in about my race. I am sure that the reference of the noble Lord was much appreciated by all Scottish Members of the House. We almost, I think, expected some joke during the evening about our race, and we really rather liked it.

I do not think that we need bother very much about the technicalities of monetary reform, because, in my view, the whole question has to do with trade and commerce, and nothing else. What is money? What ought it to be? It ought to be a temporary balancer. It determines price, it equates, it measures everything, the excess and deficiency of everything, and it is only through money that we can stabilise values. It appears, at the moment, that the whole situation has developed into an impasse. The gold of the world is becoming rapidly frozen harder and harder, and we have the bank deposits also becoming frozen. It will be within the recollection of the House that only a, day or so ago one of the chairmen of the five big banks mentioned the great difficulties which they found in utilising the money that was on deposit. It seems to me that whatever scheme is finally adopted with regard to monetary reform, if it is to be successful, it must be very simple. I find myself entirely in agreement with the Leader of the Opposition when he says, "These questions I cannot understand," and when one reads the opinions of the professors and gentlemen with heads the size of dining-room tables, one finds oneself quite nonplussed by the difficult and very complicated ideas which they all seem to put forward. Therefore, I feel that if it is to be a success, it must be simple, so that a simple soul like myself—I was called a simple soul from the benches here the other day—and the man-in-the-street can understand.

One of the great troubles with regard to gold is that it has been used lately, not in the sense in which it was intended, but as a commodity. It has been used in the place of commodities, and therefore we find that the gold standard system, I make bold to say, has completely broken down. We find, as the commodity value of gold rises, that there is more poverty and less consumption. It would appear that we have let money become our master, instead of which, undoubtedly, it ought to be our servant, and nothing else. We are told that conditions are worse in other countries than they are here. It is almost impossible to contemplate things being as bad here as they are in other countries. We, being a country dependent for our sustenance to a very large extent upon foodstuffs from outside, would find that, whereas other countries can feed themselves even at the worst, we should very quickly be in a state of starvation. I believe that we have to hurry to settle this problem.

For the moment I ask the House to allow me to give one or two very simple figures, Which are probably well known to us all, as an illustration of what I mean. In 1924 our trade figures, including imports, exports and re-exports, were £1,732,000,000, and in 1932, on the same basis of values, they are down to £1,440,000,000, a difference, or a reduction in volume, of £300,000,000. The Government have been forced into making temporary restrictions with regard to imports into this country. I think that they had to do it to avoid complete collapse. But what is the effect of the restrictions? It means that, although we may balance, we balance on a reduced volume, and as the reduced volume takes place, so you get an expansion of unemployment. Therefore, I feel that this question is of vital importance, and ought to be tackled at once. Let me instance the report of the Peninsular and Oriental Steamship Company. For the first time for 50 years they had to pass their dividend. We read the remarks of Sir Alan Anderson at the Orient meeting as to the deplorable state of affairs in shipping. That shows the gradual shrinkage in volume of the trade of the country.

What is the solution? How can we attempt to rectify the position? We hear a lot about raising prices. How is it possible to raise prices without inflation of some kind? I think that that is bound to come, and if we raise prices, or if anybody is enabled to put forward any scheme by which prices are raised, and we do not get an increase in consumption, then we shall bring about the most appalling suffering, and add to the suffering which is at present in existence. If you try to raise prices without inflation, it is the same thing as trying to fatten a herd of cattle without giving them more food. You must feed, as far as I can see, with inflation. I want to say a few words about inflation. We all are aware that there are three types of money. There is metallic money, paper currency and credit money, and equally, as there are three types of money, there are three possible ways in which we can inflate. France and Germany have tried paper currency inflation, without very much success. I do not think we want to embark on that. America has tried credit money inflation, and I find there a disastrous state of affairs that we do not want to get into. Therefore, I come back to metallic inflation, and here I believe that silver is the one hope. If we have inflation by silver we shall have it controlled by nature, and it seems to me that that is a, far safer method of inflation than by a method which may be completely uncontrolled, as we have seen already by the printing press, or by credit money which we are seeing and have seen in America. The monetisation of silver is a question that should occupy, and I have no doubt is occupying, the earnest and serious attention of the Government, and that with a view to inflation.

Let me, on the question of silver, remind the House that the population of the world is, I believe, 1,849,000,000. Of that number, 820,000,000 are people who are on a silver currency. Does not that bring a thought to one's mind? Here we are, the largest consumer in the world, and we are the most important market to the countries that produce the things that we want. Our market is vital to them. Therefore, we are in a splendid position to call the tune in regard to this question. But inflation will not help unless it reaches the consumer. What it really means is that we have to get the money into the pockets of the people. How can that be done? What does a merchant do when he wants new customers? He looks about and sees where he is likely to find them and how he can possibly help them to become customers. Naturally, the merchant looks to the East, to the 820,000,000 people, almost half the world's population, and he says: "There I see this vast number of people on silver currency. If I could only put them in a position of good credit and enhance the value of their currency, I could find customers galore." These countries require further development and are crying out for it, as we have heard to-night. It is well known that when the rise in the price of silver took place orders began to come in from the East, from those 820,000,000 of potential buyers. This is, therefore, a question that deserves the most careful consideration.

I saw in the Press the other day something which I regard as a great danger. It was a statement that these vast areas within our Empire are undeveloped, while other people who are living in a congested state are beginning to say: "Is it right that one nation should have these vast areas and do nothing with them, when we are suffering from overpopulation?" From that point of view we must try to induce those 820,000,000 people to buy and to develop the countries that they live in. What would happen then? Through these people we should get our rise in prices in a very natural way. They would begin to do business with us and we should begin to employ our unemployed people here. Consumption would begin to increase, and there would be no manipulation about it at all. It would come in the ordinary course of business, which is the soundest way that it can come. If it comes in any other way it will not last, and it will not be safe. I believe that that would go a long way to solve the terrific problem which has baffled us all for so long.

We have colossal methods of production, we are capable of almost everything, and there are millions of willing purchasers of goods without the means wherewith to buy. I believe that through silver and through inflation through silver we could start the ball rolling. What, is really wanted is to eliminate as far as possible money function. Let us get to work and try to get more of the exchange of goods and leave money out of it altogether. The volume of trade must be increased very soon, otherwise this country more than any other country in the world is going to suffer far worse than she has done up to date. Do not let us try to balance down, but let us try to balance up. In conclusion, I would say, open your ports to all reciprocal trading. Put a duty on all surplus imports, but open your ports freely to all reciprocal trading. It seems to me that that step, combined with inflation through silver, would bring back the prosperity we are all longing for. I should like to add one further word, and that is that I feel very strongly that in any future League of Nations loans or any loans by this country to another country should carry with them the obligation that it should be conditional on the borrower reducing tariffs.

9.4 p.m.


I believe it to be customary that about this stage a speaker from this Bench should intervene and define the attitude of the Government towards the Motion that has been moved. The House is indebted to my hon. Friend the Member for Southampton (Mr. Craven-Ellis) for having initiated a discussion on a subject of such interest. The Motion appeared to be clear when I read it first, but I could find little relation between it and the arguments of the Mover and Seconder. One of them desired to abandon gold altogether, but the other thought that there was not enough gold and that silver and platinum should be added to it. Although it was, indeed, a very vivacious and instructive speech which the Noble Lord gave, I was unable to understand why he should choose this Motion upon which to make it.

There was, however, one point of contact, and I think only one, between the Mover and Seconder of the Motion. They both held the view that our present monetary system does not provide a sufficiently adaptable basis of credit. To what extent can that contention be sustained? I would remind the hon. Member for Southampton that this country is no longer on the Gold Standard and several provisions which he thought still operated have been abrogated. The only relevant Statute in this connection is the Currency and Bank Notes Act, 1928. By that Act the Bank of England issue of notes is made against a basic amount of securities and a fluctuating gold holding. If at any time the Bank thinks that the legitimate requirements of industry cannot be satisfied they are at liberty, indeed it is incumbent upon them, to request the Treasury to extend the fiduciary issue.


Is the percentage of gold laid down in that Act?


No, Sir. The provision is as I have stated. It is the gold which is fluctuating. The fiduciary issue, which is basic, may, upon the application of the Bank of England, be extended, and hon. Members will recall that at about the time when we left the Gold Standard is was in fact extended from £260,000,000 to £275,000,000.


That was before.


At any rate, it was about that time. There you have a flexible system par excellence.


The Financial Secretary talks about flexibility. Will he tell us any other times since 1844 when the fiduciary issue has been altered?


This Act was only passed in 1928 and, therefore, nothing done under it could have been done except after that date. The Act makes the provision upon which our currency is based; and it is based according to the principles I have enunciated—the Bank of England may make an application, and have in fact made an application, for an extension of the issue.


; Will the hon. Member allow me for the sake of clarity? The suggestion is that it is a flexible system. The hon. Member will agree that until the passing of this Act there were no means at all whereby the fiduciary issue could be increased; it is the first Act since 1844 which has made it possible for the fiduciary issues to be increased. As he says, it was increased from £260,000,000 to £275,000,000.


The hon. Member will forgive me for saying that his remarks have as little to do with the case as the flowers that bloom in the spring. We are dealing with the actual situation. Surely he does not dispute that this Act makes the provision I have indicated. It was not on the Statute Book before 1928. There need be no dispute between us on this matter. This is the Act which the hon. Mover of the Motion is inviting us to repeal. It is true that from time to time there are changes in the gold holding of the Bank of England, principally owing to our commercial requirements, but that does not in the least interfere with the flexibility of the issue, and the fact that there was a gold holding under the provisions of this Act in the Bank of England proved to be of great utility on the 15th December last, when we were able to make the payment to America with so much smoothness.

My hon. Friend before he destroys this Act will have to show that there has been a restriction of credit. Far from there having been a restriction of credit there have been almost constant expansions of credit. Every index of credit has been mounting for some time. The gold holding of the Bank of England has risen between the 11th May and the 14th December from £120,800, 000 to £139,400,000; an increase almost equivalent to our payment to America. The notes in circulation have increased from £358,000,000 to £372,000,000. Bankers' deposits have increased from £78,000,000 to £86,000,000, and cash of the London Clearing Banks has increased from £179,000,000 to £193,000,000. It does not appear that there is any restriction of credit there; it appears to be notoriously abundant. Confronted with these facts, the hon. Member who moved the Motion, like some hon. Members who have followed him, expressed apprehension that if credit has not been restricted it may be restricted in the future. He passed great strictures on the speech which the Chancellor of the Exchequer made last week. There is, as a consequence of our payment to America, no restriction on the notes in circulation, no restriction whatever, but there is, of course, a reduction of £20,000,000 of notes in the banking department.

In the place of this asset the bank has another asset, namely, Treasury Bills. Intrinsically, therefore, there is no reason why credit should be restricted having regard purely to that book-keeping arrangement. Further, the Chancellor of the Exchequer pointed out that there was plenty of slack, that there was, in fact, and had been for some time an abundance of credit. One asset is replaced in the Banking Department by another. The Chancellor of the Exchequer did say that there might be an increase in the Treasury Bill rate, which has been low for some time; and the hon. Member has referred to the slight increase which has already taken place. He did not give us any credit for the reductions in the past, and an increase in the Bill rate is not unusual about this time. What the Chancellor of the Exchequer had in mind was the effect of a reduction of £20,000,000 of notes in the Banking Department on foreign opinion, and he was prudent enough not to ignore that the effect might be that foreigners would sell sterling, for they would be able to see from our banking return that the proportion of notes held against liabilities was diminishing. But in point of fact—and it is further important evidence of the respect in which the financial system of this country is held abroad—instead of selling sterling they have been buying sterling, and therefore the worst which my hon. Friend anticipated has not happened. If what my hon. Friend anticipated had happened, the Bank, in order to strengthen its position, might have allowed some of their Treasury Bills to run off or might have refrained from renewing certain of their holdings of Treasury Bills.

I have dealt with what has happened and what might have happened. But there has happened nothing which would entitle my hon. Friend or any Member of this House to say that this Government and the monetary authorities have embarked upon a policy of restricting credit. There has been no restriction of credit. As far as I understand it, it is not the intention of the monetary authorities to restrict credit. Indeed, the difficulty of to-day is not the provision of credit, but its absorption. Having exploded to his own satisfaction, as my hon. Friend did in his full and well-documented speech, the present monetary system of this country, I waited in vain to know what he would put in its place. After all there is a system, a pliant system, a system which has worked in very difficult circumstances. My hon. Friend talks about our affection for gold and talks about the monster gold, but he did not say what was to be put in its place. He was not satisfied with calling our system a bad system; he called the Bank of England a bad bank; he was suspicious of its whole direction; and he addressed to me a number of questions regarding the management of that institution which I will answer. But I would remind him that the Macmillan Committee recommended that the controlling authority of the monetary system should be the Bank of England. They said: It is not necessary in this country, as it was in the United States before the War, to create a new organ for the centralised control of the monetary system. For we have in the Bank of England an excellent instrument for the purpose; independent of political influences, yet functioning solely in the public interest; with long traditions and experience and clothed with vast prestige, yet not distrustful (as we have learned in evidence) of evolutionary change or hesitant of new responsibilities; entrenched in the centre of the struggle for profit and with access to the arcana of the market, yet itself aloof and untinged by the motives of private gain. That is what the Macmillan Committee said—a Committee composed of members of every political party and of representatives of every financial and indus- trial interest. Now, asks my hon. Friend, will I tell him whether this Bank of England is in the hands of foreigners or in peril of becoming so. I will tell him. The Bank of England, of course, belongs to the proprietors. He asks me who the proprietors are, and the answer is that they are the shareholders. The Bank of England belongs to the shareholders, and it was given in evidence before the Macmillan Committee that the amount of stock held at that time by foreigners, as estimated from registered addresses, was about £57,000 out of about £14,553,000. I do hope, therefore, that any fears that my hon. Friend had will be assuaged.

The next question he asked me was, whether there could be votes given by proxy. This is my reply: Votes can be given only at personal attendance at the General Courts. In the case of a joint account the holders may appoint one of their number to vote, but apart from this provision proxy voting is not allowable. That is the institution which is charged with the management of our monetary policy. My hon. Friend attacked the policy but suggested no substitute. He attacked this institution and again failed to suggest any alternative. My Noble Friend who seconded him was apparently satisfied with the institution but dissatisfied with the Motion to the extent that he did not wish completely to do away with gold, but he wished to add silver to it. I feel dispensed from entering into the bimetallic controversy because there is no reference whatever to it in the Motion, and it would be better that the House should debate that substantively. Indeed speeches have been made upon it in a previous Debate. My right hon. Friend the Chancellor of the Exchequer made a long declaration upon it. He expressed the thoughts that were in his mind as recently as 8th November last, and he did say, as my hon. Friend recalled, that he had no desire to be dogmatic. After all, this matter may be raised at the International Conference. I hope that I have satisfied the House that there is nothing, at any rate in our monetary policy, which indicates any prospective intention, or any intention at this moment, to restrict credit, but on the other hand that our policy has been to provide cheap credit, and that has been made possible by our conversion operations.

There is another reason why we should not completely do away with gold at this moment. We are about to enter an international conference, and one of our tasks at that conference will obviously be, in conjunction with the other Powers, to devise some satisfactory standard of international exchange. My right hon. Friend gave the assurance for which my hon. Friend the Member for Sowerby (Mr. McCorquodale) asks when he said: We must make it clear that we have no intention of returning to the Gold Standard unless we can be thoroughly assured that a remedy has been found for the maladjustments which led to the breakdown of that standard last year. It would be useless for the countries now on the sterling basis to revert to gold if the fundamental conditions—economic and political, as well as monetary—had not been so changed as to obviate the risk of a fresh fall in gold prices. Before we change our present basis we must be sure that the change can be maintained, and that we shall not have to do our work all over again in a few years' time. That is what my right hon. Friend said at Ottawa, and he added: We do not see any prospect of a speedy return to the Gold Standard, nor are we prepared to say at the present time at what parity such a return should be effected, if and when it takes place. It is not in any sense ruling out a possibility of return to gold, and indeed it would be imperative to discover some satisfactory international standard, but the problems to be solved, of the maladjustments to avoid in future, ale not only monetary; they are political and economic.

That brings me to the second part of this Motion, and shows how inappropriate it would be to refer to a Select Committee, with Terms of Reference such as these, the problem which my hon. Friend has raised. Its terms would limit such a committee. The problem is not a purely monetary problem. It is, as my right hon. Friend has said, political and economic as well. But there are other reasons why a Select Committee should not have this matter referred to it. Those reasons are not because the Government dissent from the objective which my hon. Friend has in view. He wants it to make recommendations for a new monetary system which will ensure, in its national aspect, a stable internal general price level. Every monetary system must have that as an objective. We desire, of course, to maintain a. stable price level. The only question is, what is to be the level? We want, of course, as has been stated from this bench on many occasions, to raise the wholesale prices of commodities and, having raised them, to keep them on a stable level. Then my hon. Friend's Motion goes on: in its international aspect, stable exchanges Certainly, in so far as a country can unilaterally take measures to preserve its exchange, we have done so by establishing the Exchange Equalisation Fund, but it is only as the result of some agreement reached at an international conference that you can reach a standard of values which will keep your exchanges firm. So the objects which my hon. Friend has in view are the objects of all monetary policies, but if at this time we were to refer this matter to a Select Committee, we should create dismay in the world. We are now engaged on the Preparatory Commission for the World Economic Conference. We are going there in concert with other nations, having heard their arguments as they will hear ours, to discover and agree upon the kind of standard that is desired. No Select Committee can replace an international conference. Whatever a Select Committee recommends would apply to this country only. If we did establish such a committee one of two things would happen—either everybody would go into it with his mind made up, just as my hon. Friend has made up his mind and has also made up the minds of the committee, or they would go there to hear evidence. If that Select Committee heard evidence with the same thoroughness as the Macmillan Committee did, they would be sitting for a year and a half. Really, we cannot hold up the affairs of the world in that way.

We have recently had a most exhaustive inquiry by the Macmillan Committee which heard every possible idea, ancient and modern, that could be put before it on monetary policy, and it closely examined all these theories. Surely my hon. Friend would not suggest that we should so soon reopen the whole matter? I trust I have said enough to show why the Government cannot accept the Motion, though the House must be indebted to my hon. Friend for having promoted a Debate on so useful a topic, and for having provided the House with so many facts. We cannot accept the Motion. There is on the Order Paper an Amendment which says that the time has not yet come for a review of the problem which the Macmillan Committee undertook. The Government have no reason to dissent from that Amendment and, if it is proposed, I would suggest that the House should accept it.

9.30 p.m.


I beg to move, in line 2, to leave out from the word "House," to the end of the Question, and to add instead thereof the words: is of the opinion that, in view of the comprehensive inquiry of the Committee on Finance and Industry whose report was published in June, 1931, it is not necessary for the Government to seek the guidance of any further committee in order to arrive at decisions on the future monetary policy of the country. On very material questions the Minister has stated the main ease for my Amendment, namely, that the whole matter has been exhaustively investigated and, in the circumstances, there is no need for a fresh investigation. Quite apart from that, I do not think at this moment the Government's hands should be tied in any decision that it may have to take at short notice. If there were another committee, their hands would be tied and, therefore, quite apart from the argument of the Minister, I think there is an overwhelming case against remitting this question to another committee. The discussion to-night has been interesting and, in the language of the Football Association, more a friendly than a League match, because there has been a curious diversity of view. People supporting the same cause have differed violently, and I have not the slightest doubt that my hon. Friend who seconds this Amendment will in some respects differ from me, because I believe he is an advocate of bimetallism, and I am rather doubtful on the subject.

We have been asked to-night to support certain causes because the advocates were young. Youth must be served Youth is the one disease which has a certain cure. Because somebody was born in the days of Queen Victoria, it does not follow that what he has said is wrong. The real argument for or against anything does not depend on who said it, but on the merits of the argument itself. Therefore, while it may be said that youth must be served, and that one must not be tied to Victorian shibboleths, it does not prove anything at all. Some people have urged in the Debate that we should have a bimetallic system, They, first of all, pointed out the great desirability of having a measure of inflation. A measure of inflation means, of course, as I have pointed out previously in this House, that a given amount of gold will exchange for less goods. The very same people urge upon us the desirability of bimetallism on the ground that they want to increase the purchasing power of silver. In other words, they want silver to buy more goods, and to have deflation in India and China. They say that deflation for India and China would make the world prosperous, and that inflation in Britain would make the world prosperous. Their argument for bimetallism may be right, but it cannot simultaneously be associated with the arguments for currency inflation in this country.

I would urge the advocates of bimetallism to devote a little more original thought to the subject and not just calmly to repeat the statement—which is not true—that throughout the ages there have always been 14 ozs. of silver produced to an ounce of gold. If there had, it would not have mattered. It would mean that the aggregate value of gold produced in a year is equal to the aggregate value of silver. It is equivalent to an assertion that the aggregate value of tomatoes produced in a year is equal to the aggregate value of caviare. It is sheer economic nonsense to say that the price of any two commodities depends solely on the aggregate quantities produced. It is to assert that there are only two commodities produced, and that they must be exchanged. That is perfectly dreadful economic nonsense.

The Noble Lord who seconded the Motion quoted from a pamphlet by Lord Desborough. Lord Desborough equally quotes a thing and everybody goes on accepting it because somebody 50 years ago said it, and nobody has ever troubled to examine the truth of it. Therefore, if bimetallism be argued, it must be argued on grounds which have intellectual merit. On the eve of a day which is of great interest to many people, namely, 12th August, 1919, Sir Auckland Geddes, then President of the Board of Trade, moved, "That the Bill be now read a Second time." The Bill was the Profiteering Bill. This is a generation which desires that youth shall be served. In 1919 this House was engaged in active debate, for the purpose of trying to defeat the normal consequences of inflation. It amazes me how some people appear to have forgotten recent history and the deplorable series of industrial disputes which followed the end of the War—ninetenths of which were due to the diversion of relative values owing to the gigantic inflation which took place during the War. Now we are asked to repeat the folly of 1919 on the ground that the people who advocate it now, were not quite as old in 1919 as they are now. They have not studied the things which happened then and have merely observed the troubles arising from the fall of prices following the Wall Street collapse of 1929. In considering such a subject as this we must not take only the history of the last three months. We have to take a wider view.

I move this Amendment for many reasons but not least because the Macmillan Report has furnished us with what I think is an admirable solution of our problem, a solution which is I believe capable of reconciling the conflcting interests of those who want a much more elastic system and those like the hon. Member for East Edinburgh (Mr. D. Mason) who remains faithful to the Gold Standard. sans phrase. The hon. Member for East Edinburgh believes in it really because he is an honest person and thinks that all debts ought to be paid in the currency in which they were borrowed. But the bulk of the War Loan was borrowed in legal currency or legal tender, which was nothing but paper, its value having no merit at all except that the Treasury saw to it that there was not an unduly excessive issue. We went off the Gold Standard in 1914 and every penny that was borrowed for the War was borrowed on paper currency and, that being the case, no question arises as to honesty or dishonesty. You can say that we borrowed one loaf of bread and are paying back two or three, but you can make no case on the ground of high honour and morality against having a different standard of prices. Though I agree with him on many other things, I differ from the hon. Member on this matter, because I think he has overlooked a fact of great importance.

What did the Macmillan Committee recommend? I think a large proportion of the Members who have spoken to-night have not devoted as much thought and study to that report as they might have done. As the Minister said, the Committee supported the conception that the Bank of England should be a private enterprise. The present Prime Minister and Viscount Snowden in 1924 were primarily responsible and rightly responsible at the London Conference which followed the Dawes Report, for enforcing upon Germany that the Reichsbank must he a private institution, because they had seen the deplorable results which followed in Germany from State control of the monetary system. It is realised that a successful central bank must be as free as possible from political considerations, and therefore it is vital to set up private institutions of such a kind as will consider the public interest impartially and dispassionately. Those who read the Macmillan Report and in particular pages 106 to 160, will find a description of the kind of central banking system which we ought to have.

Many people now deplore what they call the return to the Gold Standard in 1925. But we did not return to the Gold Standard in 1925. We returned in 1925 to the Gold Exchange Standard which is quite different from the pre-war Gold Standard. Most of those who deplore the return to the Gold Standard are deploring the wrong thing. What they ought to deplore is the decision taken in May, 1919, to abandon support of the dollar exchange, to leave the exchanges to look after themselves, and simultaneously to carry through a restriction of the Treasury note issue—and it was a Treasury note issue in those days—bit by bit, so that ultimately we should restore sterling to its old gold parity. That policy, rightly or wrongly, was pursued by the Coalition Government, by the Conservative Government which followed, and by the Socialist Government which followed that again. There was hardly a Socialist speaker during the period from January to October, 1929, who did not, with pride, justify the existence of that Government by showing how British credit had improved during its period of office. They rejoiced in the fact that sterling had appreciated in terms of dollars.

As a matter of fact, the first six months of that Government was a period of considerable prosperity. There was an improvement in trade. It was only after that Government had been six months in office that evil followed from their bad policy. In the first six months they were dissipating the heritage which they had acquired from their Conservative predecessors. Viscount Snowden, then Chancellor of the Exchequer, faithfully pursued the policy of deflation inaugurated by the Coalition in 1919, and when the right hon. Gentleman the Member for Epping (Mr. Churchill), on 28th April, 1925, announced the restoration of the Gold Standard, that was not the important act. The important acts had been taking place over the previous six years. The final pegging of the exchange was a very good thing. It meant deflation coming to an end. And, was the period 1925 to 1929 a period to justify anybody in saying that that act of restoring the Gold Standard had been a failure? Between 1925 and 1929 industrial production in this country expanded by 10 per cent. and the number of people employed increased by 750,000. In 1929 there were at work in this country more people than had ever been at work in its history and in many industries production was at a far higher level than was ever known before. Those who say that the restoration of the Gold Standard in 1925 was a mistake are condemning the wrong thing. They ought to condemn the long period of deflation from 1919 to 1925. I believe in a Gold Exchange Standard, and I think that this country would have been wiser had we returned to the Gold Standard at a lower rate of parity than that which we adopted in 1925.

What is the comment of the Macmillan Report on that matter? They considered a recommendation—and remember we are now talking of a time before the crisis of the autumn of 1931—that there should be devaluation in order to regain those advantages of which we had deprived ourselves. They pointed out that however desirable it might have been to restore the Gold Standard at a lower parity, once it had been restored the arguments against devaluation as a. policy were overwhelming. It is in that respect and only in that respect that the Macmillan Report is out of date. Devaluation was forced upon us not through the maldistribution of gold—in that, I differ from the Minister—and not through the maladministration of the Gold Standard. We were forced off the Gold Standard by a combination of three reasons. There was the fact that we had not been balancing our Budget, which had nothing to do with the administration of the Gold Standard. There was the fact that there had been a general crisis, and finally there was the fact that a mutiny had occurred in the Navy.

It is no use blaming on the maldistribution of gold the fact that we were pushed off the Gold Standard in September, 1931. The question is have we gained or lost as a result of having been pushed off the Gold Standard? Has our employment increased? Most Members of this House were returned on the basis that they were to defend the Gold Standard. I was not, because my by-election came when people had forgotten all about it, and therefore I have a greater measure of electoral freedom than most of the hon. and right hon. Gentlemen whom I am addressing. They said all sorts of things on the platform. [HON. MEMBERS: "No."] I know we had been pushed off the Gold Standard before the election. Nevertheless, you were still explaining to the people, all of you—[HON. MEMBERS: "No."] You do not know what I was going to say. You were still explaining to the people that it was a vital necessity to balance our trade, because if we did not there would be an enormous enhancement in the price level. There was not a single Member of this House who was not expressing (that fear at that time. [HON. MEMBERS: "No."] If hon. Members do not believe it, let them read up the reports of their speeches in the local newspapers. The extraordinary thing is that that enhancement of the price level has not happened. It is said: A prophet is not without honour, save in his own country. I want to get a little honour in my own country, which for the moment is the House of Commons, because on the 9th June, on the Report stage of the Finance Bill, I drew attention to the fact that, curiously enough, our being off the Gold Standard had not had, as everyone had anticipated, the effect of a rise in prices in this country, but that it had led to something much worse; it had led to a depression of gold prices, of prices measured in gold in other countries.

At the time that I said that—and this is where I claim credit for myself—nobody else had said it, and on the basis of that fact I urged the desirability of there and then returning to the Gold Standard at the then existing value of our currency, because I wished to support commodity prices throughout the world. I was convinced that if you allowed the depreciation of our exchange rates to continue, you would inevitably depress the level of prices in the world outside, and by so doing you would throw more people out of work. What I said then, everybody says now. It appears in the Note sent by His Majesty's Government to the President of the United States. A popular London newspaper, which for a year, in a paragraph on its front page, under the heading, I think, "What the Wondering World Says," used to classify among the favourable items a depreciation in our sterling exchange, now classifies it under the unfavourable items. The outlook has altered, and people realise that a continued decline in sterling exchange is a very bad thing for the employment of people throughout the entire world.

Therefore, we want to get the stability of exchanges, because it is only when we get that, I believe, that we shall lead the world back to prosperity. The Macmillan Report points the way. It points out, quite truly, that on a Gold Exchange Standard gold does not exist to back the note circulation. There is very little connection with the note circulation. It does not exist for that purpose; it exists for the clear and definite purpose of linking our currency to the currencies of other countries. It is a link, not a backing. That has been so little realised that in every Gold Exchange country in the world they have either got a fixed fiduciary issue, as we have, or a percentage ratio. Of the two, the percentage ratio is the worse, but the fixed ratio, which we have got, is unsatisfactory. It is true, as the Financial Secretary to the Treasury has pointed out, that Section 8 of the Currency and Bank Notes Act, 1928, provides that the Treasury, on the application of the Bank, can sanction an increase in the fiduciary issue, but they point out, quite rightly, that that is not quite the thing we want.

That, in fact, was not quite the thing that the Government of 1928 intended, and I ask hog. Members to read the speech of the late right hon. Sir Laming Worthington-Evans, who took part in the Second Reading Debate—a part of it is quoted in the Macmillan Report—which is to be found in the OFFICIAL REPORT of 14th May, 1928, columns 744–6. He was one of our great experts on this subject, and he quite clearly visualised a very elastic system, but the Bill which he was supporting was not as elastic as he desired. The Macmillan Report says that under a Gold Exchange Standard you must have a large sum of gold in reserve, so that you can meet the seasonal fluctuations which come. Every autumn we need something to pay off our temporary excessive indebtedness, and during the other months of the year other countries have to liquidate that.

You must have some commodity that everyone will take; if you take gold, copper, brass blocks, or tin wire, you must have some commodity in universal demand that people will accept without question in settlement of temporary indebtedness, and it is no good saying you can introduce great supplies of paper. You will not get countries abroad to accept our Treasury bills, at a time of difficulty, as a satisfactory liquidation of temporary balances. They say, "No, it is only paper, and that is a promise to pay, which may be repudiated. An act of war may make it impossible to honour it." They want something which to them has an effective value, and gold is valuable, not because it is a metal, but because it is very difficult to get. It has a commodity value, and over a long period of time the commodity value of gold determines its price in terms of other commodities. The periodic fluctuations may be due to purely monetary causes, but the long period value of gold is due to the relative effort needed in its production with the effort needed to produce wheat, barley, oats, butter, or whatever else you like. In the long run, gold comes into the world as a commodity. It only becomes money later on, and its value as a commodity in the long run will determine its money value.

The Macmillan Report recommended that with great freedom the Bank should visualise gold going out, and should not take much notice of it, if they knew it was only due to normal, seasonal causes, that they should not regard it as abnormal provided a minimum of £75,000,000 was retained as an impressive thing to create confidence. It would be a psychological thing, the £75,000,000. At the other end, they recommended that the upper limit of the fiduciary issue should be a limit so much higher that it was improbable that it would ever be reached; and they went on to recommend that the Bank of England should have freedom to move inside this very large limit without the necessity of going to the Treasury. Supposing it was announced a week from now that the Bank of England had asked the Treasury to sanction a £20,000,000 or £30,000,000 increase in the fiduciary issue, everybody would say, "Something has gone wrong." But if normally you are doing these things, if normally you let your fiduciary issue expand and contract as the circumstances of industry call for it, you avoid those troubles.

The Gold Standard has not existed in this country since August, 1914. We have had a Gold Exchange Standard, and we have to pass our legislation on that Gold Exchange Standard, which economises the gold at the disposal of the world. The world to-day has the largest glut of gold it has ever known. I agree that it is maldistributed, but the last three years have seen the largest production of gold the world has ever known, not only gold from the mines, but gold from the hoards in India. There is no prospect, anyhow, at any level of prices which we are likely to get, of there being any shortage of gold within the lives of most of us. Therefore, we can return to a Gold Exchange Standard with the certainty that it will provide us with all the elasticity we want, and that it will provide us with the stability of exchanges we need; and the sooner we get back to a Gold Exchange Standard, the sooner, in my opinion, we shall not only stabilise but bring about some moderate increase in wholesale prices, without which it is impossible to obtain a general restoration of trade.

We have now had 18 months of managed currency, and I am not too happy about it. We have got most of the world on managed currencies, and most of the troubles of the world to-day are arising from managed currencies. If I could only get the hands of Governments off currency control in every country, the world would be more prosperous. And here to-night we have a Motion which, after all, is a proposal to restore the grip of Governments on currency. I am not prepared to trust Governments with currency, not even if I was the whole Government myself. I do not believe it possible politically to control a currency system without danger. Plenty of people have tried it. Charles I lost his head over it, as I have pointed out on a previous occasion; Louis XVI died for the same reason; and in those circumstances I do not wish to emulate their examples, nor do I wish anybody else to be put in the same degree of peril. I hope that His Majesty's Government will at the earliest moment, if circumstances justify it and it is reasonably sale, restore the Gold Exchange Standard, that they will persuade the rest of the world to restore it, and that we shall operate it with that degree of elasticity which was so clearly explained in the Macmillan Report. Having had the splendid investigation and the clear views of the Macmillan Committee as to how we can get an elastic system of currency, I am of opinion that there is no need to have another body to do the same job.


I beg to second the Amendment.

9.56 p.m.

I support the Amendment in opposition to the Motion because I believe that whatever reason there may be for a weak minority Government to adopt this method of delegating functions to committees, however select they may be, the method is all wrong. It would be disastrous and dishonest at the present time for a Government such as the present Government, with such an overwhelming majority and such a wide mandate, to adopt the methods so abused by the previous Government, which was responsible for setting up 75 or 80 committees of various kinds to deal with problems with which they themselves should have dealt or they should have had the honesty to say that they were incapable of dealing with them. If this Government or any other Government wants material on which to base their opinions, they have ample material in the excellent report of the Macmillan Committee on Finance and Industry. That committee sat for no less than 22 months examining evidence of experts in industry and commerce, and they give no less than 54 pages of their report to this question of currency. If they want more evidence on which to base their opinions, they will find it in every Government Department. The archives, the shelves, and the desks of every Cabinet Minister and Under-Secretary are stocked full of reports of Royal Commissions and committees, select and departmental. Most of them are moth eaten, all of them are dust ridden; nearly all of them are forgotten, and most of them are unread.

For a Government such as the present Government to adopt the methods of shelving or delaying an issue which is of such vital importance to the country at the present time is wrong. That is why I am supporting the Amendment. I am not going to enter into the merits or demerits of bimetallism or the Gold Standard, because the more I hear upon those subjects the more confused I am. There is no economist or so-called expert in this country to whom I have not listened in the last two or three years, and no two of them have ever agreed on any issue which they have put forward. So far as gold is concerned, it seems to me that, while five countries adopt the present policy of hoarding three-quarters of the world's supply of gold in their vaults, there is no immediate prospect of this country returning to the Gold Standard, or any other country which has followed us off the Gold Standard returning to it in the very near future. There is no doubt that this hoarding of gold has had a great deal to do with the fluctuating and lowering of commodity prices, because it is obvious that, while there is such a shortage of gold in countries so highly commercialised as this country, it is impossible for us to follow that standard, whatever the level it may hold in exchange value throughout the world.

There is one point which the hon. Member for South Croydon (Mr. H. Williams) made. He agrees with the Gold Standard, but he does not agree with the standard of exchange value laid down by the previous Government. The Macmillan Report lays emphasis on the same thing. It says that the exchange value of gold in this country was unfavourable to our export trade, and that other countries such as France and Belgium, in returning to the Gold Standard, fixed their exchange value at such a level that it was favourable to their export trade. How can we know, whatever level we may fix the exchange value of gold in this country, that these other countries will not again alter the exchange value of that commodity in their own countries in order again to have it favourable to their export trade? It is not my intention to pursue this subject in detail to-night, because there are other speakers who are greater experts than I am on this subject, particularly my hon. Friend the Member for East Edinburgh (Mr. D. Mason) who, I am sure, is going to give us advice on this subject. All I rise to say is that I strongly oppose any appointment of a further Select Committee to deal with this subject at the present time.

I ask the Government, however, either on this occasion or on some early occasion, to tell the House what their policy is on this question. I was profoundly disappointed that more was not done at Ottawa on this matter. Some of us were very anxious before the Ottawa Conference took place that the question of monetary policy should be placed on the agenda. It was placed on the agenda, but what was done? We are told that a committee was set up and that that committee did good work and submitted their report, but so far there is no indication from the Government or any other source that any action is being taken whatever to improve the position with regard to either Imperial currency or international currency. While that situation exists, it seems to me that the benefits of half the work done at Ottawa have been nullified, because any preference which is granted between ourselves and the Dominions and Colonies is spoilt by the fluctuations of exchange values between the different parts of the Empire. I urge the Government to tackle this problem without abrogating it to any further select committee, and also to tell the House and the country at the earliest opportunity what their policy is.

10.5 p.m.


I gladly accept the invitation extended by those who brought forward this Motion to join in this discussion, and I feel grateful to them for having given us an opportunity of expressing our views, knowing in advance that we differ very much in. our views, but knowing also that no one wants to make any party capital out of the discussion. The hon. Member for the Isle of Wight (Captain P. Macdonald) disappointed me in seeking to make party points at the expense of the party to which I belong.


I included previous Governments as well.


The hon. Member spoke especially about the late Government and about the views of the Macmillan Committee which they set up. At this festive season I do not wish to be too controversial, and I approach this subject as one who is not an expert. I share the distrust which many Members feel for the opinions of experts on this subject. They have disappointed us so often. The Motion disappoints me because it does not go as far in the second part of it as I could have wished. In the first part it rightly states that the Government did a wise thing in going off the Gold Standard, though it should be remembered that the Government did not go off the Gold Standard willingly. We went off the Gold Standard because we fell off the Gold Standard, and the hon. Member for South Croydon (Mr. H. Williams) was quite justified in the remarks he made, because all the Members opposite were elected under the pretence that they were going to maintain the pound. Further, I hope that no one will do what the hon. Member for South Croydon invited them to do. I wish everybody a Merry Christmas, and it would not be a very merry Christmas for hon. Members opposite if they reread the election speeches of 12 months ago. They would have a very unrestful time, their consciences would be pricking them, and they would have more than the pains and penalties of Christmas indigestion.

If we on this side were to utter any criticism of the Government it would be that they did not come prepared for the departure from the Gold Standard, and made no arrangements for an alternative system. The fall from the pound came rather too late. It would have been a very good thing for this country if we had gone off the Gold Standard at least two years before we did; as it came about so late, we ought to have improvised a system; at any rate that would have been a better state of affairs than the position we are now in. At present we are more or less in the air, and that is due to the reluctance to take action of the majority in this House, who still have the old faith in gold. The average Member of the Government still believes in the possibility of the restoration of the Gold Standard. There is one hon. Member opposite who always openly avows his belief in gold as the infallible medium for the regulation of prices, and we admire his consistency; but I think it is a calamity that a Government should still cling to the old faith, because, unlike that hon. Member, they will be held responsible for their failure to make adjustments to fit the changing industrial life of the country.

The failure of the Gold Standard was due to the failure of the old men to realise that a change had taken place. The faith of the old men has more than once been responsible for national failure. I see before me young Members, and I would urge them to approach this question with young minds and fresh minds. There are a good many shibboleths to be shed, and a good many prejudices to be discarded, and I urge them to approach the examination of this problem with fresh, vigorous minds. We have been told that we ought to be bold and courageous. No question warrants more courage and a greater readiness to depart from the old faith.

We have been told that the Gold Standard failed and there has been an attempt to explain why it failed. In reality there has not been a Gold Standard since 1914. There have been attempts to work the Gold Standard, but it has been a gold exchange standard. The Gold Standard has not operated because under post-War conditions, with debts and reparations, it was impossible to maintain an adequate backing of gold in any debtor country. The maldistribution of gold led to more than half the gold of the world being locked up in the vaults of two creditor countries, and there it remains. The amount of gold in the Bank of France at the present time is £670,000,000, and the amount in the vaults of the American Federal Bank is £880,000,000. In this country we have only £140,000,000.


Will the hon. Gentleman explain what is the difference in principle between what he called the Gold Standard of 1914 and the gold exchange standard?


I should occupy the House too long in doing that. I have read very learned lectures by experts on the subject, and they have failed to give us satisfaction. I can assure the hon. Member that I do know what function gold plays. A very important point was made by the hon. Member for South Croydon in telling us what really is the value of gold. Gold does not derive its value from Acts of Parliament or from any backing by regulations or Government control. It derives its value from the amount of labour and capital expended in the production of it. It always has been so. Whenever gold was scarce more labour was applied to the production of gold, and more capital was expended, and when more gold was obtained and gold therefore became cheaper, then less effort was made to obtain gold and in that way gold more or less adjusted itself to the needs of the world. The Gold Standard has broken down because gold has been mined at very great expense and then "frozen," so that all the real value of it has not been made effective. Gold, which has a real labour value, has been stowed away in the vaults of creditor countries, and no use has been made of it.

The amount of gold available for the purpose of backing credit was very much smaller than the real value of gold, and the value therefore of that gold for all purposes was very much less. At the present time there is about £2,500,000,000 of currency gold. That is not the whole of the gold in the world. The whole of the gold for currency and industrial purposes is nearly £4,000,000,000. More than half the currency gold is frozen away, and is not really serving its main purpose. Gold has served a purpose in giving fixed values or giving definite values to the monetary units of the world. The monetary units in use in every country, whether they be pounds sterling, dollars, francs or marks, have been monetary units derived from the value of gold, because they were based on gold and because gold contains more or less real value represented by the labour involved in the obtaining of gold.

A more or less stable value was, therefore, given to the currencies of the world. The pound sterling has, since 1660, exchanged for 113 grains of gold, and a correspondingly similar weight of gold would be exchanged for the American dollar, which is of lower denomination, and for the French franc, which is of lower denomination still. This was the relation in the weights of gold coins to their denominational value. By giving a value derived from gold to the currency, whether it be in paper or in metal, a stability and interchangeability on equal terms was made possible between all the currencies of the world. It was an attempt to obtain a universal currency with varying denominations, so that all nations of the world might pay in an equitable way. That scheme failed, because gold was not available.

I am coming to the special point that I wanted to make to-night, which is that gold has served its purpose. It is a luxury which the world cannot afford. We cannot afford the growing expense of scratching, delving and digging for gold in sufficient quantities to meet the necessities of the modern world. The hon. Member for South Croydon (Mr. H. Williams), who advocated a return to the Gold Standard, must know that we are rapidly approaching the time of shrinkage in the gold yield.


The Gold Delegation published a report in 1929 which made certain forecasts. The increased production of gold since that publication, and the enormous yielding up from the hoards of India, have completely altered the picture as it was predicted by the Gold Delegation.


We have been forced to pay a very much higher price since. Gold at £6 an ounce ought to be more easily forthcoming than gold at £4 an ounce. If production of gold is made still more expensive, gold at £8 or £10 an ounce might be a material that we could not afford. There is a limit to the price that we can pay.

This problem is related to the question of employment. I have not yet heard sufficient appreciation of the point that we have always paid a high price for stability in price. At all times in the last 100 years, since the growth of industrialism required a larger currency throughout the world, we have set aside a large volume of labour power to provide us with the increasing volume of gold required for the increase in production. The increase in production has been assessed to have reached a figure of about 3 per cent, per annum in the last 100 years, and gold has been forthcoming in quantities almost sufficient to enable gold to be freely exchanged at the same value.

Now that we are up against the enormously increased productivity of the machine—and I make no apology for repeating what has been said by some hon. Members here to-night—there is a change to a difficulty in obtaining gold in abundance, and to the huge expense of getting gold, which lies deeper and deeper, and which is receding further and further into the bowels of the earth. The difficulty of obtaining gold cannot be compensated, except at greater-expense in order to obtain the required quantity. We cannot visualise an increase sufficient to meet the increased production, not at 3 per cent. per annum, but which is doubled or which has increased by 6, 10, 15 or 20 per cent.—almost any figure you care to name. Since the age of machinery, the potentiality of production has gone on increasing. At the present time, we use hardly more than half of our world industrial power. We could produce immensely larger quantities of all kinds of commodities if we were able to devise and apply a system of currency which would enable the whole of this productivity to be absorbed and consumed. To return to gold would be a definite bar upon production. The tying of production to gold again would mean that we should be deprived of the advantages that the machine offers to us. We have heard of the old idea of hitching one's wagon to a star, but to hitch modern production to gold would be like hitching a star to a London barge or some other almost immovable object; it would retard productivity and progress.

Some of us on this side of the House believe that future days are to be very much more prosperous than those of the past, that a time of happiness, of leisure and pleasure, is to come; but those days will not come if we tie ourselves to this filthy lucre, to this yellow metal which has brought about so much havoc in the past, and is now causing so much economic and industrial confusion. A good deal has been said about the part that gold plays in trade, but will anyone deny that the monetary position as regards gold has been responsible for the breakdown of world trade? Taking the figure of 100 as representing the position in 1929, world trade has gone in value down to 40 in 1932. Quantities have not fallen quite so much in proportion, because prices have fallen by at least 50 per cent. That fall in the value of trade is largely due to failure in the manipulation of gold, and to the inherent weakness of the Gold Standard itself. The restoration of gold will not pay. An attempt to go back to the Gold Standard and observe it in its strict application will mean perpetual deflation, and a bar to progress which the world cannot afford.

With regard to the second point in the Motion, I do not think that there is anyone anywhere who can describe in detail the currency system of the future. I am satisfied, however, that it is not to be based upon gold. Upon what is it to be based? Once or twice this evening, when Members have talked about the question of bimetallism, an old refrain has come into my mind, and I listened for something about "silver threads among the gold." One hon. Member even went so far as to suggest introducing platinum as well, but no combination of metals will achieve what is required. The same arguments can be used against silver as against gold. It is true, in spite of what the hon. Member for South Croydon says, that for the last 2,000 years the ratio of silver production to gold production has averaged about 15½ to 1. But the labour expended in the production of silver—


The hon. Member says that the ratio is 151 to 1, but the previous bimetallic expert said that it was 14 to 1. I said that it constantly varied.


I am not an expert. It is true that the ratio has varied from time to time; periods can be quoted when it has been 10 to one, and when it has been 20 to one; but the average over 2,000 years, as is well known from the records of currency, has been to one. No metallic basis, however, is firm enough and strong enough to hold the commercial and industrial fabric of the future; it must be based on something more responsive and more elastic in relation to the every-day life of the people who have to live under the system. There is no fundamental difficulty in relating this question of the basis of currency to the actual measure of commodities themselves. I thought we should have a little more information from the Mover on this point.

I am very grateful to the Financial Secretary for the information that he gave us. I am sure that it will be a comfort to many people outside the House that the measure of our currency has not been diminished as a consequence of paying the American Debt and that we have, in fact, a larger store of gold than we had six months ago. We have a reserve of £140,000,000, which is £14,000,000 greater than the reserve six months ago. We have a larger volume of money in circulation. I am not quite sure that we can take as much credit for that as we should like because, while there is a large volume of circulatory currency ready for use, the rate of that circulation has gone down very much and the number of transactions for each currency unit is very much less than it was a year or two ago. It is not enough to say we have plenty of money pieces to play with if we keep them in our pockets and do not use them for ordinary business. It is our business to see that those pieces are moved more frequently, and it is the businesss of the Government to keep them on the board. I believe it is possible to relate world currency to the volume of wheat, coal and other primary products and, indeed, a stocktaking, which will he related to world currency, of the main productive commodities will he required in order to find out how much currency is required.

Everyone speaks of raising the wholesale prices of commodities. It cannot be done by everyone working independently of everyone else. You can only raise the wholesale prices of commodities by world action, and the only world action possible is a world assessment of currency, a stock- taking to find how much currency you require in all parts of the world to meet productive requirements and the transaction of trade between one country and another. The relation of currency to production has been hinted at by men of greater authority than I can claim to be, and I see that Mr. Hoover has expressed something which should be borne in mind in the examination of this problem, and which must be examined very closely and solved if the whole system of international trade and finance is not to collapse. This is the keynote to the solution of our problem. Mr. Hoover said: In any event it is a certainty that trade and prices must be disorganised until some method of monetary and exchange stability is attained. It seems impossible to secure such a result by the individual and separate action of different countries. I believe Mr. Hoover has done a service to the world by directing men's minds to that aspect of the problem. I believe the Gold Standard has gone and a new basis of prices must be brought into operation. That basis cannot be applied in one economic unit by itself. It must be made universal and it must be brought in by universal consent. Instead of trying to balance the pound against the dollar, the Canadian dollar against the American dollar, and the English pound against the Australian pound, why not give a bold lead to the world and approach the World Economic Conference with a declaration that Great Britain is willing to consider, not a badly working Gold Standard for the universality of currency values, but a universal monetary unit, a universal coin, of equal value in all parts of the world? An hon. Member suggested that we might adopt the dollar, and gave an indication that he believed it was possible to found a new unit of currency. I believe it is. It is not necessary to give the same name to every unit in every country. You can still call your pound your pound in English if you prefer to do so, but another coin of a similar value, or a multiple of the same value, can be used in a Continental country and known by its Continental name.

There should be a universal currency, perfectly negotiable, not open to speculation or abuse. We should build up a world system where the allocations of currency for every country would be known. One value for the whole of the currency of the world should be allocated from time to time by joint international action. That is the way out of the confusion of to-day. The machines to which I referred earlier have destroyed the power of gold. Tireless and invincible, they move to greater and greater achievement. We hear them around us and above. They stand in our factories and send out a stream of goods fashioned in a thousand patterns from materials supplied to them. The goods are too many for our small market. The machine does not want to stop. It whistles and buzzes. It sends us its message in tones which we understand. Its message is not to economise; it does not announce bard times. The machine calls on us to help ourselves. The only effective way to help ourselves is to provide the purchasing power by reorganising modern currency in such a way as will enable us to enjoy a fuller life.

10.32 p.m.


I apologise to the Mover of the Amendment for not being here when he delivered his speech. I was doing some work on behalf of a Committee of this House which is attempting to give some recognition to Mr. Wyatt, who has been here for 37 years, and is now retiring very ill. The Financial Secretary to the Treasury called attention to the fact that this country was no longer on the Gold Standard, and it is very nice to have that said in plain language from the Front Bench. I was disappointed because his speech did not take a wider and larger aspect upon this important Debate to-night, because the monetary policy of England, in my opinion, is vital to the future prosperity of the world. He further pointed out that, although we shipped £20,000,000 of gold to America¾ in payment of the debt, it had been replaced by Government securities, that we were no worse off as to credit supplies, and that the purchasing power of the pound had not varied. He also said that he could not do away with gold, and that he did not see his way to take any definite decision because of the coining World Economic Conference. He used the words—I wrote them down at the time— "There is dismay in the world." It is because we keep on waiting for conferences and talking to other people about those important questions that there is dismay in the world. I contend that this country has it in its power to give a lead, to impose its will upon the world and to make sterling the international medium of exchange.

I like the Motion for two short sentences in it. It urges the Government "to complete the good work" which it has begun, and it goes on to say that that good work dated from the time when the Government abandoned the Gold Standard. We are to-day half way through a great policy of reconstruction, and the Government must have the courage to carry that policy and to carry their financial and monetary policy right through to the bitter end. The Motion would not have been put down if it had not been for the insistence of America on the payment of War debts. That insistence means murder for the world and suicide for America. The Motion might have been discussed on a much higher plane. Our monetary policy is vital to the world. Our policy all through, from the start of the War, in Lord Balfour's declaration after the War, and the wonderful note to America on the 1st December, has been world recovery. It is no use talking about irrecoverable debts. It is no good waiting for the World Economic Conference. I am sorry to have to say this, but the action of America in the last few days has made the possibility of the success of the World Economic Conference more remote than ever.

The hon. Member for Gower (Mr. D. Grenfell) spoke a good deal about international currency and said that there should be an international stable purchasing power. I cannot help thinking that he went too far. If this House of Commons, with the National Government, could control the policy of the world, and if the Bank of England could control credit supplies as it used to do, we might get some international policy, but we have the national fears of France and the ignorance of the great mass of the electorate of the middle West of America to cope with, and it is impossible to ignore those great factors. They upset the idea of an international exchange of currency. The hon. Member mentioned that there is two thousand million pounds of gold in the central banks of the world. The whole trouble to-day is that that gold, which was the medium of exchange in the past and which for many years acted so well, is no longer available. That gold, for the time being, is hoarded in two financial centres. Three-fourths is in the Central Bank of France and the Central Bank of America.

So long as the Bank of England had control, before August, 1931, of the gold supplies and the credit supplies of the world, she was able by shipping a few millions, or by taking in a few millions, or by putting up or lowering the Bank rate, to maintain fairly stable relations amongst the currencies of the world and to enable world trade to be continued with a certain amount of stability and certainty. The trouble to-day is that France and America having got all the gold will not allow it to function. I agree that if gold was allowed to function as the basis of credit, as it used to be allowed to function by the Bank of England, that that would be the best international medium of exchange that the world could have. That gold is not available to-day. The only way in which it can be got back into circulation and use is for France and the United States to give it to the Bank of England and allow it to operate; and no one can see them doing that.

If the policy of the Government is to lead to world recovery this country must take measures, gold being no longer available, to get the world on to the next best medium of international exchange. That is sterling. Some hon. Members have called attention to the necessity for raising the commodity price level. The reason for the fall in the commodity price level is the hoarding of gold by America and France. It has meant that the commodity price level has fallen in relation to gold, and this, in conjunction with the insistence on the demand for the payment of the American Debt, which has compelled us to produce at lower costs, is having a continually depressing effect on the commodity price level. It is quite useless for the World Economic Conference to meet until there has been first of all a settlement of the debt question.

If our policy is one of world recovery it must be directed to helping the whole world, including America. We can only pay America in three ways, by sending gold, by sending goods or by rendering services. We can go on sending gold for another three or four years, but that gold will not be allowed to function by the central banks of America, in order to increase credit. America has put up high tariff walls to prevent us sending goods or rendering services. Therefore, in the interests of the world we should use the great power which this country undoubtedly has to push France and America off the Gold Standard and impose sterling as the international medium of exchange. We could do this if we had the will. In several newspapers this morning it is reported from New York that the restoration of gold as the basis for the stabilisation of currency will be one of the chief objectives of the American Government during the last few weeks of its tenure of office. Of course, the American Government want us to go back on the Gold Standard. America and France are only holding gold in the hope that we shall one day go back on the Gold Standard. In August, 1931—and it is beginning to be realised more and more by the world—sterling did not go off gold; gold went off sterling. Sterling has been a stable currency, the more stable currency ever since, and France and America only hold their stocks of gold to-day in the hope that one day we shall go back to the Gold Standard at some price or other. I believe that before we parted with all our gold resources, if we went on paying America in gold and at the same time announced that we would never go on to the Gold Standard or only when it suited us, we would compel America to beg us not to send any more gold. Ipso facto she would be off the Gold Standard. But that would not affect the payment of our debt. Gold would then be reduced from a price in which was contained the factor that it was formerly a basis of currency. That factor would be withdrawn from the price of gold and the price of gold would come down more nearly to the commodity value.

I believe that action by this country can be taken. I believe that the mere threat would be enough. I do not like even to use the word "threat," because in this we should get co-operation with the United States. But I do believe that we can take such action, long before we have parted with the rest of our gold, to reduce the price of gold, to make them disgorge their gold, and even if they said they would not import any more gold, our bond to the United States is in gold and we would continue to pay in gold at a much better price.

I believe that sterling is now the mistress currency of the world. The great object of this country must be to get the wheels of international trade revolving again. It would be better to have gold as the basis of international currency; but we cannot get gold, so let us use sterling as far as possible. It may be said that to carry out many of the suggestions which have been made here tonight would be too great a risk, that it would open the door to all sorts of new ideas of which we have no experience. I ask the House to consider what will happen if no action is taken, if we go simply drifting on from conference to conference and no decisive attempt is made to secure for the world an international medium of exchange, and to get the wheels of trade revolving again.

I believe that even this Government and its advisers do not realise to the full, even now, the enormous strength of the character of this people, the enormous weight that this country carries in the world. I believe that we have great responsibilities, but, what is more, I believe we have a great chance. I believe that as soon as possible we should take that chance, and so frame the national policy that we can enlarge as much as possible the sterling area. Let the Gold Standard countries understand that we will refuse to receive imports from them, not from any selfish or vindictive motive, but for the good of the world, and I believe we have it in our power so to dictate the world policy that we can and must give a lead to set the wheels of trade revolving again.

10.50 p.m.


It was amazing to hear the speech of the hon. Member for Chislehurst (Mr. Smithers). When an hon. Member gets up in this House and suggests that we should push America and France off the Gold Standard, and does not tell us how we are to do it, except by refusing to take in more of their imports, one is at a loss to know how to reply. There is no sinister design on the part of either France or America, as the Governor of the Bank of France has said recently. They are bound to accept gold, and when the rate of exchange falls, as it has fallen for a number of years, any bullion dealer or banker in France, in London, or anywhere else, can take gold, or could before we went off the Gold Standard, from the Bank of England, and take it to France. The Bank of France is bound to take it, and there is a profit to the bullion dealer on the transaction. There is only one way to stop hoarding in France and the United States, and that is to improve financial conditions here, and contract paper gradually, so that it is equal in value to the gold it represents, and then no more gold will leave these shores. There is a most extraordinary confusion on the part of the hon. Member, who often makes very admirable contributions to our Debates from the City point of view, and I would suggest to him in all humility that he might really try to understand what it is which governs the movement of bullion.

The hon. Member for Gower (Mr. D. Grenfell) complained of the high price which we had to pay for gold bullion. We have to pay £6 2s. 3d., which is the present price for an ounce of fine gold. The Mint price for standard gold is £3 17s. 10½d. or £4 4s. 11½d. for an ounce of fine gold. The difference between the price of £4 4s. 11½d. and £6 2s. 3d., the present market price for fine gold, is the measure of the inflation from which we are suffering to-day. When the hon. Member speaks of the high price for gold bullion, it is not that gold has gone up in price, but it is owing to the inflation of our paper, for our paper has gone down in price. [Laughter.] There is nothing to laugh at in that.


We may as well laugh as cry.


Hon. Members might at least try to learn the elements of finance. I do not pose as an expert and an authority, but I have made a little study of these matters, and I put it to the hon. Gentleman, who is very kind in speaking of my consistency, as the real reason for what is called the high price of gold bullion. It is not because of the high price of gold bullion since we went off the Gold Standard that the pound has steadily deteriorated by 35 per cent.


The hon. Member must remember that gold is the measure of the price of commodities very much more than sterling.


The fall in sterling prices has not quite followed it because of inflation in this country. Suppose you are importing raw cotton to-morrow. When the pound is at parity you can get 4 dollars 86 cents for it, but to-day you can only get 3 dollars 20 cents. That means that the pound has fallen in purchasing power. Is not that so 7 I have a pound and I exchange it for raw cotton. Am I not better off if it purchases 4 dollars 86 cents' worth of raw cotton than if it only purchases 3 dollars 20 cents' worth? That is self-evident. What we look for is a rise in the pound. We are told that we adhere to the old orthodox doctrine. Why I should be called an old man I do not know. I do not know why references should be made to the "old man mentality." I do not feel an old man and I would never think of describing the right hon. Gentleman who leads the Opposition with such activity as an old man. It is not a question of age, but of mental activity, and we are all glad that the right hon. Gentleman possesses that vigour which he displays. The point is, what a man is advocating and what he believes in, and I believe, as many of us do, that principle to which I have referred will raise gold prices. Another point which has been emphasised, is that going back to the old parity would have a deflationary effect and would lead to unemployment and depress industry. I submit that the contrary is the case and that it would stabilise the exchange. The hon. Member for Southampton (Mr. Craven-Ellis), who has done a real service in bringing forward this important question, feels that what we are suffering from is instability of exchange. The Financial Secretary to the Treasury in a well-informed and brilliant speech showed that the hon. Member for Southampton offered no method of getting stability of exchange.

We who adhere to the Gold Standard believe that it would bring about stability of exchange and we desire to see it restored with all its faults as the best method for giving stability of exchange. We do not feel in the least lonely, because, in America, there are 120,000,000 people believing, I think, on the whole, in the Gold Standard; there are 40,000,000 in France, and 60,000,000 in Germany and indeed I think the majority of the leading countries adhere to the Gold Standard. I hope that the 45,000,000 people of this country though they may think for the present that there are difficulties in the way of getting back to it, and that the time has not yet arrived for doing so, will go back to that standard. The report of the financial committee of the League of Nations recommends it as the best mechanism. The hon. Gentleman opposite quoted President Hoover's message. He might have quoted another passage from it in which President Hoover said that the Gold Standard if effectively worked was the only practicable basis for international settlements and monetary stability. The hon. Gentleman seemed to think that the question of the scaling down of the American debt presented another reason why we should not go back to the Gold Standard. On the contrary, I think that is another argument why we should make it very clear that our hope and our aim is to restore the Gold Standard. I believe the United States as large holders of gold are suffering from this instability of exchange and believe if we took a strong line on this matter—while I do not think the Government are taking a strong line yet their attitude is a long way nearer to sound' finance than that of the hon. Gentleman opposite—it would lead to a revision and a large reduction of the debt.


Why does it not help America?


It will help America in the sense of giving stability to exchange.

It being Eleven of the Clock, the Debate stood adjourned.