§ 3.10 p.m.
§ LORD BOOTHBYMy Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
§ The Question was as follows:
§ To ask Her Majesty's Government whether they realise that a substantial increase in the monetary price of gold provides the only solution for the recurrent currency crises which at present afflict us, caused mainly by the persistent weakness of the dollar; and whether they will press the Government of the United States to adopt this course in order to avert an impending trade war between America, Europe and Japan.
THE LORD PRIVY SEAL (EARL JELLICOE)My Lords, the future role of gold is one of the aspects of the international monetary system which is being discussed in the Committee of Twenty set up last year by the Governors of the International Monetary Fund. Her Majesty's Government are satisfied, however, that a general increase in the monetary price of gold in terms of currencies is neither the only, nor indeed an appropriate, basis on which to tackle the world's monetary problems. There seems to be a consensus developing in the Committee of Twenty that the role of gold in the world monetary system should be gradually reduced.
As far as the recent international currency disturbances are concerned, the recent realignment of exchange rates, directly involving the two countries—the United States and Japan—which were evidently in fundamental disequilibrium—should be regarded as a major contribution towards restoring a more satisfactory position. In the meantime, the Government intend to press on with the negotiations for reform of the international money system on the lines set out by my right honourable friend the Chancellor of the Exchequer.
§ LORD BOOTHBYMy Lords, surely my noble friend the Leader of the House would agree that events in the past few months, and particularly in the past few days, have proved conclusively that gold is the only medium of international exchange that is universally trusted, and 242 that Special Drawing Rights and an inconvertible dollar are no substitute? Would he not agree that if a satisfactory and viable international monetary system is to be set up, gold must once again be given a key role, and the leading currencies made convertible into it at a rational price, and with more flexible exchange rates?
EARL JELLICOEMy Lords, I admire my noble friend's oratory, but he must have realised from the terms of my reply that I am not in agreement with him on this matter.
§ LORD BOOTHBYMy Lords, in that case, I can only say that in view of the extremely unsatisfactory reply I will take an early opportunity of raising this question.
EARL JELLICOEMy Lords, may I inform my noble friend that I very much favour that course, as it will not expose me to an immediate viva voce examination from him?
§ LORD CITRINEMy Lords, am I not permitted to speak? I do not intervene very much, but is the noble Earl the Leader of the House aware that one of the principal causes of the General Strike of 1926 was our return to the gold standard?
§ LORD BOOTHBYAt the wrong parity of exchange!
EARL JELLICOEMy Lords, I will take careful note of what the noble Lord, Lord Citrine, has said. I hope he will not think me discourteous, but there were two other noble Lords on their feet at the same time.
§ LORD PARGITERMy Lords, would not the noble Earl agree that there seemed to be less trouble with currencies when America had possession of virtually all the gold and buried it at Fort Knox?
EARL JELLICOEMy Lords, that may well be so, but the actual position we face at the present time is not that one.
§ LORD HALEMy Lords, may I ask the noble Earl whether it is not a fact, 243 at any rate, that the suggestion of the noble Lord who put the Question would be one means of increasing world liquidity and of dealing with the unfortunate imminence and suddenness of balance-of-payments crises? And may I ask him, without rhetoric or adjectives, whether he has observed the increased demand for non-monetary gold, soaring prices, what consequences are anticipated from that, and whether this increased demand is purely coincidental?
EARL JELLICOEMy Lords, I cannot agree that a return to the gold standard, as it were, would be the right solution. It would involve a massive and very dramatic and sudden increase in world liquidity unrelated to world needs, and the benefits of an increase in gold price would be inequitable, and, in our view, unfairly distributed.
§ VISCOUNT ADDISONMy Lords, in view of the fact that the world's largest bullion market is in London, could the noble Lord say whether it is necessary for the price of gold to be quoted on that market in American dollars, or whether it may now be quoted in pounds sterling?
EARL JELLICOEMy Lords, I could not say so off-hand, but when this matter is debated, on the threatened Motion of my noble friend, I will guarantee to be able then to make a sensible comment on that suggestion.
§ LORD WIGGMy Lords, would not the noble Earl agree that what the world needs is a remarkable, sudden increase in liquidity to release the capacity and potential which modern technology every day makes increasingly possible?
EARL JELLICOEMy Lords, I would agree that a steady increase in world liquidity is desirable. It is, though, highly desirable that this should be agreed in the Committee of Twenty. A dramatic unregulated increase would not, in our view, be desirable.
§ THE EARL OF LAUDERDALEMy Lords, would the noble Earl elucidate his earlier reply, to make it clear whether or not the Government exclude altogether any question of the price of gold playing a part in the monetary stability that he longs for?