HL Deb 11 July 1974 vol 353 cc728-31

3.35 p.m.

LORD FRASER OF LONSDALE

My 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 will represent to the appropriate international monetary authorities the desirability of establishing that the price of gold, when marketed by banks or national treasuries, should be the market price of the day.

LORD JACQUES

My Lords, monetary authorities are free to sell gold on the open market at the market rate.

LORD FRASER OF LONSDALE

My Lords, is that all? May I ask the noble Lord to make representations to the Chancellor of the Exchequer to think again about this Question? Is it not in his mind, as it is in many minds, that greater liquidity in the world would be good for all of us and that one cannot sell gold unless one has a price for it? If one fixes a price, is it not bound to be too high or too low, and is not the only possible realistic price the price of the day?

LORD JACQUES

My Lords, the ideas of the noble Lord on gold are inconsistent with the consensus which was reached in the Committee of Twenty. The Committee have rejected the concept that the management of global liquidity shall be influenced by the arbitrary changes in the availability and other usages of a single commodity, leaving aside the issues arising from the unequal distribution of gold holdings.

LORD BOOTHBY

My Lords, may I ask the noble Lord whether he does not think that the Committee of Twenty are almost imbecilic, and that their considerations have reduced the world to the shambles which it is in to-day? Does he not think that, unless proper action is taken about gold, and unless its price is fixed at the price of the day, as my noble friend has suggested and the Inter national Monetary Fund is entitled to buy and sell it at a realistic price instead of at a fantastically low price, we shall never get enough international liquidity and roaring world inflation will continue?

LORD JACQUES

My Lords, that is the noble Lord's opinion. I think I will leave it at that.

THE EARL OF DUNDEE

My Lords, may I ask the noble Lord whether it is not the case that despite this alleged imbecility the Committee of Twenty decided at their Washington meeting three or four weeks ago that loans between central banks could be given security in gold by the borrowing country and that for the purpose of this security the gold might be valued at the current market price? Is not that completely inconsistent with the noble Lord's first answer, that there was no intention to allow gold to be sold at the market price? What is the difference in principle? Did not the Chancellor say three weeks ago that this agreement had been reached mainly by the efforts of the British representatives in Washington? Ought we not, therefore, to congratulate the British representatives on this useful result which we are told was arrived at not in the conference room but later on at dinner?

LORD JACQUES

My Lords, we are grateful for congratulations on this kind of result, whether it was reached at dinner or at breakfast. The position is that at the meeting of the Committee of Twenty in Washington in June it was agreed that this area required more detailed discussion, including the possibility of sales of Fund gold to benefit developing countries. The only decision which was reached in June among the group of 10 countries was the limited one that there should be no objection to pledging gold as collateral in borrowing transactions between monetary authorities. I think that is something different from what the noble Lord has said.

THE EARL OF DUNDEE

My Lords, at the market price.

LORD FRASER OF LONSDALE

My Lords, did not the noble Lord say that there was no reason why one commodity should be chosen above all others? But gold is quite different. For a thousand years we have known what gold is. Nobody really trusts paper or politicians as most of the world trusts gold.

LORD JACQUES

My Lords, the consensus in the meeting of the Twenty was that special drawing rights were a much better basis.

LORD FRASER OF LONSDALE

No, my Lords! Nobody believes that.

LORD BOOTHBY

My Lords, may I ask the noble Lord whether he does not realise that special drawing rights are phoney gold, as the whole world knows? They are not real gold at all. Does he not further realise that nine-tenths of the world believes in gold and nothing else—least of all paper currencies?

LORD FRASER OF LONSDALE

Hear, hear!