BRITAIN’S CREDIT.

Manawatu Standard, Volume LII, Issue 50, 29 January 1932, Page 6

BRITAIN’S CREDIT.

“The best news the market has had for months” is the summing up by the London Times of the repayment by the Bank of England of the balance of credits arranged six months ago. It was on August 1 that the American and French Central Banks opened a credit of £50,000,000 for the Bank of England. The ■world heard the news with amazement, but in Britain itself there was serious apprehension. In spite of a considerable decline in the current surplus, Great Britain in 1930 made more long term loans than in 1929. She had gone to the rescue of nations when others were unwilling, except on political terms, remarks a commentator, and with the subsequent freezing of her foreign assets became more vulnerable to a flight from the pound sterling. There was a demand for payment in gold of foreign balances in London, and so insistent was it that from the second week in July to August 1 millions of pounds in gold were withdrawn daily. This was a tremendous strain upon British finance and her resources were quickly depleted. One commentator at the time likened Britain’s position to a millionaire temporarily without funds to pay his taxi fare. The credit served to restore the 1 position of the pound meanwhile, but four weeks later the British Treasury arranged with both banks for credits amounting to £80,000,000 for a one year term. But this assistance did not suffice, and in September Britain went off . the gold standard. Yet, notwithstanding this momentous decision, and all it entailed, at the end of three months the Bank of England had, by drawing on its gold reserves and from other sources', repaid £20,000,000 of the August advances from the United States and France,, renewing the balance for three months. It is this amount that has now been liquidated, without the Bank reducing its gold reserve dr increasing its fiduciary note issue, giving remarkable proof of its great strength. For it must be remembered that the debt was contracted in: terms of dollars and francs, and more than the nominal equivalent of £30,000,000 would be required to discharge the obligation. “The repayment without resort to gold shipments shows the skill with which exchange operations are conducted,” says the Morning Post, and from this it may be inferred that the Bank has been buying funds in New York and Paris to provide for repayment. Notwithstanding the unparalleled conditions, Great Britain’s credit stands high. The payment, as the London Times remarks further, will enhance Britain’s financial prestige.