CHAOS PREVAILS

Manawatu Standard, Volume LIII, Issue 28, 30 December 1932, Page 7

CHAOS PREVAILS

BANKING IN SOUTH AFRICA. \ STAGNATION OF TRADE. GOLD STANDARD DECISION,

(United Press Association—By Electric Telegraph.—Copyright.) Received December 30, 9.40 a.m. CAPETOWN, Dec. 29.

Utter chaos prevailed to-day in banking and commercial circles. The Reserve Bank, which fixes the rates, announced in the morning that all rates were cancelled, while the Post Office continued to issue money orders at 40 per cent, with a limit of £IOO. Long queues formed at the offices, which jvere crowded. At noon, when a peremptory order was issued confining business to the Union and protectorates, complete stagnation of trade ensued.

The crisis is due to the Reserve Bank refusing commercial bank cover overseas owing to the automatic termination of the purchase of the gold output at the old standard rate. Pending an arrangement for marketing the output being discussed, the unsatisfactory banking position will continue.

Judge Roos doclared emphatically to-day. that if General Smuts continues to put party before country the present Government will continue.

CHANGE FAVOURED

BENEFITS TO TRADE,

(British Official AVireless.) Received December 30, 11.25 a.m. RUGBY, Dec. 29. The Times, commenting 011 the South African currency position, says; There can be little doubt that the Government’s change of ' policy will benefit South Africa, removing a grievous impediment to overseas trade and to intercourse with her northern neighbours, enabling farmers to reap at least the advantages of the concessions Mr Havenga (Minister of Finance) obtained at Ottawa. Much, of course, depends 011 tho naturo of the new policy—whether the rate of exchange is to bo allowed to find its own level, or whether South African currency is to be linked again to gold, though at a lower rate. It is this second alternative which at the moment seems more probable, hut the position may be affected by the development of the political situation, which is still quite obscure. The Manchester Guardian’s financial editor says: Tho legal position is much the same as that in England in September, 1931, for in one sense it was not tho gold standard which was suspended in Britain last year but only tho gold convertibility of Bank of England notes. The South African Government's intentions about the future of currency are not clear, but nothing lias been said yet to indicate that the South African pound will ho devaluated. On the contrary, such steps as have been taken suggest that the primary objective of the Government, at least for the time being, is to prevent depreciation of the currency, resulting from a capital flight for which fundamentally thero is little economic justification. It docs not follow that by funding gold convertibility on the note issue South Africa will thereby depreciate her currency.

Following to-day’s development of the South African financial situation the interest which was aroused in financial circles in London continues and events are being watched closely.' Although no change was made in the nominal rates of between South Africa and 1 London yesterday, business was confined to very small transactions.

At the close of the Stock Exchange to-night South African mining shares remained on the weak side, dealers awaiting further news regarding the exchange position. EFFECT ON SHARE MARKET. LONDON, Dec. 29. The Daily Express’s city editor says buying and selling in gold mining shares between London and Johannesburg is- paralysed. There lias been a boom in shares in Johannesburg, but a temporary setback in London, where the banks are unable to estimate the value of the South African pound. The decision of the mining companies not to sell gold to the Reserve Bank is natural as the producers cannot be expected to accept a currency which is likely to depreciate. The South African mines may insist on being paid the present price of gold in sterling which will bring the South African pound down to the level of sterling. The mines are not obliged to sell to the Reserve Bank and can sell to the Bank of England or any other buyer.. This will decide the value of the South African pound.