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Chicago Daily Tribune: British suspend gold basis
芝加哥論壇報: 英國暫停金本位
Item number: C142
Year: AD 1931
Material: Paper
Provenance: Timothy Hughes Rare & Early Newspapers 2025
This is a Chicago Daily Tribune newspaper from AD 1931, announcing Britian suspending Gold Standard.
LONDON ACTS TO END DEPRESSION; ANNOUNCES “BUSINESS AS USUAL”
LONDON, Sept. 20. Following is the official statement issued from 10 Downing street tonight, announcing Great Britain’s suspension of the gold standard:
“His majesty’s government decided after consultation with the Bank of England that it has become necessary to suspend for the time being operation of the sub-section of the gold standard act of 1925, which required the bank to sell gold at a fixed price.
“A bill for this purpose will be introduced immediately and it is the intention of his majesty’s government to ask parliament to pass it through all its stages on Monday, the 21st of September. In the meantime, the Bank of England has been authorized to proceed accordingly in anticipation of the action of parliament.
Elames Heavy Gold Withdrawals.
“The reasons which led to this decision are as follows:
“Since the middle of July funds amounting to more than £200,000,000 [approximately $1,000,000,000] have been withdrawn from the London market. The withdrawals have been met partly from gold and foreign currency held by the Bank of England, partly from proceeds of a credit of £50,000,000 [$250,000,000] which shortly matures, secured by the Bank of England from New York and Paris, and partly from proceeds of French and American credits amounting to £80,000,000 [$400,000,000] recently obtained by the government.
“During the last few days withdrawals of foreign balances have accelerated so sharply that his majesty’s government felt it was bound to take the decision mentioned above.
Protects Bank’s Reserves.
“This decision will, of course, not affect obligations of his majesty’s government or of the Bank of England which are payable in foreign currencies.
“Gold holdings of the Bank of England amount to some £130,000,000 [$650,000,000] and, having regard to contingencies which may have to be met, it is inadvisable to allow this reserve to be further reduced.
“There will be no interruption of ordinary banking business. Banks will be open as usual for the convenience of their customers and there is no reason why sterling transactions should be affected in any way.
Stock Exchange Closed for Day.
“It has been arranged that the stock exchange shall not be opened on Monday, the day on which parliament is passing necessary legislation, This will not, however, interfere with bustness or the current settlement on the stock exchange, which will be carried on as usual.
“His majesty’s government have no reason to believe that the present difficulties are due to any substantial extent to the export of capital by British nationals. Undoubtedly the bulk of withdrawals has been for foreign accounts.
“They desire, however, to repeat emphatically the warning given by the chancellor of the exchequer that any British citizen who increases the strain on exchanges by purchasing foreign securities himself or assists others to do so is deliberately adding to the country’s difficulties.
Restrict Foreign Exchange Purchases.
“The banks have undertaken to cooperate in restricting the purchase by British citizens of foreign exchanges except those required for actual needs of trade or for meeting existing contracts, and should further measures prove to be advisable his majesty’s government will not hesitate to take them.
“His majesty’s government have arrived at their decision with the greatest reluctance. But during the last ten days the international financial markets have become demoralized and have been liquidating their sterling assets regardless of their intrinsic worth. In the circumstances there was no alternative but to protect the financial position of this country by the only means at our disposal.
“His majesty’s government are securing a balanced budget and the internal position of this country is sound. This position must be maintained. It is one thing to go off the gold standard with an unbalanced budget and uncontrolled inflation. It is quite another thing to take this measure, not because of internal financial difficulties but because of excessive withdrawals of borrow capital.
“The ultimate resources of this country are enormous and there is no doubt that the present exchange difficulties will prove only temporary.”
English Exchanges Will Close as Parliament Enacts New Law.
<The Situation>
As a move to turn depression into prosperity Great Britain has suspended the gold standard, dependent upon the action of parliament today.
While British stock exchanges will be closed as well as those of several other European countries, the New York and other exchanges of the United States will remain open.
British banks and all other business will remain open. United States busi ness, in the opinion of leading finan ciers, will be slightly affected owing to the smallness of American investments in London and Europe generally.
The feeling was expressed last night that the selling on the New York and Chicago exchanges in the last few days already has discounted the British cabinet’s action.
BY JOHN STEELE.
[Chicago Tribune Press Service.]
(Pictures on back page.)
LONDON, Sept. 20.— The gravest crisis in the financial and economic history of Great Britain reached a climax tonight with the government’s decision to suspend the gold standard act.
This step, unprecedented except for the days of panic following the war, unquestionably indicates that the situation is even worse than was revealed by the formation of the emergency national government to save England from bankruptcy. So, tonight England is sleeping under the fear that world confidence in the massive pillars of the Bank of England will be shattered in the morning and will send the sturdy pound sterling sliding down to hitherto unknown depths.
Will Rush Legislation.
The announcement of the government’s decision to halt at any cost what is probably the most rapid depletion of England’s gold supply in history—more than $1,000,000,000 has been withdrawn from London since July 15—came with dramatic suddenness after an emergency cabinet meeting tonight. Tomorrow parliament will be asked to smash all speed records for legislation to rush the necessary bill through in one day.
Pending action by parliament, the London Stock exchange will remain closed tomorrow. All the provincial exchanges in England have also been advised to remain closed.
The Bank of England announced late tonight that it had raised its discount rate from 4½ to 6 per cent. Again the extreme gravity of the situation was reflected in the fact that this is the first time, except during the war, when the Bank of England has raised its rate except at the regular Thursday meeting of the board of governors. Not even during the near panic of some weeks ago, after the first gold raids, did the bank resort to such precipitate action, and never before was such action taken on Sunday.
Banks to Remain Open.
Banks throughout the country will be open as usual Monday and the gov ernment advised all Britons to adopt a “business as usual” policy.
A government statement revealed that gold withdrawals by foreign countries, which started some time before the Hoover war debt and reparations moratorium was declared, suddenly had increased in speed and volume, leaving the Bank of England with only $650,000,000 in gold, an amount dangerously low in view of the large credits England had obtained from France and the United States recently. It is impossible to overestimate how critical the situation has become and with the closing of the stock exchange tomorrow anything may happen.
The bill to be presented to parliament tomorow is likely to include a provision to empower the government to control the exchange as well as to suspend the gold standard, although it is predicted in authoritative quarters that it will not be necessary to employ the full power that the government is assuming.
Seek to Stop Flow of Gold.
Suspension of the gold standard act Is designed simply to arrest the flow of gold. At present the Bank of Eng-land is obliged to sell gold to anybody who asks for it at between 77 shillings 9 pence and 77 shillings 10½ pence per ounce, or a minimum of $18.66.
In 1844 bank acts were passed making it obligatory for the Bank of England to sell gold above this figure, and this act remained in force until 1919 when it was suspended in the post-war inflation period. Almost identical laws were again passed In 1925 with the additional specification that the bank had to sell fine gold in 400 ounce bars. Whereas, under the act, anybody could go to the bank to tender currency and demand gold, with the suspension, the bank has the right to refuse the sale or demand any price it wishes.
Monday to Tell the Story.
The suspension of the gold standard, it is generally agreed, will perform the task of arresting the flow of gold perfectly, but the effect on the pound sterling in foreign exchanges remains to be seen, and there is no telling what shattered confidence in Britain might bring tomorrow in New York, Paris, and Amsterdam exchanges.
Although nothing has been sald about it, there exists possibility that arrangements have been made to peg the pound in foreign exchanges artificially during the period of the suspension of the act. In fact, this is the only way to keep the pound from taking the worst tumble in its career.
It is believed that yesterday’s flurry on the Amsterdam bourse did as much as anything to precipitate the government’s drastic action, although it was undoubtedly coming for the last few days. The Amsterdam bourse is regarded as the soundest and steadiest stock exchange in Europe, and when it joined the rar’s of the hairtrigger exchanges the confidence in world finance got one of the worst shakings in months.
MacDonald Plungs Into Work.
While London was enjoying the rarest of treats in the shape of a fair weekend, Prime Minister MacDonald was suddenly plunged into a sea of nerve-racking work comparable to the days preceding the formation of the emergency government. It was reported yesterday that Mr. MacDonald hurriedly returned to London from his country house at Chequers early in the day, but it is now revealed that he rushed back secretly Friday night and has been in consultation almost constantly since.
During the events of the past few days he has maintained the closest contact with his principal advisers, and he left for Chequers Friday noon under the belief that everything was running normally. But within less than an hour after his arrival at Chequers he returned to launch a series of consultations with financial advisers and ministers. At 4 o’clock this afternoon an emergency meeting of the cabinet was attended by all members at 10 Downing street and Mr. MacDonald placed the facts before them.
All the detalls of the almost frantle consultations are not revealed yet, but tomorrow night Philip Snowden, chanceller of the exchequer, is acheduled to broadcast an explanation of the government’s position over the radio.
Not a Dying Gasp.
The line the government is going to take—If tomorrow’s activities in the financial world do not upset its plans in reference to the pound sterling—is that the action is not to be regarded as the last gasp of Britain’s life as a financial power, because it is being taken with a balanced budget. The government statement declares that suspending the gold standard with a balanced budget is quite a different thing from grasping at this straw were the exchequer already half drowned.
The statement makes a half hearted attempt to vindicate the British subjects from blame for the flight of gold from England by declaring that foreigners undoubtedly are responsible, but it adds significantly that If British subjects do anything nything to to aggravate the country’s financial situation, “should further measures prove to be advisable the government will not hesitate to take them.”
According to present plans, parliament will have the busiest day of its history tomorrow, for it is to be called upon to enact legislation of the most vital kind in almost less time than It would ordinarily consume to pass the most obscure local bill for Scotland. The house of lords has been specially summoned to lend an approving voice, and the royal commission is to meet early tomorrow evening to give royal assent to the measure.
Wales Lunches with Premier.
It is learned that the prince of Wales, who has just returned from a vacation In France, had lunch this morning with Mr. MacDonald, who explained the situation to him. After luncheon the prince of Wales decided to cancel a projected trip to the northlands in order to remain in London. He returned from a vacation on the Riviera Saturday.
It is ironic that when the ministers of the cabinet, with drawn faces, filed out of the little door of Mr. MacDonald’s official residence tonight they came upon a huge throng who were admiring the illuminated government buildings at Whitehall, oblivious of the fact that a few feet away probably the graveat decision in the country’s financial history was made.
Later in the evening, however, although the news of the closing of the stock exchange was supposed to be kept in the strictest secrecy from the public until morning, the crowds got wind of it somehow and now Fleet street is dotted with small groups gravely expressing fear as to what may happen to the pound in the morning.
The first crop of comments on the crisis tonight took the form of a pep talk, with financial authorities trying to minimize the gravity of the situation and predicting that at least internal conditions will not be altered. No time was lost in recalling recent opinions of leading British economists that a slight inflation of the pound, such as the suspension of the gold standard is certain to cause, under the most favorable conditions, is a good thing.
It is pointed out that a reduction of the present exchange rate of the pound from $4.56 before commodity prices fell would also penalize speculators who are converting money from sterling into United States money. At the some time financial circles cannot help but deprecate the situation, to say the least. They bitterly blame the shock on rumors, among other things, saying that reports in the foreign press on the trouble among sailors in the Atlantic fleet trouble did infinite damage.
Lloyd George Makes Plea.
Before the smoke cleared tonight, David Lloyd George, Liberal party leader, made a significant statement from his armchair at his Churt, Surrey, residence, where he is recuperating from illness. He hinted strongly that if England is going to add an election to her bulging bag of troubles it would better be an election along national party lines and not a party clash.
If the nation remains steady and united we shall pull through all right,” the veteran politician stated. “Our resources are quite adequate to meet the situation, but a faction fight among ourselves at this juncture. would be unpatriotic lunacy. Mere threats precipitated this second and graver crisis, British common sense, if it is given a chance, will find a way out.”
CANADA TO STAY ON GOLD BASIS, BENNETT SAYS
OTTAWA, Ont, Sept. 20. B. Bennett, prime minister and acting minister of Finance, said tonight Canada proposed to maintain the gold standard.
What Great Britain may do is for the government of Great Britain to determine,” said Mr. Bennett. “As for Canada, we propose to maintain the gold standard.”
The prime minister added that he had nothing further to say on the matter.
Britain’s Suspension of Gold Standard Climax of Battle to Hold Pound Value
New York, Sept. 20.—[Special.]—
The suspension of the gold standard in England, announced today by Prime Minister MacDonald, marks the failure of a gallant six year struggle by Great Britain to stabilize the pound sterling at its pre-war parity. What will be the ultimate effects of this failure on the British economy, banking authorities here could not determine tonight. The logical outcome is that, after the inevitable period of falling quotations for sterling in foreign exchange markets of the world, the pound will be revalorized and restored to the gold standard on a depreciated level.
The breakdown of Great Britain’s struggle to restore the pound to its pre-war gold value was described by bankers as another of the series of international financial misfortunes growing out of the world wide depression. Even under normal conditions Great Britain would have faced a period of prolonged and difficult readjustments, but the depression ren dered these readjustments doubly difficult.
Crisis Long Impending.
The crisis in Great Britain has been gathering headway for months but it was brought to an acute stage by the central European breakdown in June and July. The freezing of large amounts of credit in Germany and other central European countries precipitated a run on the London market, weakening the gold reserves of the Bank of England and driving sterling down in all the principal money markets of the world.
London, as the world’s banker, was called upon to repay one billion dollars of short term credits lodged there when the crisis in Germany spread fear throughout the continent and forced European bankers to call home their foreign balances. The strain of meeting this enormous demand at a time when London itself had huge amounts of money tied up in central Europe was met partly by a heavy outflow of gold from the Bank of England and partly by the 750 millions of foreign credits secured by Great Britain from central banks and private bankers here and in France.
Reserve Now 650 Millions.
The Bank of England has paid out all the gold it can wisely lose, reducing its gold reserves to about 650 milllons; the credit of 250 millions supplied on Aug. 1 by the federal reserve banks here and the Bank of France Jointly has been exhausted, and the credit of 400 millions opened on Aug. 28 by bankers here and in Paris has been so heavily drawn upon, without avail, as to render future support for the pound useless.
In undertaking to restore the pound sterling to its pre-war parity, after it had sunk to $3.18 in February, 1920, Great Britain set herself a task that few other countries were willing to face. The fact that France, Germany, Belgium, Italy and other European countries had allowed their currencies. to fall to levels far below their pre-war value and had stabilized them at a fraction of their old values only added to the difficulties of the English attempt.
Stabilization Drive Blamed.
In the opinion of a number of important economists here and abroad a large part of Great Britain’s economic difficulties in recent years has been traceable entirely to the attempt to restore the pound to its old value. The recent McMillan report prepared by a group of distinguished British bankers went so far as to admit that the stabilization of the pound at $4.86⅝ might have been a mistake, although the report also said that to go backward now and revalorize the pound at a lower level was unthinkable.
Using Fiat Money.
Great Britain, in effect, will be using “fiat” money, which, Dr. Eugene E. Agger. Rutgers university economist, explains is money that has no metallic value. It is money, he points out, that bears no value except the authority of the government that Issues it. Under these circumstances, paper money be comes no longer a symbol of gold lying in vaults. Its value is based entirely on the force of the government behind it.
In the light of today’s announcement suspending the gold redemption clause. of the gold standard act of 1925, bankers here concluded that Britain might be faced, despite her efforts to avoid It, with the necessity of following the post-war example of other European countries by revalorizing her currency on a basis below pre-war parity.
The suspension of the gold redemption clause has the effect of removing the pound sterling from the gold standard. The clause in question reads as follows:
“The Bank of England shall be bound to sell to any person who makes demand in that behalf at the head office of the bank during office hours of the bank and pays the purchase price in any legal tender, gold bullion at the price of 3 pounds, 17 shillings, 10½ pence per ounce troy of gold of the standard of fineness prescribed for gold coin by the coinage act of 1870, but only in the form of bars containing approximately 400 ounces troy of fine gold.”
The operation of this clause placed the pound sterling on what economists called the “gold bullion standard.” The Bank of England was not obligated to pay out gold to every holder of a bank note as the federal reserve banks here are obligated to pay gold to every holder of American gold currency; but it was bound to make possible the settling of international balances by gold through redeeming legal tender in moderately large amounts in gold bars.
Suspended During War.
This law came into effect in April, 1925, when Great Britain resumed gold payments, after having suspended the gold standard during the war. At that time credits aggregating 300 million dollars were opened in this market to be used in defense of sterling exchange. Of these credits, 200 million was supplied by the federal reserve banks under an agreement to sell gold to the Bank of England, if required, and 100 million was supplied by a syndicate of American bankers under the leadership of J. P. Morgan & Co. None of the credits was ever used, an experience in sharp contrast to the heavy use made of the credits opened this year.
The current depression has been particularly hard upon Great Britain. because it has involved such great difficulties for raw material producing. countries in which a large part of Great Britain’s foreign investments are lodged. In addition, the country has been burdened with heavy expenditures for social services to support its unemployed and was consequently unable to balance its budget until the new national government introduced drastic economies for that purpose a few days ago.
CAPITAL SILENT, OFFICIALLY, ON BRITISH CRISIS
Privately Wonders About Fate of Pound.
[Chicago Tribune Press Service.]
Washington, D. C., Sept. 20.—Neither Secretary of the Treasury Andrew W. Mellon nor any other administration official was willing to comment tonight for publication on the British financial crisis.
On every side there was evident the feeling that because of the delicacy of the situation it would be unwise to venture public observations on the import of the action of the British government in abandoning the gold standard as the basis of domestic finance.
The opinion was privately expressed in official quarters that American Investments in British securities will not be affected. The step the British government is taking is to suspend the payment of domestic obligations in gold. Obligations abroad will continue to be met in gold.
Difficulties Predicted.
One official was inclined to think it would be exceedingly difficult for Britain to keep her foreign obligations on a gold basis and handle her internal finance on another basis.
There is a good deal of speculation priately on the fate of the pound stering as a result of the drastic measure adopted to halt the drain of gold from the Bank of England. UItimate devaluation of the pound was suggested as a possibility. One authority on International finance said that the British government is not unlikely to find itself compelled to adopt an “adjusted gold basis” which would be in effect a stabillaztion of the pound permanently at a lower level, perhaps around $3 instead of $4.85.
May Affect War Debts.
A possible effect of the British crisis on war debts was suggested by one official. The debts owed the United States were adjusted on the basis of the capacity of debtors to pay. President Hoover recently said that America will not exact payment beyond capacity to pay. It is considered not unlikely that at the close of the Hoover moratorium Britain will ask an extension and possibly a revision of the debt on the score of inability to pay.
Among senators who have favored stabilization of silver and the adoption of a double monetary standard the crisis in Great Britain was viewed as giving impetus to British proposals, Senator Wheeler [Dem., Mont.] said.
“I feel very keenly that we ought to stabilize silver throughout the world. We ought to get back to a double standard in this country, and I think all countries will have to come to that.”
Hoover Discusses Situation.
It was reported here tonight that the White House dinner Friday evening attended by President Hoover and Secretaries Stimson, Mellon and Lamont was arranged after the President obtained information of the step Britain was contemplating. It is understood there was a thorough discussion at the dinner of the situation as it might affect financial interests of this country and that consideration also was given as to whether this government might be able to do anything to aid the British in facing the financial crisis.
BRITAIN IS CLARIFYING FINANCIAL SITUATION, CHICAGO BANKER SAYS
Chicago’s financial leaders were unwilling last night to estimate the local effects of the action of the British government in suspending sales of gold by the Bank of England.
Arthur Reynolds, chairman of the board of the Continental Illinois Bank and Trust company, said that he believed the British were clarifying the financial situation in their abandonment of efforts to peg the pound sterling.
“It puts the government of the British empire in a more favorable position to liquidate its internal debts,” he said. “The fact that Britain will continue to pay foreign obligations in foreign currencies, as she contracted to, will lessen the disturbing effects on these currencies.”
The board of governors of the Chicago Stock exchange will meet at 8:15 a. m. today to consider the situation arising out of London’s action. A call for the meeting was issued last night by Paul H. Davis, president of the exchange.
KELLOGG BACK IN U. S., CONFIDENT ENGLAND WILL PULL THROUGH
New York, Sept. 20.—[Special.]—Frank B. Kellogg, former secretary of state and now one of the judges of the world court at The Hague, returned today on the Holland-America liner Rotterdam with Mrs. Kellogg. He appeared to be in much better health than when he went away, July 11.
Mr. Kellogg was optimistic about conditions in Europe and the United States despite news received in the dispatches from London concerning abandonment of the gold standard there and closing of the stock exchange.
Mr. Kellogg admitted the situation was serious, but said he believed that Great Britain would pull through.
Speaking of conditions in the United States, the former secretary of state said national, state and municipal economy is the only remedy for unemployment and the financial depression.
London Newspapers Praise Action on Gold Standard
LONDON, Sept. 21.—[Monday.]—The London Daily Mail, which has always opposed British adherence to the gold standard, welcomed its suspension this morning and sald it would stimulate every trade and Industry and “take a load off the nation’s back.” The paper expressed the bellef that the suspension will lead to a great revival in the iron, coal and steel industries and in many other directions.
The Daily Herald, Labor and Socialist organ, commends the government for what it calls “a wise and salutary step which would be a distinct advantage to British export trade.
The Telegraph, which has been a strong adherent of the gold standard, regretted the step, but said that “events have been too strong for the government.” It describes the suspension as a blow to British national pride “without peace time precedent.”
United States Criticized.
[Copyright: 1931: By the New York Times.]
LONDON, Sept. 21.—[Monday.]—The financial editor of the London Times, in reviewing the situation, is severely critical of the United States for what he calls its violation of the rules of the gold standard game. He will say today:
“It is necessary to emphasize the fact that the international economic crisis has played a large part in the temporary abandonment of the gold standard. The responsibility for this belongs to the countries which have hoarded gold on unprecedented scales. Creditor countries which insist on payment in gold are asking for the impossible.
“The prohibitive tariffs keep out goods, and unless the creditor nations relend the credits due to them, the debtor nations must pay gold to the extent of their resources and then default.
Takes France to Task.
“The gold standard game can only be played according to its well proven rules. It cannot be played on the new rules practiced since the war by France and the United States.”
The Times, after summarizing the various factors of the situation in an editorial, will make the following allusion to the part played by Socialism:
“If the reckless use of the public purse in this country had continued the end would have been disaster. The suspension of gold payments by the Socialist government would have been one thing. But a suspension by a national government committed to retrenchment and reform is another. The Socialist government would have had to go off the gold standard with an unbalanced budget and it might never have returned to it.
“It may be said emphatically that there is no cause for alarm in the decision which the government has reached. On the contrary, in the light of proven necessity its action will inure to the benefit not only to this country but also to the whole world.”
該法律於1925年4月生效，當時英國在戰爭期間暫停金本位後恢復黃金支付。當時，總額達三億美元的信貸在本市場開放，用於維護英鎊匯率。在這些信貸中，兩億美元由聯邦準備銀行提供，根據協議在必要時向英格蘭銀行出售黃金；一億美元由以J. P. Morgan & Co.為首的美國銀行財團提供。這些信貸從未被使用，這一經驗與今年開放的信貸被大量使用形成了鮮明對比。
