1949-09-20 — Page 7

POUND STERLING

Eighteen Years Minus 2 Days

London, Beptember 18.

-It was almost exactly 13 years ago tonight that Britain announced to the world that it was abandoning the gold standard.

It was Sunday afternoon September 20, 1931-when Prime Minister Ramsay Mac- Donald summoned the press to the Cabinet room at 6 p.m. На announced the historic decision and it was published in the newspapers.

The Stock Exchange, which had been open the previous Saturday for the first Satur- day in 14 years, was closed the following Monday and Tuesday while the world as- justed itself.-United Press.

Main Aim Of Sterling Devaluation

London, September 18.

THE CHINA MAIL, TUESDAY, SEPTEMBER 20, 1948.

DEVALUED TO U.S. $2.80 BRAATHENS

Biggest World Financial Sensation Since 1931

WORLD-WIDE

REACTION

London, September 18. Britain tonight announced the devaluaton of the Pound Sterling

by 30 and a half per cent.

From tomorrow, September 19, it will be worth only $2.80 instead of $4.03. This was announced tonight in a dramatic world-wide broadcast by Sir Stof-

ford Cripps, Chancellor of the Exchequer, only 28 hours after his return from the Washington dollar talks.

The decision to lower the rate of the Pound is the biggest world financial Its impact "sensation since Brita in come off the gold standard in 1931.

on international monetary markets will be terrific. The extent of the cut came as a surprise even to those quarters who had been predicting de- valuation. None of them had suggested a rate below $3 and most had forecast that it would be higher.

**

The new rate is even slightly lower than the black market rate. The price of a dollar to Britons will now jump from just under five shillings to seven shillings and two pence.

Some big fortunes will be made by holders of gold shares and

degree, would remain the same. but that some adjustments would have to be made in the case of countries whose currencies are de- 2 greater or lesser valued to degree.

at its présent level in relation to the devalued Found Sterling.

The rate of the kroner is 20 to the Pound.

SWEDEN: Sweden, whose financiers had forecast a 20 per cent devaluation of the Sterling tonight suspended all payments with foreign countries until fur- ther notice.

National

This decision of the Bank was taken to give the coun- by a chance to discuss the new value of the Crown in relation to

to sell other people who had gambled on Nash, announced in Wellingtoners were shocked. They

Sir Stafford Cripps Addresses The Nation

London, September 18.

Sir Stafford Cripps, British Chancellor of the Ex--

chequer, in announcing the devaluation of the Pound Sterling from $4.03 to $2.80 in a nation- wide broadcast last night said that this step- was the most serious that the Government could possibly take, and “wa are taking it be- couse our present sterling-dollar difficulties are, we believe, otherwise insoluble." Earlier in his broadcast, Sir Stafford said, "Though we took the decision before the Foreign Sec- retary, and I left for Washington, we did not then announce it because we wanted to tell our American and Canadian friends first and to inform all the members of the Common- wealth and also because it takes-a-little time to arrange these matters.' Si Stafod appealed "most That is a very difficult thing earnestly and with all wy to stop and there has been a strength to our manufacturers good deal of it going on lately. and exporters to redouble their With low reserves we cannot af- efforts to sell their goods in the ford losses of that kind. We had dollar markets."

to take some steps to stop it.

which

Explaining why the step taken tas contrary to what he had stated on behalf of the Govern- ment in July last, Sir Stafford NEW ZEALAND: The New Zea-

said that Britain's gold reserves land Finance Minister, Mr. Walter

began to run away at much too fast a rate, despite the aid she today that the New Zealand Pound will be devalued at the forecast that Sweden will devalue was getting under the Marshall

Plan. by only 20 per cent, causing an If we could not stop that same rate as Sterling.

EIRE: Eire tonight devalued appreciation of the Crown in rela-

those reserves, which the Pound to $280. Banks will tion to Sterling of about eight per drain.

served the rest of the Sterling open tomorrow but exchange deal-

ARGENTINA Business eir Area as well as ourselves, would

disappear," he said. cles in Buenos Aires said to pended.

night, following the announce - of the ment of the devaluation Pound Sterling, that they ex- pected the Argentine peso to fellow suit.

The main reason for the de- valuation of the Pound is to en- able British exporters more cheaply abroad and thus a fall in Sterling and other soft boost exports, especially to the currencies.

Those South Africa gold mizes collar countries.

By cheapening the Pound, Bri-which have been working on a Lain hopes that American and narrow margin at the old price of other "hard

buyers gold

gold will find their profit margins currency" will find British products cheaper increased from anything up to six-ings have been temporarily sus than at present and will there-fold in extreme cases fore buy much more of them.

A simple example of how de- valuation will work is the case of an American who wants to travel. Hitherto, he may have: kept away from Britain because he has heard that British hotel charges and other prices were

too high at the old exchange rate Now, he will be able to buy more Pounds from bis dollars and will find a holiday in Britain much cheaper. Thus, it is hoped,

many more American and Cana- dian tourists will be attracted to Britain

Imports from hard

currency countries will not cost any more dollars than before, though the dollars wil cost more Sterling.

If wheat cost $2 a bushel, it will still cost $2.

Imports from North-America may even cost fewer dollars be cause the whole purpose of de- valuation is to stimulate petition in dollar markets, which should obviously go some way to Teduce prices there.

*日日

When Starting was devalued

The devaluation automatically raises the price of gold from its present level of 172s. 34. to almost 250 shillings per ounce.

The exact price in London is likely to be 248s. id. which is equal to 250 shillings delivered at New York

"The main uation is

The main purpose of the deva~ to stimulate exports from the Sterling Area to the dol- fro lar countries.

INDIA: The Indian Govern- ment, in a statement issued in New Delhi, announced that the Rupee

More reaction reports on the Sterling devaluation will be found on Page 9.

cert.

ment

The Argentine Government was informed of the devaluation of the Found in a note from the Bri- tish Embassy in Buenos Aires this evening.

HOLLAND: The Dutch Gov-' Sir Stafford Cripps and British will be devalued to the same rate ernment tonight announced it "finds itself compelled to consider Treasury officials had until this as Sterling

FRANCE: The French Gov-taking a similar step" to that of week-end denied that the Govern-

the Britain in devaluation. ment had any intention of devaluerament tonight announced ing the Pound..

suspension of the free market in gold until further notice.

World-Wide Effect

A communique said that trans- A world wide devaluation offers of foreign exchange would be soft currency tonight foliowed suspended and foreign accounts in Britain's decision to reduce the France blocked Pound Sterling exchange rate The communique announced from $4.03 to $2.80 Synchronis-that Stock Exchanges will be

with the Chancellor of the closed tamarrow. Exchequer, Sir Stafford Crippa's, Financial requirements of London broadcast discicaing

tourists in France will be provided Britain's decision to devalue came flashes telling of other new dollar rates.

ing.

The devaluation was a climax to Government preparations

COO-

for.

The decision will be announced as soon as possible

The Netherlands Bank has withdrawn all the present rates of exchange as from tomorrow and also stopped dealings foreign currencies

and paper transactions.____

hais

Exceptions Made- Exception can be made in urgent cases but settlement for them will be made later after the new rates are fixed,

"We must stand on our own feet in this matter of dollars. We must not run any risk of large- scale unemployment" he added. Realistic Level

"

That was one reason convinced us of the need to lower the Sterling rate of exchange to a new rate which would stop this drain on our reserves.

"It was essential to Sx that rate at level that we could hold.

U.S., Canada Told

"The Government· decided- and we told our American and Canadian colleagues of this de- cision on the first day of our arrival before starting on any discussions or consultations-to the deitar exchange reduce value of the Pound Sterling. "In the last few days we have attled what the new rate should Sir Stafford said it was es-be and now I have to tell you ef sential to fix the new rate at a that decision: it is that in place of level that Britain could hald: the present rate, fixed in 1946, of "We can always let the rate go$4.03 for the Pound, the rate will up if events prove that we have in future be $2.50 to the Found. gone down a bit too low," he "We can always let the rate ga added.

up if events prove that we have "We thus start upon another

亚 bit too low. gone down stage in the magnificent struggle Another reason I have already of our

people to overcome the mentioned: we. had to increase crashing difficulties imposed upon our power to eam dollars, that is them by their sacrifices in the the only permanent solution for world war. We have, so far, sue our difficulties to earn more dol ceeded, and it is ne time now to lars.

hold back" be falter or

stated

We Sir, Stafford continued

med "In the dollars or spend less to get a light of the renewed promises of balance. Merely to cut down our co-operation from the members spending and do nothing to in- of the Commonwealth, from the crease our earnings is a policy of United States. and from

desperation and not one that we friends in Western Europe, we could adopt" have, on your behalf, accepted Speaking la simple, "plain the challenge of the times for man's" language Sir Stafford told fresh and decisive action, coavine. the ordinary Briton that devalua- that it will bring us stili tion would mean an increase ára ed

nearer to our goal of happiness the price of bread and flour

be the only and prosperity for our people." But this would

In Earlier on, Sir Stafford said, noticeable increase

the time being, Sie We and the Sterling countries of prices for

OUT

must either earn

French Consultations The Prime Minister's Office

The Dutch Minister of Finance announced tonight that consulta-

has ordered that Stock Exchanges tions were taking place to examine

will transact no foreign currency the consequences of the British business on Monday and Tuesday. decision to devalue Sterling. of

The French Government would Banks will remain open to do or

the Commonwealth, like Austra-Stafford said. decide its position only when in dinary business but will not be

permitted to do any foreign cur possession of all the facts.

of business

with

the dollar area DENMARK: Denmark tonight rency transactions for those twolia, India and so on, all do a lot The Premier, M. Willem Dress, and we pool our dollar earnings. followed Britain's example devalued her currency from 4.81 returned from Belgium suddenly So though this problem affects kroners to the doilar to 6.92 today to attend the special Cabinet the United Kingdom particularly for the Sterling kroners to the dollar,

meeting called to discuss the as bankers The Sterling value of the kroner Dutch Government's attitude to Area-it also affects the whole

non-dollar world. remains unchanged at 19.36 to the devaluation Pound.

in 1931, almost the whole effectducted with a "secrecy comparable was to reduce dollar prices rather to that which went before the

Sterling prices wartime than to raise

Allied invasion This cannot be expected to the

Europe same extent this time, but some

The French Government an- reductions may be hoped for.. nounced the suspension of the free gold until further Again, not all British exports market in will bring fewer dollars than notice. A communique said that before. Some

Continental transfers of foreign currencies middie-men have been buying | would be suspended and foreign British goods for soft currency accounts in France blocked and then selling them to the Banks and Stock Exchanges in Americans for dollars.

the countries affected by the valuation should help to stop sweeping cecnomie realignment this and divert these dollars to will be closed tomorrow. Britain.

De

The devaluation announcement came as a bombshell to thousands

tourists in Europe,

More Exports

New York financial circles to- The main reason for hoping that, on balance, devaluation will night were shocked at the increase Britain's supply of dot-rate of the Pound Sterling-consi-

new

and

days.

"Nor can we solve it alone. The dollar countries in particular mus! help us and the rest of the non-collar world to earn more dollars.

EGYPT: Egypt tonight an- BELGIUM: Belgian financial nounced the devaluation of the circles thought that the devalua- Egyptian Found at the rate of tion of the Found would be ful $2.671. The cut in the rate be-lowed by the devaluation of other came effective immediately. European currencies. An official Gaston All banks will be closed to close to the Premier, M. Ga morrow and the Stock Exchange Eyskens, told Reuter "I do not derably lower

expected. will be than

closed tomorrow and think that there will be any de Lars,

observers there said that Tuesday.

valuation of the Belgian franc." exports will go to dollar markets Britain may expect an immediate NORWAY: Norway tonight de- GREECE The Greek Premier instead of soft currency markels revival of American merchandise valued the kroner from 496 to has crdered Greek banks to

If British export prices, in

buying as a result of the decision.

7.14 to the dollar. She announced closed tomorrow following the Pounds,

unchanged, they Currency changes affecting at the same time that her cur-announcement of the devaluation and dollars by all sorts of de- will cost an

st an Indian buyer just commonwealth and other county san would be maintained of the Found. Retter. as, many rupees as before, but tries are shown in the following they will cost an American buyer reports:

is the fact that more of her

fewer dollars. This will strong- Australia: The Prime Minister,

by attract Sterling Area exports | Mr. Joseph B. Chifley, announced away from such countries as In- in a special broadcast from Can- dia and towards such countries berra today (September 18) that as the United States.

the Australian Pound Sterling would be devalued in the same proportion as Sterling.

On direct exports British ex- porters, ta their own interests, will not cut their prices in dollars for goods for which American buyers are prepared to pay as mary dollars as before. They will go on selling at the old dol- ar price and make correspond- ingly larger Sterling profits

Whenever lower dollar. prices

24.

New Aussie Rate

Mr. Chifley said that the new par rate was $2.24 to the Aus- tralian Pound and would operate as from the commencement of business today.

The Prime Minister added that of Australian the present rate

are necessary to increase dollar £125 to £100 would remain un business, however, it will be in changed.

exporter's own interest

The Governor of the Common- well as Britain's to cut those wealth, Bank, Dr. H. C. Coombe prices. Unless British internal announced that the new price of prices rise sharply, which is un- gold in Australia would be £15. Fikely, they will be able to do so. 9. 10. per fine ounce, compared To the British man-in-the-to the present price of £10. 15. 3. street, for all internal purposes. D Dr. Combe said that the banks Pound is still a Found: but would open for business in Aus- there is a danger that the in-tralia today as usual.

reased Sterling price of; imperts From the dollar area may raise

he cost of living.

Small Rise

S. A. Rate

South Africa:

The South Afri- can Prime Minister, Dr. Daniel Malan, announced in a nation- wide broadcast from Pretoria to- night that South Africa had de This rise should be small, cided to devalue her Pound to the probably less than ve per cent, same rate as the Pound Sterling. and · would be due is to the devaluation itself than to the measures that have been taken ta' make devaluation safe, It people insisted on

higher vages every time there was e mall increase in prices, then te Mliation could start an inflation- ry spiral, but Snancial experts Lere think that this is unlikely

o happen...

Every Found

Dr. Matam said that the new par value of the South-African Pound would be 28.4 grains of fine gold, or $2.80 compared with previous value of 65,26857 grains of fine gold, equivalent of $4.30. The devaluation would be immediately effőctive,

Dr. Malan said that the ex- change rates between South Africa

the bank or in and the United Kingdom, and all those countries whose, currencies

ny form of sayings or invente have been devalued in the same

ment is still worth 20 shillings hav

。 the Englishman, and is as safe |_____

is it ever was. Indeed, by the day hatBENE

beasures which have been taken ling Area, money in the bank

ensure that the devaluation | zuid in savings is actually meter. trengthens Britain and the Ster than it was before-Bevier.

FLY TO CANADA

by

be

Talks had started last spring about our exchange rates in a way which led to doubt as to whether they were not too high. Once It was suspected that a lowering might take place, people tried to sterling into gold turn pounds

vices.

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He warned that over the next few months a few articles made raw ma- from imported dollar terials might go up in price if dollar prices did not fall

(Continued on Page 9),

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