Borrowing and business in Australia

Bibliographic data

Monograph

Identifikator:: 183051623X

URN:: urn:nbn:de:zbw-retromon-222122

Document type:: Monograph

Author:: Wood, Gordon L. http://d-nb.info/gnd/1239193688

Title:: Borrowing and business in Australia

Place of publication:: London

Publisher:: Oxford university press, H. Milford

Year of publication:: 1930

Scope:: xv, 267 Seiten; graph. Darst.

Digitisation:: 2022

Collection:: Economics Books

Usage license:: Get license information via the feedback formular.

Chapter

Document type:: Monograph

Structure type:: Chapter

Title:: Part V. Australia during and after the great war

Collection:: Economics Books

RETURN TO GOLD IN 1925 217 speaking world was revealed in the arrangements by which a gold credit of 200,000,000 dollars was set up by the Federal Reserve System for the use of the Bank of England should the necessity arise. The Bank of England, on its side, inspired an unofficial embargo upon British capital investments overseas. By this means the threatened world cleavage between gold currency countries led by the United States, and paper currency countries led by Great Britain, was averted. The monetary adjustments called for by the decision to return to gold bore very lightly upon the Australian financial authorities. By a singularly fortunate coincidence Australian currency was at a substantial premium.! The adjustments connected with the restoration were made so easily that the significance of the step was scarcely realized by bankers or business men in Australia. Few apprehended the part that happy chance, in the shape of plentiful funds awaiting transfer to Australia, played in the smoothly operated change ; and still fewer recognized in after events the presence of depressing factors arising out of the necessary financial adjustments. These fortuitous funds in London were the substantial un- transferred balances of large loans that had been floated in 1924, some money accumulated from a succession of good seasons, and the very considerable Bawra dividends. At the very moment when there was a paramount necessity for the balance of international payments to be heavily in Australia’s favour that desirable circumstance existed.2 Little wonder, therefore, that the real deflation which ensued was masked for the time being, and that the most effective factor operating to conceal the true inwardness of the situation was once again the great volume of capital borrowing. ! ‘During 1924 the exchanges were favourable (to Australia) and the price-level Fell to parity with U.S.A. prices. When the sterling dollar exchange moved towards parity at the beginning of 1925 it was profitable to import gold from the United States for the Australian pound was at a premium with the British. As the banks had been complaining of low cash reserves in Australia and ample funds in London this movement was encouraged, and imports during the early months of 1925 amounted to over £10,000,000.'—Copland in Foreign Banking Systems, p. 53. * For a time, indeed, the volume of funds in London was a source of great smbarrassment to bankers in Australia, and the buying rate was at one period 70s. per cent. discount. This situation ultimately, of course, had the effect of dis- souraging exports and encouraging imports, and this in the end helved to restore the equilibrium of indebtedness. a1 rd

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