EXCHANGE EQUALIZATION ACCOUNT.
It is now proposed to make that £25,000,000 the nucleus of a new " Exchange Equalization Account," the Government also to have powers to borrow (not neces- sarily Public Loans) up to an amount not exceeding 1150,000,000. With what object ? In the first place, the Government in effecting its repayments of franc and dollar credits has already incurred a loss, probably of about £30,000,000, and that, no doubt, will be dealt with through this Exchange Equalization Account. What, however, is more important is that this new piece of machinery will, within the limits I have just mentioned, provide the Government with a weapon to combat the speculations in the sterling exchange which have been taking place on foreign account for a long while past. These violent fluctuations in sterling are injurious to trade and industry, and while it is not to be supposed that even with these new powers we can expect entirely to control the exchange situation, they will be most helpful in that direction, while their exercise will in no way impair the soundness of our currency structure. The regulations affecting the Bank of England Note Issue will remain quite unchanged, but the nature of the backing of that portion of the Note Issue not covered by gold will really be stronger in the sense that it will comply more fully with modern requirements arising both out of our departure from the gold standard and out of the conditions prevailing in other countries. The Government's proposals have been well received in the City.
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