Ill

THE RETURN TO GOLD

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risen somewhat less than American prices. Butit is generally agreed that these influences havenot been strong enough to account for every-thing. The Board of Trade returns indicatethat there has been a movement of funds oncapital account in the past year (and most of it,probably, in the second half of the year) fromNew York to London of the order of magnitudeof £100,000,000. This is due (in proportionsdifficult to calculate) to the return of foreignbalances previously held in London, to Ameri-can investment in Europe resulting from thegreater confidence engendered by the DawesScheme coming on the top of an investmentboom in Wall Street , and to speculative pur-chases of sterling in the expectation of itsimproving in value relatively to the dollar.This unprecedented movement introduces aprecarious element into the situation;—wecannot expect that it will continue on the samescale, and it may, at any time, be partly reversed.We require an interval, therefore, to readjustour liabilities either by a recovery of exportsrelatively to imports or by establishing a rateof interest on permanent loans high enough tocheck the present (in my judgement excessive)flow of new foreign investment outwards. Atpresent we are in danger of lending long (e.g. toAustralia) what we have borrowed short fromNew York. The strength of our pre-warposition lay in the fact that (through the billmarket) we had lent large sums short, which wecould call in. At the present time this position