Economic Affairs

Part of the debate – in the House of Commons at 12:00 am on 30th November 1966.

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Photo of Mr Roger Cooke Mr Roger Cooke , Twickenham 12:00 am, 30th November 1966

I agree that the£200 million is a net earning, but when looking at the figures it seemed to me that we were paying out about£500 million in interest on deposits. However, if I am wrong it does not alter my general argument that if there is a crisis of confidence, people selling to us may demand payment earlier because of a possible risk of devaluation. It has been said that if we had to pay for our imports only a week earlier it would cost our reserves£150 million. If there is a crisis of confidence, depositors begin to withdraw their money at the same time, so that we are in danger when the situation is not 100 per cent.

In addition, world liquidity for trading purposes may be getting into short supply—that is, currently required generally for world trading. It is estimated that an extra 3 billion dollars is required each year for world trade, and 1 million dollar's worth is supplied by newly-mined gold. The rest of the increase in world liquidity is met mainly by outflow of dollars, but also, to some extent, by out-flow of pounds.

I have long believed that this is a a dangerous situation. It is all done on tiny reserves. The whole of our liquid reserves are smaller than those of the Bank of Texas. At the end of the war, J. M. Keynes suggested that there should be a new international currency, to take the weight off sterling called Bancor. A former Chancellor of the Exchequer, my right hon. Friend the Member for Barnet (Mr. Maudling) tried to get the bankers to work a new system called the "Maudling Plan", which he put forward in Washington. My right hon. Friend then said: …I have in mind an arrangement of a multi-lateral character under which countries could continue to acquire the currency of another country which was temporarily surplus in the markets and use it to establish claims on a mutual currency account which they could themselves use when their situations were reversed. Such claims on the account would attract the guarantee that attaches to holdings in the fund. That proposal aroused a lot of interest, and some work has been done on it. If the Chancellor refers to it tomorrow, I shall be interested to hear him. I believe that we should be using this calm period to try to get the I.M.F. to create a new type of international currency—