The British Exchange Equalisation Fund, 1935-1937

After this article had already been planned, the justification for its publication was reduced by the partial lifting of the veil of official secrecy with which the working of the British Exchange Equalisation Account has been surrounded since its inception five years ago. Since, however, the Chancellor's statement has so far revealed the gold holding of the Fund for a single date only-March 30th, 1937it is thought that it may be of interest to trace its movements since the end of I935, when the previous estimates1 terminated. Encouragement to proceed with publication has been derived from the fact that, although the estimates and calculations used have been in no way altered since the publication of the official figure for March 30th, the estimate for that date is within some 5oo,ooo ounces, or about i3l Mn., of the true figure. This is, of course, a fortunate accident. The smallest range of error which could in general be hoped for in these estimates is of the order of plus or minus 3 Mn. ounces, or about 2zo Mn., while at times the error has no doubt been far greater than this. Nevertheless, it cannot but be gratifying to the author that the Chancellor should have chosen a date for his first revelation when the actual figure was so close to the estimate. It is to be hoped that, in addition to the publication of future half-yearly figures, three months in arrear, the Treasury will publish the figures of the Fund for the years since its inception, and thus make it possible to effect the necessary corrections in the earlier estimates. The assumptions and methods of calculation used in these estimates of the movements of the Exchange Fund have been fully described in the two previous articles on this subject,' and it is not necessary to repeat them here. One important departure from the assumptions formerly used has now been made. Previously it was assumed that the total of tap Treasury Bills held otherwise than by the Exchange Fund remained constant at I145 Mn. This assumption has now been abandoned. Since November, 1935, no less than three mediumterm loans have been issued, of which large portions are believed to have been taken up by Government Departments and the Bank of England, and thereafter sold off gradually at declining prices. It

Economics · Order (exchange) · Political science · Publication · Secrecy · Treasury · Economic, financial, and policy analysis · Finance · History · Law