Bill, check your private mail..................
The Exchange Equalisation Fund
The Exchange Equalisation Fund is a monetary fund instituted by the British Government in 1932 for the buying and selling of foreign currencies in order to keep the pound sterling stable. The necessity for such a fund arose out of the abandonment of the gold standard in 1931. Parliament sanctioned the creation of the Exchange Equalisation Fund with power to borrow 150,000,000 pounds sterling. This sum was in 1933 increased to £350,000,000 and in 1937 to £550,000,000. The Fund was controlled by the Treasury through the Bank of England. The policy was to buy when prices of currencies are falling, to sell when they are rising, thus market tendencies are counteracted, speculation is curbed and stability results. In 1934 the U.S.A., and later France established similar funds, so that these three nations acting in concert could ensure some degree of stability in the international exchanges.
Source: Harold Wheeler, "How Much Do You Know?", Odhams Press
In 1941, ex-governor of the Bank of England Vincent C. Vickers wrote:
"Cheap money and the exchange equalisation fund have well fulfilled their peacetime objectives, and the nation has thrown off for ever the restrictions of the Gold Standard; but such steps are not in themselves enough. The supply and issue of money and the creation of credit still remain almost entirely outside the control of the Government, and are still managed by Banking and Finance and by the Bank of England with its intimate associations with the Bank for International Settlements; whilst, until our actual declaration of war, Foreign Exchange speculators were permitted at all times to gamble with the nation's credit, untrammelled by any sense of patriotic duty and thinking only of their own profit..."
Amongst other things, Vickers recommended:
"Fixation of foreign exchanges by foreign exchange equalisation funds, and agreement with Empire countries and all other countries willing to fall into line; and, once this was accomplished, the removal or diminution of trade barriers which to-day protect the countries from the results of a bad monetary system."
An Exchange Equalisation Fund in Thailand failed to prevent the baht crisis in 1997, one of Thailand's worst ever economic crises.
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