Buy British

Mr. Chamberlain's Chancellor of the Exchequer and Inner Cabinet confidant, Sir John Simon, is cold and devious, a lawyer whose poker face and ambiguous, clausy rhetoric are well adapted to muddling through. Devious and poker-faced as ever last week, Sir John took steps definite enough to jolt the bowler-hatted businessmen of London's "City." He mobilized the Bank of England and the London Stock Exchange to impose "Simon's unofficial ban" on British buying of U. S. securities.

No law was passed, no edict issued. Investors were simply advised that their cash is needed at home to finance rearmament, that the pound sterling must not be weakened by further flight of capital. This step towards totalitarian economics produced no excitement. Sir John simply wished, and British-fashion, business "assented."

But for England, traditionally the world's banker, and for Wall Street, now the world's safe deposit box, Sir John Simon's order to investors to "Buy British" recorded another portentous retreat from the free capitalism of Adam Smith. Under it, Britain found that capital export opened markets, expanded prosperity across national boundaries, employed surplus British wealth. Today, British capital is no longer exported in this sense; it flees, and its flight is at this time a drain on national resources.

Germany, Italy and Japan have found a way to stop this drain. But they did so by violating capitalism's unwritten Magna Charta: That money must have a right to go wherever it can make profits and avoid losses. In Britain, this right has now been suspended by Sir John Simon's dictum: "The export of capital . . . would be deleterious to the national interest."

Since January, Sir John has been planning to float a rearmament loan of $1,500,000,000--three times as much as the British have spent buying U. S. securities since 1935. For some time he has been hinting that he could not raise all this money so long as Englishmen remained free to put their investment cash into U. S. securities. Meanwhile, since 1935, Englishmen, fearful of war, had shipped $500,000,000 to the U. S., now have about $1,000,000,000 invested in marketable U. S. securities. Silent pressure has gradually reduced the flow, since first of the year it has subsided. Sir John has bottled up all the potential refugee cash that did not escape before. Only bounders will persist in selling pounds and buying dollars, but the British Government has marvelously effective ways of cracking down by the use of "influence." Thus one month after Britain had begun conscripting men, preparations were being made to conscript wealth, too--by consent.

U. S. economists began discussing the possible consequences of Britain's silent change of economic front:

> Except for normal commercial transactions and British Government payments for arms purchases, Britain, possessor of the world's No. 2 gold hoard (about $3,000,000,000 plus the hidden treasure of India and the mines of the Rand), will no longer add to the top-heavy U. S. gold cache ($15,867,000,000), some 60% of the world's supply. This means that English speculators will no longer be free to unload gold, which is of no present use to the U. S., in exchange for valuable U. S. securities and commodities.

> New York City banks, their vaults already bulging with $923,760,000 of funds deposited by Europe, have considered charging fees to discourage growing foreign deposits. If runaway British money does not add to this, such fees may be closer to i of 1% (just cancelling out FDIC assessment on deposits) than to -L- of 1%.

> U. S. stock markets will now have to wobble along without the occasional support they have received from British buying. Although English buying has been a mere fraction of i% of the $11-18,000,000,000 annually traded on the New York Stock Exchange, it has sometimes an effect out of proportion to its size, in these dogdays of trading.

> Englishmen not free to flee from pounds into dollars may find means to go on hoarding U. S. currency: London's oracular Economist reported last month that ships carrying gold to the U. S. on every trip returned carrying U. S. paper dollars to British hoards. In March and

April Europeans, dubious of their own currencies' shock-resistance, gobbled up $100,000,000 of U. S. legal tender in $100, $500, $1,000 bills.

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