ALMOST A PANIC

Dominion, Volume 28, Issue 96, 17 January 1935, Page 9

ALMOST A PANIC

Buying Run on Dollars In New York INTERVENTION BY FEDERAL BANK Apprehension Over Coining Court Decision SHARE VALUES DECLINE By Telegraph.—Press Assn.—Copyright, l , (Received January 16, 8.25 p.m.) New York. January 15. A situation rapidly approaching the panic stage on the foreign exchange markets was checked late today when the Federal Reserve Bank, acting apparently on behalf of the Treasury's two billion dollar stabilisation fund, started buying great quantities of francs to halt a seem- . ingly endless buying run on dollars. Growing apprehension that the coming Supreme Court decision on the gold clause case would topple over the entire structure of the Government’s monetary legislation sent the dollar to a 2.8 cents premium over the fixed gold parity. The franc dropped 14 points to 6-45, while the pound sold, at 4.83 J dollars, the lowest since November 4, 1933. Meanwhile the state of agitation among exchange dealers spread to the commodity and security markets, all suffering severe declines. A two to three cent drop in wheat futures was rivalled by a dollar a bale drop in cotton. Other staple products dependent on world markets participated and declined throughout the day. The Stock Exchange underwent liquidation sales almost three times greater than yesterday. Metal and metal processing shares were all hard hit, some speculative ones dropping over 20 points. This unsteadied the general list, with practically every issue showing losses. Throughout the day banks besieged the Treasury for an assurance that it would maintain the price of gold at 35 dollars, an ounce, but, in view, of the uncertainty as to the court’s action and. counter-legislation Congress might enact, the Treasury’s only guarantee was that it would continue the price “until further notice.” In Washington, according to a “New York Tinies” dispatch, Administration circles interpreted to-day’s market confusion as only a taste of what would result from an adverse court decision, and believe that for that reason, among others, the court will uphold the policy as absolutely essential to prevent financial chaos. The activities on the exchange markets were partially ascribed to newspaper reports that certain “departmental experts” would welcome an adverse decision as a means of forcing Congress to return the dollar to its original value. Treasury officials made it clear, however, that they are wholeheartedly behind the monetary policy, and consider the voiding of it most disadvantageous to the Government. The possibility that, the court might frustrate their long campaign to cheapen the dollar proyoked some members of the inflation bloc to take a more radical stand. Senator Thomas, author of the amendment under which the dollar was devalued, intimated that Congress might ignore such a decision entirely and make it inoperative by refusing to appropriate funds to pay the enhanced gold value of Government securities. A cable dated January 8 stated that, following the Supreme Court’s adverse decision against the Administration’s .petroleum control programme, the tribunal started consideration of perhaps the most vital phase of the New Deal, namely, the Congressional action in voiding the so-called gold clause in public and private securities. A test suit involves the holder of .a single bond of the Baltimore-Ohio Railroad, who contends that a 22-dollar interest payment should have been equivalent to' the old gold value or about ,40 per cent, more, and that, in effect, complainant has been deprived of property without due process of law. It is estimated that about 100 billion dollars’ worth of securities are involved in the issue, as well as the entire basis of president Roosevelt’s monetary policy. For that reason the Attorney-General, Mr. H. S. Cummings, took the almost unprecedented action of personally defending the suit against the Government before the Supreme. Court to-day. He argued that the crisis of 1933 was so serious that summary action was necessary “to keep the people from slipping to a lower level of civilisation.” LONDON EXCITEMENT ‘‘Paris Takes Fright” RELUCTANCE TO SHIP GOLD (Received January 16 r 11.50 p.m.) London, January 16. The wild movements of the franc and dollar caused excitement in the London foreign exchange market. Paris banking houses refused to take gold from the Bank of France for shipment to New York, unless a guarantee was forthcoming from American banks that the gold on arrival would be paid for at the official price of 35 dollars an ounce as a necessary corrective to the demand for dollars against francs. Gold shipments were not forthcoming, the French franc had a break, and an advance in (he cross rate was the result. This reluctance to ship gold was due to the belief in Paris that an adverse decision of the Supreme Court in the gold clause action would mean that the United States administration would revalue the dollar at the old parity rather than pay a surcharge in paper dollars. Conditions on the exchange market at the late session bordered on farcical. The truth is, says the “Financial Times.” that Paris took fright. It must be realised that in the event of an adverse decision the Administration and Congress would get round the legal position somehow and certainly not resort to deflation.