CURRENCY AGREEMENT

Evening Star, Issue 22455, 28 September 1936, Page 9

CURRENCY AGREEMENT

ENGLAND, FRANCE, AND AMERICA STABILISING INTERNATIONAL EXCHANGES effirt to promote world prosperity Press Association—By Telegraph—Copyright LONDON, September 26. The British Treasury issued the following communique at 3 a.m.: — “ His Majesty’s Government, after consultation with the French and American Governments, joins them in affirming a common desire to foster conditions which will safeguard peace and beet contribute to the restoration of order in international economic relations, and to pursue a policy tending to promote world prosperity and improve the standard of living. “ His Majesty’s Government must, of course, in its policy towards international monetary relations, take fully into account the requirements of internal prosperity in countries, as corresponding considerations will be taken into account by the French and American Governments. The British Government welcomes the opportunity : to reaffirm, its purpose to continue the policv it has recently pursued, the constant object of which is to maintain the greatest possible equilibrium in the system of international exchanges and to avoid the creation of any disturbance of it by British monetary action. His Majesty’s Government shares with the French and American Governments the conviction that a continuation of this twofold policy will serve the general purpose which all Governments should , pursue. . “The French Government has informed His Majesty’s Government that, judging that the desired stability of the principal currencies cannot be ensured on a solid basis except after the re-establishment of a lasting equilibrium between the various .economic systems, it. has decided, with this object, to propose to its Parliament a readjustment of France’s currency. His Majesty’s Government and the United States Government have welcomed this decision in the hope that it will establish more solid foundations 'for the ■stability of international economic relations. “ His Majesty’s Government and the French and American Governments de■cl_re their intention to continue to use the appropriate available resources so as to avoid as .far as possible any disturbance to the basis of international exchanges resulting from the proposed readjustment. They' will arrange for , such consultation for this purpose as , may prove necessary with the other two Governments and authorised agencies. “ His Majesty’s Government and the French and American Governments are ,i also convinced that the success of the policy set forth above is liked with the development of international trade. They particularly attach the greatest - importance to-action, being taken without delay to relax progressively the present system of quotas and exchange con--1 trols with a view to their abolition. His Majesty’s Government, in common with the French and American Governments, desires and invites the co-opera-tion of other nations to realise the policy laid down in the present declaration. It trusts that no country will attempt to obtain ah unreasonable competitive exchange advantage, and thereby hamper the_ effort to restore more stable economic relations, which it is the aim of the three Governments to promote.” NO CHANGE IN BRITISH POLICY STERLING TO REMAIN FREE CURRENCY LONDON, September 26. The currency declaration arises from discussions between the British, French, and American Governments during the last few days. It does not involve any change in British monetary policy. Sterling will ■ remain a free currency not linked with gold or other currency. The declaration is also intended to make clear that His Majeoty’s Government will not deliberately depreciate the pound sterling by way of reprisal for the monetary measures proposed by France. His Majesty's Government has also undertaken to consult other Governments in order to avoid exchange disturbance arising from the readjustment in the value of the franc. STABILISING ECONOMIC CONDITIONS GRATIFICATION IN AMERICA WASHINGTON, September 25. The Secretary of the Treasury (Mr ‘ Henry Morgentnau) announced that the Treasury had entered into a tri-party agreement with Britain and France to . link the dollar, pound, and franc on a * more stable basis. Details of the French revaluation plan have not been published here, and Mr Morgenthau’s statement is limited to generalised comment, expressing the hope that the • new international monetary development will lead to the stabilisation of . world economic conditions. Unofficially, however, Treasury officials are represented being exceedingly pleased at the outcome of tele§hone. conversations with London _ and 'aria.' They believe that the decision which has been reached will do more to promote peace in Europe than could bo accomplished by any number of international conferences. v While agreeing not to retaliate against the lowered gold .value of the franc, Mr Morgenthau’s statement emphasised that the internal policies of the nations must come first and that the Government would take whatever steps wem deemed necessary in the future to protect the economic well-

being of the people. He said ho would recommend a continuance of the Treasury’s two billion dollar stabilisation fund as,“ the best insurance the United States has against the adverse reaction of monetary or economic conditions in other countries.” DEVALUING THE FRANC CONTROVERSY ARISES IN FRANCE PARIS, September 27. The necessary legislation for tho readjustment of the franc to the pound and dollar will be submitted to an emergency session of Parliament on Monday, and there will also be a measure to compensate French nationals suffering heavy loss. The Bank of France meanwhile is taking steps to avert speculative manoeuvres. The Minister of Finance (M. Auriol) stated that the Government was doing its utmost to prevent an unwarranted rise in prices. He added that the nefotiations with Britain and America had een proceeding since June, the objective being to end economic war and to create an alignment avoiding monetary and financial difficulties. A stabilisation fund of £130,000,000 will maintain the stability of the new franc, the gold content of which will be fixed at 49.43 milligrammes of gold of .900 fineness.

The basis of the currency agreement between England, Franco, and America is believed to be holding the franc at 105 to the £1 and the dollar at 4.86 to the £l. , , It is understood that there will be no direct embargo on gold exports, but the minimum number of francs that can be exchanged against gold will be fixed so high as to make business practically impossible. The requisitioning of all gold will, under the new price, give the Government a profit estimated at between £175,000,000 and £230,000.000, more than compensating -for the failure of “baby” bonds. The Government’s stiffest obstacle will be the Senate, where it is expected that devaluation will be attacked for reducing the purchasing power of fixed incomes and injuring French investors, who lost 80 per cent, of their money in the 1928 devaluation. The devaluation has speedily aroused a controversy. M. Reynaud, a former Minister of Finance, recalls that he urged the step in 1934, since when France had lost 30,000,000 francs in gold and the condition of the people had become worse. “ This is the last chance,” he said! “ Don’t let us muddle it.” /On the contrary, the former Ministers. MM. Marin, Mendel, and Bonnet, condemn the decision. M. Mendel declaring that devaluation is a downright swindle. FRENCH STOCK EXCHANGES CLOSED PARIS, September 26. An official decree has been issued closing all Stock Exchanges throughout drance until further notice. M. Auriol, Minister of Finance, announces that the Government will ask Parliament on Monday for power to requisition all the gold in France. \ DWINDLING GOLD STOCKS LONDON, September 26. The * Daily Mail’s ’ Paris correspondent says that it is estimated that France has lost over £11,000,000 in gold exports during the past week. A year ago the Bank of France held £1,100,000,000 worth of gold. To-day the amount is about £700,000,000. FRANC TO BE DEVALUED . BERNE, September 26. The Government, after a long conference. announced a decision to devaluate the Swiss franc. It will subir't its proposals ot the Chamber on Monday. The Stock Exchanges will be closed on Monday and Tuesday. ND ACTION BY BELGIUM BRUSSELS, September 26. The Government is adhering to the Anglo-French agreement, and will not devaluate the belga. HOLLAND TO LEAVE GOLD STANDARD AMSTERDAM, September 27. It is officially announced that _ the maintenance of the gold standard is no longer possible owing to the French and Swiss action. This sudden change in policy created general surprise. The Bourse will be closed on Monday and Tuesday. The Dutch Government and the Bank of the Netherlands decided to place an embargo on the export of gold from to-day. EMBARGO ON EXPORT OF GOLD AMSTERDAM, September 27. (Received September 28, at 11 a.m.) The Government has issued a statement that Switzerland’s decision to devalue has forced the Government to reconsider its attitude. There is now no possibility of maintaining Holland’s monetary policy unchanged, as she is the only country in the world on the gold standard, and therefore feels to the highest degree pressure on the exchange rate and* gold reserves. In order, therefore, to avoid being forced off the' standard by weakening gold reserves it has been decided to place an embargo on export. POLAND'S DECISION WARSAW, September 27. _ Poland is not following the devaluation measures in Franco and Switzerland. FEARS IN GERMANY DETRIMENTAL EFFECT ON TRADE i BERLIN, September 26. Though the devaluation of the franc was at first dismissed as negligible, business circles fear that German trade will be hit because of the fillip to French trade. Furthermore, the countries with which Germany now has barter agreements may bo' attracted to transactions in the devalued currencies.

BERLIN, September 27. The Bourse is normal. The devaluation of the franc did not come as a surprise. It is regarded as not demanding any change in German monetary policy. Nevertheless, since France’s step will probably be followed elsewhere, Germany’s foreign trade must detrimentally be affected. SOVIET RAID ON THE PDUND CHECKMATED BY AMERICA NEW YORK, September 26. The Treasury to-day had an early opportunity to fulfil its pledge to protect the three-Power monetary agreement when it threw nearly 5,000,000d0l from the stabilisation fund into the exchange market to checkmate what appeared to be a concentrated Soviet raid on tho pound. Soon after the market opened the Russian State Bank offered £1,000,000, and with equal promptness the Treasury bought it all. The action halted a sinking spell for sterling, and Mr Morgenthau indicated that he was prepared to go the limit to keep America’s part of the agreement reached yesterday. At a Press conference Mr Morgenthau did not hesitate to show extreme annoyance at what he regarded as a deliberate Russian attack on the agreement, but later in the day the official attitude of the Treasury softened. Moscow’s action, however, remained bewildering. Some recalled that tho Soviet was reported to be losing, money on past devaluation of stealing and the dollar and wished to protect herself in the current adjustment. The Treasury made quite a handsome profit on today’s transaction. The devaluation of the franc gave a strong impetus to speculative buying, stock market prices advancing one to three and a-half points with sales near the million mark in two hours’ trading on Saturday. With the London and Paris markets dosed foreign exchange trading was almost at a standstill, the franc fluctuating between 5 and 5.20 cents and closing at 5.14. Sterling dropped to 4.91 to rally and close at 4.97, off 4J cents from Friday. In a statement to the Australian Associated Press, Professor Copland expressed the view that the agreement on French devaluation marked the final step in world currency disturbances, and, with the rest of tho gold bloc following France in due course, the fast great single depressing influence on money markets would be removed. There would be some return of French funds from the New York and London money markets with a temporary hardening of interest rates and a reaction in stock and commodity markets. The, chief problem for Britain and America would be to prevent the reaction m sterling going too far, thus creating a demand for further dollar devaluation. The Secretary of State (Mr Cordell Hull) hailed the monetary pact as likely to facilitate his tariff reciprocity programme. Neutral observers believe that, while the developments were wholly unexpected and the Administration had nothing to do with precipitating them, President Roosevelt will get the credit for a popular accomplishment. ACCUSATION DENIED MOSCOW, September 27. (Received September 28, at 10.10 a.m.) The Foreign Office denies Mr_ Morgenthau’s assertion that the Soviet Bank endeavoured to depreciate sterling. LONDON AWAITS DEVELOPMENTS LONDON, September 27. Tho City is extremely pleased with the devaluation, particularly as it was reached By agreement between the world’s three most important financial nations, who are trying to hammer out a solution of the present difficulties. The City is discussing whether the devaluation portends heavy early sales of British securities bought in recent months on Continental account. It is generally felt, however, that if the franc were most drastically revalued—for instance, to the former parity of 124.21—a big repatriation of the franc might be expected, but at present it is unlikely, as the condition of French politics is likely to minimise confidence and a recovery in French trade, which otherwise might encourage repatriation. A Commonwealth Bank official told the Australian Associated Press that anything tending to French stability will improve her wool purchases. Thus increased French purchases of Australian wool are possible as a result of the devaluation. f ITALIAN CABINET TD MEET ROME, September 27. The Cabinet will meet on Tuesday to discuss the financial policy. Italy will participate in the stabilisation agreement if invited. FOREIGN EXCHANGE MARKET CLOSED LONDON, September 26. Assumedly at the request of bankers the foreign exchange market did not open to-day. Foreign currency and gold dealings were suspended. BILLS TO BE INTRODUCED PARIS, September 27. (Received September 28, at 10.30 a.m.) A Bill to be introduced in the Chamber of Deputies to-morrow stipulates compulsory declaration of gold held by companies and private individuals above 50 grammes weight. A tax equal to the increased value of gold will be imposed on all gold holdings. The Bill authorises the Government to reduce taxes on necessary foods in order to avoid an increase in the cost of living. Another Bill giants an advance of 3,000,000,000 francs to Credit Foncier for settlement of mortgage loans. GOLD VALUE TO BE FIXED BY DEGREE PARIS, September 27. (Received September 28, at 10.10 a.m.) The Gold Bill does not fix the value of the franc, which the Government may decree between 43 and 49 milligrammes of gold. The import, export, or business in gold are illegal without

authorisation of the Bank of France, which will administer an equalisation fund of £100,000,000 under Treasury control. THE DEPRECIATED FRANC {British Official Wireless.) RUGBY, September 26. (Received September 28, at 11 a.m.) A communique published in Paris states that the value of the franc will be reduced to a level comprised of between 49 and 43 milligrammes of gold. The gold value of 47 milligrammes is equivalent to 107 francs to the pound in present conditions. The Paris correspondent of ‘ The Times ’ says that, based upon present relations between the British and French price levels, the purchasing power parity of the franc lies between 95 and 105 francs to the pound. HIGH HOPES FRENCH FOREIGN MINISTER’S VIEWS (British Official Wireless.) RUGBY, September 26. Received September 28, at 11 a.m.) The French Minister of Finance (M. Auriol), commenting on the monetary agreement, said it constituted the beginning of monetary peace, of economic peace, and of human peace. The agreement between Britain, France, and America, to which would shortly be joined other countries, such as Belgium, would, he was convinced, complete the.action of the three great democracies. It would bring about equilibrium of the economic situation. “ We will endeavour to mitigate whatever inconvenience may be caused, and the Government wishes to avoid social hardships and to consolidate social peace. The Government will propose to Parliament the requisition of gold at the present rate.” HOW THE VOTING WENT COMMUNISTS ABSTAIN LONDON, September 27. . (Received September 28, at 1 p.m.) The Paris correspondent of ‘ The Times ’ says the Chamber’s Finance Commission approved the devaluation scheme by 20 votes to 12, the Socialists and Radical-Socialists favouring it. Centre and Right opposing it, and seven Communists abstaining from voting. The dollar exchange will be allowed to fall between 20.15 and 22.96 francs, compared with 15.18 on September 26. The franc’s sterling rate will'depend on the movements of the dollar, which will probably be 4.95 to the pound, and for this reason the upper and lower limits of the franc in Loudon should be 99.74 and 113.68.