Bay of Plenty Times. EVENING DAILY MONDAY, DECEMBER 2nd., 1935. OOZING GOLD.

Bay of Plenty Times, Volume LXIV, Issue 11889, 2 December 1935, Page 2

Bay of Plenty Times. EVENING DAILY MONDAY, DECEMBER 2nd., 1935. OOZING GOLD.

For the second time this year a run has set in on the gold reserve of the Bank of FrancA In April last there began a withdrawal of the metal which, by the third week in May, became very pronounced. It was actuated by fear that the authorities would devalue the franc. Some wild scenes were enacted then. Depositors came with bags, suit cases and even wheelbarrows Avith which to carry away their gold, and some A r ery foolish things Avere done by the panic-stricken. The raid on the gold reserve AA r as so strong that the Bank of France found it neeesary to raise its discount rate from to 3 per cent, on May 23; tAVo days later the rate Avas, further ad\ r anced to 4 per cent., and three days later still, on May 28, the rate AA’as rushed up to 6 per cent. These rapid movements in the Bank rate slioaved the urgency of the situation and the need for protecting the gold holding. The Bank of France holds in its capacious vault§ over £I,OOO millions of the metal taken at the standard price of £4 4s lid per fine ounce. The Bank has to hold a considerable volume of gold because the note circulation in France is very large.. This is due to the fact that the French do hot make much use of the cheque, most payments, even very- large transactions being paid in notes.

The panic arose because the internal economic conditions were in a bad way.. The Budget deficit was large, and the inflow of revenue was tending to stagnate, and the cost of living high. It was thought by many that devaluation would be inevitable. However the situation adjusted itself; depositors regained their senses, and the gold that had been withdrawn filtered back into the vaults of the Bank. On June 20 the Bank rate was reduced from 6 to 5 per cent., on July 4 to 4 per cent., and on July 18 to 3i per cent. It will be noted that the rate was not brought back to the per cent, level which ruled prior "to May 23! The French Parliament was obliged to take notice of the situation, and finally M. Laval, the Premier, was given authority to issue decree laws, and Parliament adjourned for a period which is just . about expiring. Oyer eighty decrees were issued with tlie object of reducing expenditure and increasing the revenue partly by imposing additional taxation. The farmers, who are a dominant party in Prance, through their organization. Front Baysan, intimated that they would not pay the taxes for various reasons, and it is evident that the - tench Government has not made much headway since the adjournment, for the fear of devaluation ls . r . e y ived > an d there is again a uuthdrawai °f go l d , whicll the stockbrokers on the Bourse have facetiously termed a “gold hemorrhage. The Bank of Prance has been obliged to again raise the discount rate, which on No-

vember 14, was raised from 34 to 4 per cent., and a week later to 5 per cent. Reports from Paris indicated that it might go higher and reach 6 per cent., and'that has taken place. At the same time the Dutch guilder was reported shaky. In Holland, as in France, the State accounts are in a chaotic condition, the deficit showing a tendency to increase. The troubles of the Gold Bloc are in striking contrast with the calmness and the general economic progress of the Sterling Bloc under the leadership of Great Britain. The Bank of England discount rate was reduced to the traditional minimum of 2 per cent, on June 30, 1932, and that rate has not been changed since. Furthermore instead of losing gold, the Bank of England has added nearly £5,000,000 to its reserves since the beginning of the year. The Bank of England itself cannot pay the current market rate for gold. By law it can pay only £4 4s lid per fine ounce, and it has added to its reserve through the Exchange Equalisation Fund being .used to find the balance required for the purchase of gold. The Bank . now holds over £197,000,000, about £3,000,000 being added during the past three weeks, which seems somewhat significant. Perhaps when the reserve reaches £200,000,000 the British Government may set fit to take some action to restore the Gold Standard.