EXPERTS' VARYING VIEWS

Evening Star, Issue 21632, 30 January 1934, Page 8

EXPERTS' VARYING VIEWS

Writing in ‘Lloyd’s Bank M. Frederic Jenny, financial editor of ‘ Le Temps,’ stated (in an article datedi November 28, 1933): “ Other countries may watch the United States monetary drama, not indeed with indifference, but? with equanimity and calm. They can only wish that the final act of this drama may not be too long delayed, and, that instead of continuing to put tha nerves of the world to the test by aj slow and indefinite policy of depreciation of the dollar—a policy marked iyintermittent hesitations and in continue ous contradiction with itself—the United States Government will rapidly, arrive at a definite decision, by assign* ing to the currency a new level, as kiwi as may be thought fit. The rapidity of the fall of ' the dollar, the confusion caused by the tactics of the purchase of gold, and the alarms which resulted, in financial circles across the Atlantic during the course of November lead one to think, despite all affirmations to the contrary, _ that perhaps the moment of this decision is not far distant.” .

M. Jenny, referring to the question of States Government gold pur* chases, stated: “ The inauguration of this method, which is in a certain degree related to that employed by the British Exchange Equalisation Fund, ati first caused rather serious anxiety/ which we, for our part, were never able to understand. . . . So long as the dollar has not attained a level definitely judged low enough by the United States Government, neither the Banls of England nor the Banque de France,' nor any other European central banksf will have to trouble about the gold policy of the President of the United States of America. Even if this policy tended to drain away considerable quantities of gold, there would be no occasion to be unduly alarmed, because, ini the present state; of the balance of payments of the United l States of America) the heavy purchases of sterling, francs,, and other currencies involved would depreciate the dollar to such a point thatj even the Americans who most ardently wished for inflation, would end by becoming anxious about it. . . , Great Britain will always be able to protect herself by stabilising her own: currency. _ In this case the London market, with its credit and its prestige, will be a sufficiently powerful centre of attraction for available capital, and! consequently for gold, so that the effect of the gold movements towards the United States will be compensated, and probably more than compensated.” On the other hand, writing foun weeks later, a. financial critic in thaj ‘ New Statesman ’ of December 23, stated:—

“ The Americans, after leaving their; buying price for gold unaltered for a! fortnight, have raised it again, though only to a small extent. The dollar has accordingly fallen again, less because of the change in itself, than because the clear sign that the gold policy remains unaltered has destroyed the.-mis-placed confidence of those who believed stabilisation to be at hand, Much more important than the change in price ia the fact that the Americans appear ah length really to have begun buying gold and foreign exchange convertible into gold, on a substantial scale. There ia still a great deal of uncertainty about i the quantity of gold they have actually, bought; but there seems no doubt that real buying has begun, as it had, not even a fortnight 1 ago. Presumably thiai means that the President and lus ad* visers have realised that the mere dederation of a buying price, without actual purchases at that price, can have an effect only so long as real purchases are believed ’to be going on. Financial • opinion haying concluded, on sufficient evidence; that they were not, the policy of ■ forcing down the gold value of tho dollar could be maintained only by making actual purchases. Accordingly the United States, in order to lower, the value of ..the dollar, will now proceed to buy gold that is of no use to her, because she has more than enough! already, and the gold countries, which also have far ’ more gold than they need, will be more scared than everThe effect on gold prices in the world market will continue to be deflationary* and this will largely offset the tendency of the policy to raise prices in tha United States. So the financiers go round the mulberry bush! ” As to silver purchases by the U.S.A.* ‘ The Times Trade Supplement ’ comments thus on President Roosevelt’s action f in not only ratifying the silver agreement reached at the World Economic Conference, but in giving orders for the mints to buy domestically.produced silver at 64§c an ounce, which’ is between 40 and 50 per cent._ above the market price:—“The giving of such a substantial subsidy to domestio silver producers is regarded in the bullion market as a political rather than' an economic move, because its international reactions must be small. Certainly so far its effects on the world market for silver have been negligible.! Indeed, members of the bullion market! are rather doubtful whether the American Government’s action will not increase instead of diminish the output of silver and thus nullify the intention of the silver agreement,. which was to withdraw supplies from the market and to raise the world price.”