EXCHANGE PANIC

Hawera Star, Volume LIV, 17 January 1935, Page 5

EXCHANGE PANIC

America Buys Francs to Avoid a Run on Dollars

ALARM OVER GOLD PRICE BANKS BESIEGE TREASURY (United Press Aseociatioa—By Electric Telegraph Copyrig-TTC) NEW YORK, Jan. 15. A situation rapidly approaching a panic static on tlie loreign exchange markets was checked late to-day when the Federal Reserve Rank, acting apparently on behalf of the 1 reasmj s .U4C0.000.6d0 stabilisation fund, started buying great quantities of francs to halt a seemingly endless buying run on dollars. A growing apprehension that the expected decision of the Supreme Coni t in the “gold clause” case would topple over the entire structure of the Government’s monetary legislation sent the dollar to a premium of 2.8 cents over the fixed gold parity. 4he franc dropped 14 points to 0.4,5 cents, while the pound sold at cents, the lowest quotation since November 4, 1933. , x . Meanwhile the state of agitation among exchange dealers spread to the commodity and security markets, all suffering severe declines. A two to three cents drop in wheat intures was rivalled by a dollar a bale fall in cotton. Other staple products dependent oil 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 shares dropping over 20 points. This unsteadied the general list, with practically every issue showing losses throughout the day. TREASURY BESIEGED. The banks besieged the Treasury foi an assurance that it would maintain the price of gold at 35 dollars an ounce but in view of the uncertainty of the court’s action and of the counter-le-gislation that Congress might enact the Treasury’s only guarantee was that it would continue the price “until further notice.” At Washington, according to a New York Times dispatch, Administration circles interpreted to-day’s market confusion as only a taste of v hat would result from an adverse court decision, and they believe that, foi 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 depaitmental exncrts” 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 were wholeheartedly behind the monetary policy and would consider the voiding of it most disadvantageous to the Govern-

ment. The possibility that the court might frustrate their long campaign to cheapen, the dollar provoked some members of the inflation bloc to take a more radical stand. Senator Thomas, author of the amendment under which the dollar should be 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

EXCITEMENT IX LONDON. WILD MOVEMENTS ON ’CHANGELONDON. Jan.. 16. "Wild movements of the franc and the dollar caused excitement on the London foreign exchange market todav. 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 65 dollars an ounce. As a necessary corrective to the demand for dollars against francs, gold shipments are not forthcoming. An advance in the cross rate was the result of this reluctance to ship gold due to a belief at Paris that an adverse decision of the Supreme Court in the “gold clause” action would mean that the United States Administration would revalue ¥he dollar at the old parity rather than pay a surcharge in paper dollars. Conditions on the exchange market hate in the session bordered on the farcical. “The truth is,” says the Financial Times, “that Paris took fright. It must be realised in the event of an adverse decision that the Administration and Congress would get round the legal position somehow. They would certainly not resort to deflation.”