U.S. DOLLAR

Hawke's Bay Tribune, Volume XXII, Issue 89, 30 March 1932, Page 8

U.S. DOLLAR

A FORCING DOWN PRESSURE FROM ABROAD. BUDGET NOT YET BALANCED. By Telegraph—Press Assn.—Copyright. New York, March 28. The somewhat tardy onslaught on the dollar started on Saturday as a repercussion of the failure of Congress on Thursday to approve the sales tax to balance the Budget was continued to-day, despite an assurance that this country will not suspend the gold standard.

Although it was a bank holiday in England and elsewhere in Europe, heavy liquidation from abroad sent foreign exchanges, led by the pound sterling, soaring, the final prices being substantially above Saturday’s closings, rjthough they represented a slight recession from the day’s highest levels. Sterling closed at 3824, having touched 3831, the highest since October 31. The franc closed at 394 f, having touched 394 7-8, which is about a quarter above the gold export level. The mark retained Saturday’s level 23.92, the highest since late in 1929. In view of the holidays in Europe, it is reported that bankers and dealers operated from their homes. The dealing converged on New York, the only important market open.

CHANCE OF BUDGET BALANCE. AS SLENDER AS EVER. "Times” Cable. London, March 29. "The Times’ ” Washington correspondent says the disruptive forces in the House of Representatives are now too strong to be curbed. The chance that Congress will balance the Budget by taxation and economy is as slender as ever. Failure to balance it will

exaggerate the nervousness about domestic conditions, increase every American’s distrust for American banks and managers, and start a flight, from the dollar.

The British Treasury has notified the participating banks that it will pay on Tuesday £30,000,000 of the remaining £50,000,000 due on the £200,000,000 credit extended in August.

The New York correspondent of the ‘•Tunes” in a recent despatch stated: — In the course of the past week there was a notable and even dismaying predominance of bad news over good. Prices of a number of important commodities fell to record low levels; there were large actual exports of gold, besides a decline in earmarkings at the New York Federal Reserve Bank; almost the last vestiges of the January recovery in stock prices were wiped out; bank credit contracted further; currency in circulation increased by more than £8,000,000; the Far Eastern crisis, among its many other serious implications, brought into question the practicability of the Treasury’s Budget-balancing programme; and Britain, abandoning free trade, committed herself to a tariff which will bear directly upon about half —measured by values—her imports from the United States. Moreover, the President, Mr Hoover, rightly concerned by the disastrous hoarding of currency in this country, perforce revealed the great extent of the practice, and so ran the risk of increasing the danger he seeks to avert.

Time will have to show how effective will be the President’s appeal to the patriotism and self-interest of the country and his organised campaign for producing mass confidence. Time will have to show no less how successful will be the operations of the Reconstruction Finance Corporation, which has only just begun to function. Obviously, no appeal and no campaign can prevail long if bank failures are. going to continue at the rate at which they have been piling up in recent weeks. It is not a distrust of money that has produced hoarding in the United States, or even to any great extent distrust of securities —the number of shareholders in American corporations is actually greater now than at any other time in history—but distrust of banks. The work of the National Credit Corporation, valuable as it has been, was altogether too limited in its scope The Reconstruction Finance Corporation will have to go a great deal farther than the Credit Corporation in relief of banks with “frozen” assets if public confidence is to replace fear. It is, indeed, prepared to go much farther, but it is plain that if it is to bring about a change in public psychology which alone will arrest the present disastrous trend, its managers must act with great promptness and conspicuous energy. Business defaults in the United States rose to a new high record level in the last week of January, according to Bradstreet’s, the increase of 8 per cent, over the previous week’s figures being in sharp contrast with the seasonal trend, which would expect a decrease of 12.4 per cent. Steel production, which ordinarily shows a marked increase at this time of the year, showed no change from the week before, when it was 27 per cent, of capacity. Trade in general continued in the doldrums, awaiting the results of the lieconstruction Finance Corporation’s activities. Indices of business activity reached a new low point for the whole period of the depression, a figure slightly lower than was touched in the last week of December.