Gold Countries Fight Their Final Battle

Northern Advocate, 8 June 1936, Page 5

Gold Countries Fight Their Final Battle

Fate Of Currencies Bound Up In Franc

[United Press Association.~By Electric Telegraph. — Copyright .] (Received 10 a.m.) LONDON, June 6. The countries adhering to gold currencies are fighting what most people believe is their final battle. Gold has been heavily under fire all the week, culminating in a panic flight from francs and guilders. Many Frenchmen actually brought their savings to England in suitcases. Officials of a leading bank reported that one man opened a valise and, shooting a vast quantity of French banknotes on to the counter, demanded that they be changed into sterling amounting to more than £SOOO. The panic spread 'to Holland, where the authorities, doggedly adhering to their determination to protect the guilder, again raised the bank rate. Swiss francs also are very weak. There is no question that the fate of all gold currencies is bound up in the franc, on which attacks surprisingly ceased when it seemed to have reached the last ditch. Little selling was reported yesterday.

The respite was not due to any change in any opinion about the long term outlook, but to the belief that the extreme Lefts in France will force M. Blum to adopt stringent exchange restrictions rather than devaluation, to which the Communists are opposed possibly because they desire a continuance of the depression which the overvaluation of the franc is causing, and which the granting of the strikers’ demands for higher wages would accentuate unless the franc is devalued. Big financial interests, including the Bank of France, formerly inflexible opponents of devaluation, now paradoxically are supporting it, as they realise that if wages must rise, it will be safer to have an elastic paper franc than a rigid gold one. In the prevailing uncertainty, speculators prefer to adopt a waiting policy. London Views. London dislikes the idea of a managed franc, and considers exchange restrictions on the German model would open up a terrifying prospect for European trade, already hopelessly fettered by the tangle of currency and other restrictions.

The city also considers that restrictions would prove more dangerous to France than devaluation, and would be found to result in the creation of a market of “black francs” thus upsetting the market for international securities and commodities. They think, restrictions would accentuate the depreciation of the franc, and even lead to unregulated inflation.

The “Economist” points out that cooperation between Britain, France and America not to engage in competitive devaluation would,a big step towards the revival of international trade, especially if Germany took the opportunity to revalue the mark. The future lies in the hands of Paris. M. Blum’s task is very difficult, as it would be politically inexpedient for him to take the responsibility of devaluation, which he is likely to defer to the autumn.