AMERICA AND GOLD

Otago Daily Times, Issue 22487, 4 February 1935, Page 9

AMERICA AND GOLD

THE ADMINISTRATION'S POLICY QUESTION OF LEGALITY COURT'S DECISION POSTPONED (United Press Association.) (By Electric Telegraph—Copyright.) WASHINGTON, February 2. (Received Feb. 3, at 7 p.m.) After the markets had closed to-day the Chief' Justice (Mr C. E. Hughes) announced'that the Supreme Court would not issue a gold .clause ruling on Monday as expected. He explained that the matter-was under consideration, but nine justices were not yet ready to render an opinion. During, the past fortnight market movements have been largely influenced by. speculation on what the decision might be. The fear that ■ - - ■■** | it might be adverse—that is, that the Administration's inflationary gold policy is illegal—has caused much apprehension and inertia has ruled in the securities exchange, whereas continued industrial improvements would normally send prices sharply forward, and commodity markets in general would be similarly affected. ■ It is understood that the Administration is- confident of a favourable ruling, but it is prepared for an adverse •one. It is reported to have measures drafted that would be rushed through Congress to counteract the immediate deflation effect, such a ruling'would have. The nature of these Bills is not known.

.ylt. is further reported that, in the event of an adverse ruling, the Government is prepared to close the. security exchanges to prevent immediate fluctuations in prices. The postponement of the decision is viewed as a little alarming, in some Administration quarters, as it seemingly indicates that the court is finding difficulty in weighing the legal issues involved against the Government's contention that the policy is imperative to national: welfare.

: A New York message on January 15 stated:

. A situation .rapidly approaching the panic stage on the foreign exchange markets was checked late to-day, when the Federal.. Reserve Bank, acting apparently on behalf of the Treasury's 2,000,000,p00 : dollar, stabilisation fund, started buying great quantities of francs to halt the seemingly endless buying run on dollars. Growing apprehension that the coming Supreme Court decision in the gold clause, case would topple over the entire structure of the Government's monetary .legislation sent the dollar to 2.8 cents premium over the fixed'gold parity.- The franc dropped 14 points to 6.45, while the pound sold/at 4.83}, the lowest since November 4, 1933. In London and Paris conditions were also very unusual, as the following message, dated-January 15, shows:— Wild jnoyements of the franc and dollar caused, excitement on London foreign exchange. Paris banking houses have refused to take gold from the Bank of France for shipment to New York unless a guarantee is forthcoming from American banks that gold on arrival will be paid for at the official price of 35 dollars, an ounce as a necessary corrective to the,demand for dollars against francs.. Gold shipments are not ,forthThe French franc had a break and; an in the cross rale was the result. This reluctance to ship gold is due to the belief in Paris that an adverse decision by the Supreme Court in the. gold clause action would mean that the United States Administration woUld revalue the dollar at its old parity, rather than pay a surcharge in paper dollars. ,