AMERICAN AID

Poverty Bay Herald, Volume LXIII, Issue 19131, 28 September 1936, Page 5

AMERICAN AID

SOVIET CHECKMATE RAID ON STERLING WASHINGTON PROFIT USE OF BIG FUND (Elec, Tel. Copyright —United Press Assn.) . . WASHINGTON, Sept. 2(i. Mr. Henry Morgenthau, the Secretary of the Treasury, announced last night that the Treasury had entered into a tripartite agreement with Britain and France to link trie dollar, pound, and franc on a more stable basis. Mr. Morgenthau's. statement was limited and generalised to a comment expressing the hope that the new international monetary development would lead to the stabilisation of world economic conditions. Unofficially, however, the Treasury officials are represented as exceedingly pleased, at t*he "outcome of telephone conversations,with' London arid Paris. They believe that the decision reached will.do more to promote the peace of Europe than could be accomplished by any number' of international conferences. While agreeing not to retaliate against the lowered gold value of the franc, Mr. Morgenthau's statement emhasised that the internal policy of the nation must come first and that the Government will take whatever steps are deemed necessary in the future to protect the well-being of the people. He said he would recommend a continuance of the Treasury's £400,000,000 stabilisation fund as "the best insurance the United States has against, the adverse reaction of monetary' or economic conditions in other countries." FULFILLING THE PLEDGE The Treasury to-day had an early opportunity to fulfil it's pledge to protect the agreement when it threw nearly £1,000,000 from its stabilisation fund into the exchange market, to checkmate what appeared to be a concentrated Soviet raid on tho pound. Soon after the market opened, the Russian State Bank offered £1,000,000, and witli equal promptness the Treasury bought it all. This action halted the sinking spell for sterling, and Mr. Morgenthau indicated he was prepared to go to the limit to keep America's part in the agreement reached vesterday.

At a press conference Mr. Morgenthau did not hestitate to show extreme annoyance at what he regarded as a deliberate Russian attack on the agreement, but later in the day, the

official attitude of the Treasury softened. Moscow's action, however, remained bewildering. Some recalled that the Soviet was reported to be losing money on past devaluation of sterling and the dollar, and wished to protect herself from the current adjustment. The Treasury made quite a handsome profit on to-day's transaction.

The devaluation of the franc gave a strong impetus to speculative buying of stock market prices and trading. Owing to London and Paris markets being closed, foreign exchange trading was almost at a standstill, with a franc fluctuation of between 5.20 cents and closing at 5.14. Sterling dropped to 4.91 to rally at the close to 4.97, off 4J cents from Friday.

POSSIBLE DOLLAR. REACTION In a statement to the Australian Associated Press, Professor D. B. Cophind expressed the view that the agreement on French devaluation marked tho final stop in world currency disturbances and, with the rest of the gold bloc following France in due course, the last great single depressing influence to the money markets would be removed.

"There would," he said, "he some return of French funds from the New York and London money markets, with a temporary hardening of interest, rates and a reaction in stock commodity markets. The chief problem for Britain and America would be to prevent the reaction of sterling going too far, and thus creating a demand for a further dollar devaluation."

Mr. Cordell Hull, the Secretary of State, hailed the monetary,, pact as likely to facilitate his tariffi reciprocity programme.

Neutral observers believe that while the developments were wholly unexpected, and the Administration had nothing to do with precipitating them, President Roosevelt will get the credit for a popular accomplishment. MOSCOW DENIALS DEPRECIATION PLAN (Reed. Sept. 28, 11.40 a.m.) MOSCOW, Sept. 27. The Soviet Foreign Office denies the assertion of the American Secretary oi the Treasury, Mr. Henry Morgenthau, that the Soviet Bank endeavoured to depreciate sterling. VIEWS IN BERLIN NAZI FOREIGN TRADE DETRIMENTAL EFFECT BERLIN, Sept. 27. Though the. devaluation of the franc was at first dismissed as negligible, business circles later feared that German trade would be hit, because, of the fdlip to French trade. Furthermore, the countries with which Germany now has barter agreements might be attracted to transactions in devalued currencies!. The Bourse, however, remains normal. The devaluation of the franc did not come as a surprise. It is (regarded as not demanding any change in the German monetary policy. Nevertheless, since France's step will probably l)o followed elsewhere, Germany's "foreign trade must detrimentally be alfccted.

BEGINNING OF PEACE WORLD OUTLOOK FRENCH MINISTER'S VIEW (British Official Wireless.) Reed. noon. RUGBY, Sept. 27. The French Minister of Finance, M.. Auriol, commenting on the monetary agreement, said it constituted the beginning of monetary peace, of economic peace and of human peace. The agreement between Britain, France and America, to which would shortly be joined other countries, such as Belgium, would, he was convinced, complete the action of three great democracies. It would bring about equilibrium of the economic situation. "We will endeavour to mitigate whatever inconvenience may be caused and the Government wishes to avoid socia hardships and to consolidate social peace," ho said. "The Government will propose to Parliament to requisition gold at the present rate." EXPECTED NEW LEVEL RELATION TO STERLING (Reed. Sept. 28, noon) LONDON, Sept. 27. A communique published in Paris states that the value of the franc will be reduced to a level comprised between 49 and 45 milligrammes of gold. The gold value of 47 milligrammes is equivalent to 107 francs to the pound sterling in the present conditions. The Paris correspondent of The Times says that, based upon the present relations between British and French price levels and purchasing power, the parity of the franc lies between 95 and 105 francs to the pound sterling.