GOLD STANDARD

Southland Times, Issue 21996, 21 April 1933, Page 5

GOLD STANDARD

AMERICA OFF

ACTION BY PRESIDENT

MOVE TO RAISE PRICES

SURPRISE IN LONDON

(United Press Assn.—Telegraph Copyright.) Washington, April 19.

Mr Roosevelt announced to-day the restoration of the gold embargo as a move to improve domestic commodity prices. Its restoration is effective immediately.

This is the first step in the campaign the President has undertaken to establish a controlled price level and controlled credit to counteract deflation. Additional steps are in prospect, but their extent will not be determined until the effect of to-day s move is known.

Mr Roosevelt has apparently won a respite from the leaders in Congress, who have been hammering for outright currency inflation. He wants the price level raised in such a manner that it will be under control at all times and not permitted to go too high. The forthcoming international economic discussions are part of a general manoeuvre to restore the United States to a normal basis of available cash jobs and credit and the President hopes to get the world back on to the gold standard. This standard may be on a different gold ratio with respect to currency than in the past, but he is adamant for the stabilization of the world monetary situation.

Giving up the attempt to further support the American dollar in the foreign exchanges is regarded as serving the dual purpose of increasing American commodity prices and putting the President in a strategical position for economic bargainings. Just how the gold embargo reacts to raise American commodity prices is somewhat involved. It is explained that cotton, for instance, is sold on a gold basis. On the present basis the rate is about six cents per pound. Should the price of gold fall 10 per cent, a resultant increase in the price of cotton of 10 per cent, is regarded as inevitable. The Secretary of the Treasury, Mr W. H. Woodin, states that the action of the President in forbidding the export of gold has sent the United States off the gold standard.

A message from New York . states that Mr J. P. Morgan in one of his rare public statements endorsed Mr Roosevelt’s action in restoring the embargo on the export of gold.

NEED FOR ACTION

REGAINING LOST MARKETS.

(United Press Assn.—Telegraph Copyright.) (Rec. 5.5 p.m.) Washington, April 20 The official dropping of the gold Standard to-day was viewed in informed circles as a prelude to extraordinary measures to regain lost foreign markets, effect debt readjustment and raise commodity prices which, if accomplished, will inevitably be at least at the partial expense of so-called depreciated currency coun-

tries. , « • i Mr Roosevelt formerly opposed tinkering with the currency,” but in the opinion of his friends the results of domestic relief legislation, farm relief and public works have been disappointing. Furthermore, deflation has taken place in the last month and frozen assets in closed banks totalling six to eight billion dollars produced a condition where, with the completion of foreign countries off gold, it appears necessary to meet the situation with a modified currency. It is believed that a powerful bargaining material exists for conferences with England and other countries, but the immediate anxiety is to solve ruinous domestic deflation. ,

MARKETS RALLY

SHARP RISES IN PRICES.

STERLING GAINS GROUND.

(United Press Assn.—Telegraph Copyright.) New York, April 19. Stock and commodity markets in the United States leaped forward to-day. On the New York exchange prices surged from one to more than three dollars a share. Silver futures had the most spectacular rise in the history of trading in New York, with gains of three cents an ounce.

Foreign exchanges shot up spectacularly in tertns of the American dollar to-day. Sterling was quoted in the mid-afternoon at 3.81 for cables, the highest quotation since April, 1931. With the exchange dealings rigidly controlled by the Federal Reserve Bank the market was described as thin and uncertain. Sterling closed at 3.73 dollars and the Canadian dollar at 861 (2J cents higher). Traders said the sterling rate was only nominal, the wildest fluctuations occurring after the London market had closed. The stock market soared one to eleven points before meeting profittaking in the late trading. Cotton rose two dollars fifty cents a bale in New York, while silver, rubber, cocoa and several other commodities rallied sharply. Speculative enthusiasm ran so high that the quotation machinery was swamped. Buyers were particularly eager to acquire metal issues and other commodity shares, several of which whirled op four to six dollars or more.

WHEAT RISES

HEAVY BUYING IN CHICAGO.

(United Press Assn. —Telegraph Copyright.) Chicago, April 19. In a buying stampede rarely paralleled except in war-time, wheat shot almost five cents upward, reaching 70 cents at one time for September delivery. Profit-taking shaved the high points at the close- when prices were If to 2J cents above yesterday’s to finish at: May 65 to 65 j, July 655 to ' 661, September 67 Jto 678 cents a bushel. All deliveries of wheat reached new high levels for the season, the gains ranging from 11 to 21 cents. Among the bullish items was the announcement of the disposal of May futures and the British embargo on Russian products. ’

WINNIPEG QUOTATIONS.

Winnipeg, April 10. , A let-up in the buying support in the final minutes resulted in wheat

futures skidding sharply at the close, easing rapidly from earlier three cents advances to finish one and a-half cents above the previous close. May is quoted at 54g, July 55J and October at 57J.

RISE OF STERLING

FRUIT EXPORTERS PLEASED.

(United Press Assn—Telegraph Copyright.) (Rec. 10.40) San Francisco, April 20. Fruit export circles here were elated as the pound sterling rose, enabling British buyers to purchase California’s dried, canned and fresh orchard products. The United Kingdom is California’s best foreign customer, but California of late has found Australian competition in the British markets a restricting factor. The rise in the pound tended to cut down the advantage Australia gained when Britain dropped the gold standard.

MOVE CONDEMNED

COMMENT IN LONDON.

BANKING CIRCLES SURPRISED.

(United Press Assn—Telegraph Copyright.) (Rec. 10.40 p.m.) London, April 20. The Financial News says: News of developments in the United States’ currency policy will produce full effects on the markets, but it came as a great shock to banking circles where it had been hoped America would not deliberately wreck her currency. The move is generally condemned as an act calculated to aggravate the crisis and throw the world back into chaos at a moment when it was hoped that through the Economic Conference stability was in sight. Britain went off gold having spent every penny of gold reserve to enable her to secure further credits. America has gone off while still in possession of gold with which she could easily have maintained the stability of her currency. She was not driven by necessity, but has taken the step in cold blood.”

FOREIGN EXCHANGES

STERLING-DOLLAR RATE.

(British Official Wireless.)

(Rec. 5.5 p.m.) Rugby, April 19. Messages from Washington to the effect that the Administration will not support the dollar abroad by means of shipments of gold created considerable excitement this evening in foreign exchange circles in London, where the stcrling-dollar rate fluctuated freely and at one time touched 3.62 dollars. It finished at 3.61 i compared with 3.49 at Tuesday’s close. The following rates of foreign exchanges are current to-day compared

The selling rate for telegraphic transfers, London on Cape Town, is £99 17/6 for £lOO sterling, and the buying rate £lOO 17/6.

“RACING DOWNHILL”

CURRENCY DEPRECIATION.

A TEMPORARY ADVANTAGE.

The International Chamber of. Commerce has coined a phrase, “racing down the hill,” to describe the struggle of nations to depreciate their currencies and so gain advantage over each other in world trade. In a review of the movement published in the latest issue of its official journal the chamber claims that it is necessary to inaugurate a movement for a general return to gold. Unfortunately, it adds, marrying currencies to gold is not unlike human marriage; it is easy to say “yes,” but the arrangement will break down unless certain collateral conditions are observed.

The many proposals eagerly canvassed in regard to monetary pplicy, the chamber states, give the impression that there is still not a sufficiently general understanding of the importance of an international standard of value. When the common standard is abandoned and the currency divorced from gold there is no barrier to a competition in depreciation among the various countries, and voluntarily or involuntarily they move in that direction. In an isolated instance a depreciation of currency gives the country in question a temporary advantage by way of an export premium, but the moment the same thing is done by others it becomes a race in currency depreciation, the only absolute limit of which would be the worthlessness of all currencies.

"Under a condition of currency instability the transaction of normal business through accustomed channels becomes difficult, uncertain and costly,” the chamber proceeds. ‘‘The lack of fixed relationships between the various currencies of the world turns normal international business transactions into a gamble. It creates further Government interference with the free passage and exchange of goods, and provokes sudden and abnormal tariffs and other barriers. Sterling fluctuations on one occasion last year wiped out, on another occasion doubled, the 10 per cent general duty imposed by Great Britain in March, 1932. The effect of depreciated currencies on the United States tariff, and on the whole industrial structure of the country which is linked thereto, may be judged from the fact that imports from depreciated currency countries for the first half year of 1932 fell only 7.7 per cent below the quantity for the corresponding period of 1931, while imports from gold par countries showed a decrease of 34.6 per cent. Seven depreciated currency countries showed an actual increase.

“To this situation,” the review adds, “there seems only one answer. It cannot be a general sauve qui peut down the hill of universal currency depreciation. It can only be the pursuance of a policy of international co-operation and mutual concession in dealing with the causes of trade disorder and currency confusion, and of measures which will arouse confidence rather than alarm in capital and put idle currency and credit to work again.”

with par: Par. To-day. Paris, fr 121.21 86 13-16 New York, dol to £ 4.866 3.6U Montreal, dol 4.866 4.20 Brussels, belga 35.00 24.50JGeneva, fr 25.22 17.72J Amsterdam, fr 12.10 8.471 Milan, lira 93.46 66 11-16 Berlin, r.m. 20.42 14 17-32 Stockholm, kr 18.159 19 Copenhagen, kr 18.159 22.45 Oslo, kr 18.159 19.55 Vienna, sch. 34.585 33 nom. Prague, kr 24.02 115.*Helsingfors, mark Madrid, kr 124.23 25.225 227 40 1-16 Lisbon, escu. 4.’, 110 Athens, dr. 375.00 605 Bucharest, lei 25.225 575 Belgrade, kr — 2521 Rio de Janeiro, mil 5.898d 51 nom. Buenos Aires, dol 47.57d 40} Montevideo, dol. 47.57d 33 nom. Bombay, rupee — 18 l-16d Shanghai, tael 14 9-16d Hong Kong, dol. 24.58d 15 13-16d Yokohama, p to yen 24.582 14 1 i _ 1.