FREE DEALINGS IN GOLD

Southland Times, Issue 23142, 8 March 1937, Page 7

FREE DEALINGS IN GOLD

French Financial Policy Changed DEFENCE LOAN TO BE LAUNCHED EXPERTS TO CONTROL THE EXCHANGE FUND (United Press Assn.—Telegraph Copyright) (Received March 7, 6.30 p.m.) LONDON, March 6. The French Council of Ministers at a sitting last night decided not to control foreign exchange and to authorize the free importation of and dealings in gold from March 8. The council also resolved to launch a big loan for national defence. The Bank of France previously bought gold at the pre-devaluation rate. The new measure is expected to lure gold from hoarding places. The defence loan, which will be for an unspecified amount, will be the only loan the Treasury will issue in 1937. Strict instructions have been given to all departments to curtail expenditure as supplementary estimates will not be granted. A committee of experts has been appointed to supervise the operation of the exchange equalization fund and to take steps to prevent fluctuation in prices.

The Bourse responded strongly and Government and industrial stocks are higher. Four Banking Experts The Faris correspondent of The Times says that four banking experts will control the exchange fund, under the leadership of M. Charles Rist, an honorary director of the Bank of France. Their appointment is generally approved, yet paradoxically the appointment has stimulated sales of French currency, as the views of M. Rist and two of his colleagues suggest that the franc will shortly be allowed to find a level nearer the low limit—equivalent to 113 to the £—set by the Devaluation Law. The Government, by appointing the committee, has changed its monetary policy without changing its Minister of Finance, says the correspondent, and simultaneously has transferred a delicate task from a harassed politician to detached technicians. A later message says that the issue of the loan has been postponed at least until March 10 because of the necessity of modifying, technicalities of the monetary law dealing with the free negotiation of gold and of clarifying the position of the experts who will manage the exchange fund. It is expected that the essential measures will be passed by Tuesday. Accordingly, a proposed broadcast by the President (M. Albert Lebrun) has been postponed. The Prime Minister (M. Leon Blum) in a broadcast address tonight explained that the measures were aimed at permanently solving a situation in which mere expedients were dangerous and devaluation disastrous. He pointed out that the Government expected the repatriation of imported capital. Investor Protected The loan is being issued in francs, pounds and dollars, which are the currencies of the Powers—France, Britain and the United States—who signed the monetary agreement in October. The investor will thereby be protected against variations of currencies, and could be repaid in the most advantageous of them. M. Blum pointed out that the Government required £200,000,000, which was normal in a crisis, because half that amount corresponded to extraordinary armaments credits, and it had been decided to cover them by the loan. An indication of the gravity of the situation in France is the fact that M. Lebrun had proposed to broadcast from every station tomorrow night “a solemn appeal to the nation” to support the defence loan. It would have been the first time any President had broadcast such an appeal, The loan bonds will guarantee compensating the holders in gold for every decline in the franc; no French Government has given such a guarantee since the 1926 crisis; Dealings in the franc on the London exchange yesterday were erratic. Initial selling evoked strong support from Paris. Heavy selling of francs late in the day brought down the spot trade rate to 106 J to the £. CONFERENCES AT WASHINGTON EFFECT OF LOAN ON THE THREE-PARTY PACT (Received March 7, 7.30 p.m.) NEW YORK, March 6. The Washington correspondent of The New York Times says that the French financial developments had repercussions at the Capitol. The Secretary of the Treasury (Mr Henry Morgenthau) conferred with the French Ambassador (M. Georges Bonnet), the Counsellor to the British Embassy (Mr Mallett), the Governor of the Federal Reserve Bank of New York (Mr G. L. Harrison) and the President (Mr Franklin D. Roosevelt). Mr Morgenthau declined to reveal the character of the discussions, but it is understod that they dealt with problems of the tripartite currency stabilization in the light of the contemplated French loan.

Persistent reports that such a loan would be floated, or at least in part subscribed, in the United States are deprecated here. NO ITALIAN LOANS THIS YEAR REPORT ON FINANCIAL POSITION (Received March 7, 6.30 p.m.) ROME, March 6. Italy’s gold reserves are valued at £43,700,000 at current rates. The Grand Fascist Council held a sitting of four hours and heard a report by the Minister of Finance (Lieutenant-General Achille Starace) on the country’s economic and financial situation. A communique issued afterwards revealed that the Bank of Italy’s gold reserve on February was 4,021,000,000 lire. This figure, the Minister explained, did not include Treasury reserves consisting of gold given to the country by patriotic citizens last year and foreign

currency and bonds in the possession of the Foreign Exchange Institute. The note circulation of the Bank of Italy on February 20 was 15,677,600,000 lire, including 1,500,000,000 lire sent to East Africa “for the Italian Empire’s monetary needs.” The Minister declared that the Government would be able to meet all its obligations for the whole of the 1937-38 financial year without additional loans or extra treasury operations. This is the first occasion the gold reserve figure has been published since February 20, 1935; it was then 3,396,— 000,000 lire. The Fascist Grand Council will meet again on Tuesday to discuss Lieuten-ant-General Starace’s report.