PLANS TO STABILISE CURRENCIES

Timaru Herald, Volume CXLII, Issue 20548, 14 October 1936, Page 9

PLANS TO STABILISE CURRENCIES

USE OF GOLD RESERVES AMERICAN GESTURE TO EUROPE STRONG DEFENCE AGAINST SPECULATION United Press Association—By Electric Telegraph—Copyright LONDON, October 12. It is officially announced that tile Treasuries of England, France and America agreed upon practical measures for operating the Exchange Equalisation Funds in harmony, die aim being to maintain the greatest practicable degree of stability between the pound, franc and dollar. Financial circles point out that this is merely the logical -sequel to the earlier announceme.it. when the franc was devalued. Its importance lies in the fact that the Government was so promptly able to arrange and carry out its promises of co-operation. The sterling remains free, but the statement carries the “gentiemen's agreement.” Further, it will therefore be hailed as an encouraging event.

RECIPROCAL DEFENCES AMERICAN CO-OPERATION WITH EUROPE British Official Wireless (Received October 13, 5.5 p.m.) RUGBY, October 12. In connection with the arrangement between England. France and America for operating the exchange equalising funds in harmony, the Treasury announces that the Secretary of the United States Treasury will publish a new regulation, enabling gold to be obtained in the United States In exchange for dollars by any country which gives reciprocal facilities to the United States. His Majesty’s Government has arranged for such facilities to be afforded in London to the United States authorities. Similar arrangements have been made with the Bank of Fiance. Balances in New York, arising from the intervention of the exchange controls, will be exchanged for gold at fixed prices, as the American announcement will show. Similarly balances in London and Paris will be exchanged for gold, on terms to be agreed in the light of daily circumstances.

NEW TYPE OF GOLD STANDARD

EXPERIMENT BY AMERICAN TREASURY United Press Association —By Electric Telegraph Copyright (Received October 13, 9.25 pm.) WASHINGTON, October 12. Mr Henry Morgenthru, junr. (Secretary to the Treasury) to-day annoonced a new type of gold standard among the United States. Great Britain and France, based on the free exchange of gold among the respective stabilisation funds. The three-Power arrangement, which will become effective tomorrow. does not establish fixed ratios for the currencies of the three countries. Gold transactions will not be permitted by individuals. Second Step Mr Mongenthau characterised the new standard as a second step towards international stabilisation, directly resulting from tile gentlemen’s agreement on September 28. The chief effect would be to take the power of trading in gold away from irresponsible speculators and to vest it in the Government. Other nations were welcome to enter the agreement at any time. The agreement is recoverable unilaterally at 24 hours' notice. The primary purpose will be to protect American business from violent fluctuations in the exchanges. It would have no effect on the domestic value of the dollar. Mr Morgenthau added that no sudden changes were planned by ’ i United States without consultation with the other Powers. Gold will be transferable among the countries through the central banks, namely the Federal Reserve Bank at New York, (as the Treasury's fiscal agent) ffie Bank of England and the Bank of France. The United States will se.i gold at 35 dollars a fine ounce, plus one quarter per cent for handling charges. Regu’-tion of Ratios The ratio of the dollar and franc to the pound will be regulated by the international flow of commerce, by services, by the cost of bullion in London, by the demand for the dollar, franc and pound, and by other intricate factors. It is expected that out of the original gentlemen's agreement would arise a compact for international stabilisation, with a fixed ratio of currencies under the Pact- Excessive paper balances could be converted into gold. For example, if Britain was overstocked with dollar exchange in the United States, she could convert it into gold on application to the Federal Reserve Bank of New York. i Mr Morgenthau declined to say ■ whether the arrangement would mean | the reduction of the American gold supply, which was 10.979.00C,000 dollars on October 9. Some quarters i anticipated reductions, which would I not Injure American credit.