Pound, Dollar & Franc

Pound, Dollar & Franc

Chaos but not panic gripped world money marts last week. With the British paper pound (which fortnight ago was golden) gyrating madly up and down between $4.40 and $3.45 not a single exchange in Europe could function freely. Berlin's exchange was "closed indefinitely." From Berlin to Bucharest the governments of Eastern Europe either banged shut their bourses or chained up bear traders with iron rules. Tokyo's exchange was shut. Chileans learned, not without grief, that half the Central Bank of Chile's "gold reserve" is in British pounds--i.e. has turned to paper. Even Paris, where lies 20% of the world's banking gold, was uneasy, extra prudent. By French Government decree any security which lost 10% of its quoted value in a single day was suspended for that day from trading on the Paris bourse. Warned bourgeoise La Liberte in allusion to the pound: "A pillar of civilization has fallen, and it is Socialism that has brought it down." "Just As Much Integrity." Englishmen whistled up their courage. Much was made in the City of the "conspicuously successful," the "very satisfactory" reopening last week of London's 'Change. Prior to this experiment Exchange authorities quietly encouraged impromptu curb trading by brokers in Throgmorton Street. Soon the expected fact appeared that the fall of the pound was occasioning a rise in the price of securities quoted in pounds. Once this law of nature was tested and found to be working properly, London 'Change was opened with a boom. Government bonds were firm, industrials soared, British bankers relaxed and grew self-righteous. "There can be just as much integrity," ran an unctuous phrase heard often in the City last week, "there can be just as much integrity in a pound worth $4 as in a pound worth $4.86." British tourists fussed and fumed as they landed at Manhattan, were offered as low as $3 for a pound by exchange offices on the piers. "A pound is still a pound in England!" stormed one Briton in an Old Etonian tie just off the S. S. Homeric (Britain's "Ship of Splendor"). "I shall carry my pounds home with me! A bit high this, something of a holdup, what?" From London the international firm of Thomas Cook & Son circularized the British Isles with a doleful announcement that the fall of the pound had upped travel costs to Britons 20%, advised holidays at British resorts, cruises on British ships where a pound is still a pound. Norman Home, The pound being where it is, can bearded Montagu Collet Norman, eleven times Governor of the Bank of England (TIME, May 4), continue to hold that helm? Mr. Norman was strangely in Canada just before the pound was taken off gold (TIME, Sept. 28). He returned secretively to London via Liverpool last week, slipping off the S. S. Duchess of Bedford on a special tender, dashing in a closed car to his train, commencing to dictate rapidly to a secretary before the train pulled out.

London by this time had heard impressive rumors that Mr. Norman will soon be succeeded as Governor by that director of the Bank of England who was seemingly closest to the actual helm in the crisis fortnight ago, Sir Josiah Stamp, grizzled chairman of the great London, Midland and Scottish Railway.

It was Sir Josiah who was at the railway station when the crisis brought George V hurrying to London (TIME, Aug. 31). It was Sir Josiah who delivered in Euston station a short crisp lecture on Imperial finance said to have much eased His Majesty's mind. Last week as Governor Norman's train drew into London there again on the platform was big, broad Sir Josiah with the familiar round button on his right temple. "Hello, old boy!" he boomed at slender Mr. Norman. "How are you?" "Greatest Friend of New York." Next morning, from the office of the Governor of the Bank of England, it was denied that Mr. Norman will resign. But in the City's eye Sir Josiah grew, emerged as a sort of public champion of the paper pound. To the Press he communicated what for a director of the Bank of England amounts to volumes, a whole column of newsprint in which:

1) Sir Josiah declared that the "natural population" capable of being supported by Great Britain would be only 30,000,000 were it not for the -L-60,000,000 annual profits of London "as an international money centre from banking commissions and all kinds of financial services." Banking and brokerage profits alone, he thought, make it possible for Britain to support today a population of 45,000,000.

2) Sir Josiah voiced ringing confidence that the superior fiscal organization and longer experience of London in handling complex international transactions will keep the City's services and the pound in brisk worldwide demand. 3) "The greatest friend of New York," concluded Sir Josiah, "could not say at the present time that New York's financial dealings with foreign countries have been characterized by a steady, courageous purpose or by intimate and far-seeing knowledge." For the cashing of bills of exchange "on any large scale a very elaborate machine of financial knowledge and financial courage is required, and this cannot be immediately improvised either in New York or in Paris." Almighty Dollar, Mighty Franc. British bankers might whistle last week, French and U. S. bankers might sympathize, might aid * but Greeks, Turks, Brazilians and such put John Bull's pound pudding to the proof. Greece, which has pegged her drachma to the British pound for years, switched last week, pegged it to the dollar. Small Danzig did likewise with her gulden. Great Brazil, whose 20 United States are larger than the 48 U. S. states, began at once to collect certain taxes on a dollar basis, despite the fact that by law of 1926 Brazil's milreis is pegged to the British pound. In Rio, bankers close to President Getulio Vargas rumored that he would peg the milreis to the dollar. Close second last week to the increasingly almighty dollar was the French franc. Turkey, which has quoted foreign currencies on Istanbul exchange in British pounds, switched all quotations into francs. Bulgaria and Rumania switched to francs for export-import business quotations. Czechoslovakia, which has quoted her goods in pounds for export, quoted proudly last week in the stable Czechoslovakian crown. Since the U.S. holds 44% of the banking gold (more than twice as much as France) rivalry between dollar and franc last week was not serious. Shipping lines which had, used sterling rates followed, particularly on the Pacific Coast, the lead of the Pacific Coast-European conference, switched certain rates to the dollar. At week-end only one country could be said to be enthusiastically following the pound: President Carmona of Portugal took public note that the Portuguese escudo is pegged to sterling, recalled how lucrative are Portugal's sales (of Port wine, etc.) to Britain, made clear that the escudo will cling to the pound. This worried Spaniards. They sell to Britons sherry, etc. Anxiously Madrid foresaw that Portugal, by letting her escudo slide with sterling, will be able to offer drink, etc. to thirsty Britons cheaper than Spain, whose peseta is semi-stabilized on a gold basis. Gold Standard--"Cross of Gold?" Sacrosanct to most bankers though the Gold Standard is, rumblings came from some quarters last week remindful of William Jennings Bryan, "free silver," "16 to i" and "You shall not crucify mankind upon a cross of gold!" In Colombia, harassed President Olaya Herrera decided that his country's burdens are too great to bear on a gold basis. Congress at his behest rushed through legislation similar to Britain's, barred gold exports from Colombia, barred even the exchange of Colombian pesos into dollars. Further south, President Terra of Uruguay declared that by meeting her interest obligations abroad in gold "Uruguay is simply wasting time!" Also restive was Scandinavia, Sweden suspending gold payments last week "until Nov. 1," Norway "indefinitely," Denmark "until further notice." Last to go off gold last week was Egypt. In London nebulous resentment at the gold standard, nebulous notions that Depression can somehow be cured by tampering not only with the standard but with gold itself as a monetary medium crystalized at a meeting of prominent British merchants. Chief speaker: Sir Hugo Cunliffe-Owen. Sir Hugo is tall, staccato, persuasive. As chairman of British American Tobacco Co. Ltd. he has intimate export contact with that half of the world where coin is not gold or gold-backed paper but silver, the East. Roundly Sir Hugo declared that the gold standard countries of the West must increase the purchasing power of silver (now at its all time low) in order to release the latent, stupendous buying power of the East. How do this? Sir Hugo admitted that he could think of nothing better than the William Jennings Bryan plan of linking silver legally to gold at some fixed ratio.* Careful not to make himself too explicit, tobacco's Sir Hugo generalized: "The shade of Bryan hovers over the world situation now. May it guide us." On the same platform sat Mr. C.H. Minor, representing International General Electric. "Bryan was right!" cried he. "Bryan was merely ahead of his time." Other Britons taking these cues, there was soon in full swing last week what might be called a Britain-for-Bryan boom. Boomers included placid Sir Robert Home, onetime British Chancellor of the Exchequer and Rt. Hon. Leopold Stennett Amery, dynamic onetime Colonial Secretary. Electrum? Britain's gold standard tinkerers soon recalled that King Croesus of ancient Lydia was reputedly the first monarch to put the coin of his realm on a gold basis. Before Croesus the Greeks used coins of a gold and silver alloy called electrum. Why not, urged the rememberers of this fact, create an "Electrum Standard?" Instead of pegging silver legally to gold at 16 to 1 why not fuse the two metals, create new world coinage? Responsible banking opinion everywhere last week treated electrum talk as September madness.

* They loaned the Bank of England approximately $643,000,000 (TIME Aug. 17 et seq.) which proved not enough to keep the pound on gold. * Bryan's ratio was 16 to 1. Today an ounce of gold will buy approximately 70 oz. of silver.

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