Evening star., 1923-12-22
Action of Foreign Exchange
Leading Incident of Week
Demand for Cotton in Face of High
Prices Also Surprise-Railroad Stocks
and Bonds Remain Backward.

the cotton mills to pass the high
cost on to the ultimate consumer,
and the suggestion is constantly
being thrown out that mill operations
will have to be curtailed for lack OF
adequate proft. But so far the hg.
ures do not support the idea OF an
impending letup in the proouction OF
cotton goods, either here or abroad.
During the last week domesac SPIN
ners took 10 per cent more OF the
raw staple than they did in the same
week last year. while. experts SO far
this season are nearly ~ per cent
larger than in 1922.
Decline OF Franc Significant.
The decline in the French franc to
much the lowest In history has been
the most significant incident OF the
week. In the chamber OF deputies
at Paris there has been an animated
discussion about the state of the
finances, and for the first time a
respectable minority has had the
courage to connect the rapidly fall
responding increase In the cost OF
living with the Ruhr policy and Its
results for reparations.
Total expenditures for reconstruo-
tion, pensions, ETC., set down as RE-
coverable" through German indem.
nifty payments now amount TO be-
tween 10000. 100000 and 10000, ,00o-
600 francs. France has had TO cover
this and TO meet besides it's ordinary
budget deficiencies by increasing
its national debt until this stands
more than 10000. 100000 francs. or
fully 100 per cent above what 1t was at
the end of the war. That the French
authorities are afraid of the results
upon French investment sentiment OF
indefinite piling up of new bond and
note issues is Indicated by the policy
which they adopted early in the
year.
Instead OF offering directly all the
securities needed to meet require
ments. the government has been
others engaged in reconstruction
work. These construction firms
thereupon have been issuing their
own obligations. using the govern
ment bonds as collateral. The erect
upon the debt volume is the same.
but the public get the impression
that they are being asked to absorb
much smaller offerings from the
treasury than they were In previous
year.
Fresh Bond Issues Necessary.
The simple reading OF the decline in
the franc is that French finances are
depending upon full collection OF
reparations and that this is regarded
as extremely doubtful. There are
three ways in which the French
budget would have to be balanced In
the absence OF payments from Ger
many through extra taxation,
through paper currency imitation or
through further bond issues. Addl-
tional taxes are the most reasonable
method of the three. but in order to
euffice they would involve an extra
burden upon French Industry too
great for any government 10 conten-
plate. A determined fight has BEEN
put up against meeting government
deficits by expanding paper note Is
sues.
The assumption is, then. that the
budget deficiencies will continue to
be handled as they have in the past,
by fresh bond issues. In this event
the question is, how long the French
investor, when he awakens to the un-
certainty of reparations. will be will
ing to 60 on taking these govern
ment loans.
Copyright, 1927