Evening star., 1926-05-23
USE OF i. S. GOLD
TO RESCUE FRANC
|SEXPECTED SOON
Winston and Strong in Paris
Negotiating With BRAND
on Currency Aid.
POUND STERLING CASE
REGARDED AS SIMILAR
Lira, Too, May Be Rehabilitated by
American Money, in Opinion
of Observer.
BY FREDERIC WILLIAM VILE.

BY FREDERIC WILLIAM VILE.
Unbeknown to the American public
at large, high financial officials or
the United States Government are
now in Europe. cooperating with Old
World financiers in the work Of stabil-
iyinc exchange. They are Garrard
Il. Winston, Undersecretary of the
Treasury at Washington, and Ben
.amin Strong, governor of the Fed
eral Reserve Bank of New York. On
occasions when the New York Fed
eral Reserve institution participates
in large-scale foreign operations, 1t Is
acustomed to act for the other II
Federal Reserve banks of the country.
Present activities are no exception to
the rule.
1t was the cooperation Of the New
York Federal Reserve Bank and the
Bank of England early in 1925 that
paved the way to the recent trium-
phant achievement of the British
pound sterling in crossing par for the
first time since December, 1914. Great
Britain. through the establishment of
$500, ,000, 900 gold credits in New York,
was enabled to return to gold money
standard.
Exchange Was Stabilized.
British exchange was promptly and
permanently stabilized as the direct
result of that development. What
MessrS. Winston and Strong, who
have been in Europe since the middle
OF April, are understood to be doing
is to examine the possibilities of
serving other European banks of issue
as helpfully as the New York Federal
Reserve Bank helped the Bank of
England.
The American financial officials are
working in close harmony with Nor
tagu c. Norman, the governor Of the
Bank of England, who negotiated the
great Anglo American gold transac-
ton in New York in January year
ago. They are acting in common with
the French government at the present
moment, with a view to assisting
Premier BRAND and Finance Minister
Peret ir their efforts to rescue the
franc. M. Robineau, the governor
Of the Bank of France. has been in
conference with Mr.. Strong.
It will occasion no surprise in
Washington If the next few days bring
news from Paris that Federal Re-
serve Bank gold will be put to work
TO save franc exchange. just as 1t was
used to rehabilitate British sterling
In 1925. Messrs. J. P. Morgan &
Go. joined with the Federal Reserve
authorities in establishing the Bank
OF England gold credits, underwriting
one-third Of the amount.
May Also Help Lira.
So far there has been intimation at
Washington only of American interest
in the franc crisis. But there is
ground for believing that eventually
the United States may become equally
interested in putting the Italian Ira
on its feet. AS far as France Is con-
cerned. everything depends upon
French ratification of the American
debt settlement. There have been in
formal assurances to several Of our
principal European debtors that Amer
lean aid would be at their disposal for
putting their various exchange houses
I'm order, provided the war debts were
funded.
America is helping herself when
she helps the outside world stabilize
foreign currency. It is the well
known policy of the Federal Reserve
system to cooperate with central
banks abroad in & program Of cur
rency stabilization. A country whose
currency is on a sound basis has far
more purchasing power than one
whose money unit, like the franc or
lira, Is shot to pieces. American
goods-raw materials agricultural
produce and manufactured wares
find their best market among peoples
whose currency is on a normal stand
ard. The Immediate effect Of the re-
turn Of the British pound toward par
last year was the sale to Great Britain
of the biggest bill of goods Uncle Sam
ever shipped to those islands--more
than billion dollars worth.
At times currency imitation has led
20 large temporary increased exports
from foreign countries, due to the fact
that the gold value of the currency
az the country was at such a discount
that goods naturally flowed out Of the
country where the imitation was TAX
ing place. These exports went into
competition on a basis not of the cost
of production. but rather on the basis
Of the depreciation of the currency.
Such a phase Of the international
trade situation would necessarily be
temporary, but none the less disturb
ing to the markets in other countries,
where the temporarily stimulated sales
were being made.
Z. S. Has Excess Gold.
american intervention in the Euro
lea.n exchange situation has another
purpose than making the Old World
better market for American goods.
The United States Treasury is suffer
Ing from an embarrassment of gold.
At the end Of 1925 our total stock of
gold was 81, ,40S, ,696 ,0C0. or nearly half
Of the worlds total of $9,S4S 1896, 900.
How to relieve the ''glut" Of gold held
by the Treasury is q constant source
OF anxiety to the Government. Ways
and means to divert the flow of gold
that has been coming in our direction
Pince the war has been one Of Secre-
tary Melons major problems. Last
month-April--we exported more gold
than we imported, but the net i'm
ports for the first three months Of
1926 were approximately $1,000 900.
as compared with net exports for the
same period last year of approximate
~ $133,000000 Transactions such as
we effected with the Bank of Engla nd
in 1925 go far toward stemming the
tide Of gold in our direction, .... =
The mind Of the average man or
woman cannot grasp why Uncle Sans
gold hoard Is an economic embarrass.
ment. but 1t is. and our financial au-
thorittes conceive that 1t could turn
from an embarrassment into some
kind Of a disaster If we should con-
tinue to be "choked" with an inliges-
tible amount of the precious money
metal. Gold piled up in Mr.. Melons
vaults hecor1es n frozen national as.
iContinued 90 Page i. Column 4)