Evening star., 1928-06-21

Here is a straight tip on the money
market. (But no one should gambie.)
Something is q ing to happen in Paris
after midnighc next Saturday that Will
affect billions of francs by stabilizing
their value. If any one knew just at
what valuation that stabilizing will leave
the franc, what fortune might be his
by selling short-or ong-and cashing
in Sunday morning, or whenever the
Bank of France gets ready, on the basis
Of the new legal valorization! That's
why our tip is important.
How can the market value OF a franc
be fixed by any decree of the Assembly?
Somehow the idea smacks of the
"l6-to-l" high finance. when world
markets were to be ignored in the pres
ence of fiat to be issued by Congress,
provided. The mere fact that 1t
took about 80 ounces of silver to equal
/ ounce of gold in place Of IS made no
difference in political oratory. sixteen
to one" must be the ratio to save the
poor man" But now France. without
oratory. is going to fix the value Of a
franc and make the valuation stick, and
that is interesting. Vive Ia France.
Vive les francSl
Other countries have stabilized their
money. so It is not an imposSib.llty.
StabiliZing fixes the value and reduces
speculation. The essence of the virtue
Of money at any time is its fixity OF
value, for money is a measure of all
values-it has no other raiSon d'etre.
If money be elastic. like rubber. prices
of all kinds of goods fiuctuate, and
debtors and creditors alike suffer i'm
NJ T~a = iS no q vi 10
confidence ceases. 1t is less than four
years since the purchasing value of a
20-cent franc had fallen not only TO
cents. but was on the verge of falling
further to : cents. and then---to ma
tional bankruptcy. There came crisis.
panic on the Bourse. Nobody dared
keep money overnight without trying to
buy something tangible with 1t before
its entire value had disappeared. And
France could not export anything. for
her money was worthless in foreign ex-
changer nearly so.
The same conditions Of finance ex-
isted in Italy before the MusSolmi re-
gime: also in Belgium and all other
countries Of Europe. It was costly to
be victorious in World War. for the
victors suffered no less than the van
,uuished, until the Dawes Commission
took hold of European liquidation and
made ii possible to collect the German
reparation debt to the allies. of which
annual payments So per cent Is allo-
Gated to France. In the fourth year of
the Dawes plan Germany pays sl.7So,-
900 600 gold markS--about SASS .000, 900
of which France gets more than half:
hereafter the annual payment will be
approximately S625. 100000. And that
is gold-not paper money.
-
But up TO 1926 France was unable to
collect enough taxes TO meet her cur
rent expenditures FinancierS call that
task balancing the budget" France
could not balance her budget" while
rebuilding the devastated area of wars
destruction. The government borrowed
beyond all legal limits from the Bank
of France. The radicals insisted ON is
suing fiat paper money over and over
again. and every Issue reduced the mar
ket value of all the money IN circula-
ton. II was based on nothing but faith,
hope and charity.
During the war the United States
maintained the value OF both the Brit
iSh pound sterling and the French franc
by agreeing to buy all sterling offered
at certain fixed rate and Great Brit
ain. in her turn, agreed to buy at a GER
tain rate all francs offered But In 1919,
following the armiStice. this ARTIFICIAL
support. the real burden of which fell
entirely upon the United States. was
suspended by both the United States
and Great Britain. Half the gold OF the
world accumulated In the United States
Treasury. but II could not be shipped 70
Europe until Europe ceased 10 make ex-
travagant purchases abroad, beyond her
home production and her exports, Tor
just SO long as her imports exceeded eS-
ports. she would require to make settle
mentS for her excess OF foreign pur-
chaSes In gold exchange, and SO any ad-
vances tloanS> OF gold to Europe would
result only In reShipment Of that gold,
abroad. while she persisted III excess OF
imports, leaving Europe as barren OF
gold as before So she had only fiat
legal tender" paper money, which she
could circulate at home, but not abroad.
SO her trade was forced to be domestic,
She was Obliged To rely upon what was
produced AT home and consumed at
hcme, until she became able To produce
more than she consumed. giving sur
plus for export. That condition applied
to all Europe, but nowhere more aeutely
than IN France,
The conditions have SO improved
within the last tfye years that the United
States has been able to ship 20 Europe
a net sum of about half billion dollars