Evening star., 1928-06-21
BACKGROUND OF EVENTS
BY PAUL Y. COLLINS.

Of gold. and it stays put" and no longer
travels back on return tourist ticket"
*& *&
So. gradually. European paper cur
rency has acquired rising value, and
imitation has been curtailed. Some Of
this improvement is directly attributable
to American generosity. For example,
America sent shiploads Of food TO Lat
via to save the starving. That food was
consigned to the government of Latyia,
so as not TO pauperiZe the people who
desired to avoid charity. by paying for
the food The Latvian government gave
us her bonds in payment. and in turn
consigned the food 10 municipalities and
took their bonds. Those bonds then
became the basis of a Latvian money
system-all based upon American food
supplies. Some day the bonds viii be
paid.
Greece called in her paper money and
clipped it in halves literally. destroying
one-half. Other countries called in their
paper money and charged q tax Of so
per cent for stamping it, making all un-
stamped currency worthless in trade Or
taxes.
But in France the radicals overthrew
the Poincare government in 1924. and
that resulted in the greater loss CT world
confidencs in French finances. for the
radicals called for imitation to meet an
nual deficits. and imitation increased the
downfall of credit, until, as above noted,
the panicky crisis was reached in 1895
To meet that crisis. after many cabi-
nets had fallen. Poincare again headed
a ministry. made UP. then, Of several
former ministers, representing q coaii-
ton OF parties.
Drastic measures were undertaken. In
cluding a constitutional convention 10
amend the constitution so as TO enable
the government to increase taxes and
provide for a sinking fund TO reduce
the enormous debt. Her annual interest
alone amounts to 90 per cent Of her in
come. This vigorous action of the coa-
lition cabinet aroused patriotism and
confidence. so that the market value of
the franc showed increase. especially in
domestic purchases. Trade revived az
home, and by Christmas. 1s26-Six
months after the installation of the
Poincare coalition cabinet-the Bank of
France announced that it would buy or
sell all francs offered. at a fixed rate,
approximately 3,s5 cents per franc, or
l23 francs per pound sterling. So the
Bank OF France succeeded in ''pegging
the franc at that price.
%&
Nevertheless. up to the present,
Through legal fiction, the French
law has refused to recognize any 6if-
ference between gold franc worth
about 20 csntsl and 3 paper franc
with its market value OF less than 4
cents. But now Ii Is proposed BY
Poincare that on next Saturday night,
after midnight. the law shall pass
fixing legal ratio between sold and
paper francs. Gold francs. OF course,
remain at par. Some claim that that
ratio Will be AZ certS per paper franc:
others that IL will be, in a long deci-
NAL. about sos cents. The secret is
strictly kept, 10 prevent speculation
before IL becomes y dc facto and
de jCre rate.
The law will authorize the Bank
OF France TO buy on government ac-
count all the paper francs offered at
the nxed legal rate. and the govern-
ment, in the meanwhile, has fortified
itself by buying up foreign exchange
70 the total amount Of more than
10000 0o0,0oo francs. II now stands
second IN the worl6 in the amount OF
actual gold In its treasury II the
Bank OF France had not "pegged" the
franc at S,95 cents. the recent strength
ening or the government reserves
would have 50 increased the market
value of the franc ttat Il would have
brought down the selling value cf all
merchandise and caused great distress
70 debtors and producers IN all lines.
The Economist Of June Q SAYS that
IN order 10 stop the flow OF foreign
eSchange INTO the Bank OF France,
now that the bank holds such strong
reserve, the buying rate (for francsl.
which has stood at l24Os francs per
pound sterling for the past year has
been raised TO iS4,20. and the selling
rate nom iali0 TO i24,2O"
Very recently Mr.. Poincare was re-
turned to power ey the electorate upcn
the issue Of StahiiiEation, but. accord
Ing TO the london StatiSt, There a
little doubt that President NJ. Dcu-
mersue Is opposed on principle 10
staolhxauon al the present figure, and
uaat NJ. Marin an influential per-
Sonage, who heads the strongest group
on the Right. shares his views
A new governmenr loan ey Poiucare
was subscribed by the people Of France
70 the amount OF ie,00o million francs
10000 900 oo0l. ana this enables the
government TO wipe out its indebted
ness to the bank, substituting bonded
ElQeotedneSS 70 the people. The
Statist further says; The aecunu-
lation Of foreign curseneieS is also con-
deMnsd, because Il tends to lead 30
imitation France Is saturated with
currency and credit, ard the addi.
tional amNuntS pumped into eircula-
tion are findinS employment I'm un-
wholesome RcurSe SPECULATION =
The only effective bar Co the contin0a.
tion OF these infavorahle tendencies
would be ON an uns0utvoeal declara.
tson on the part OF NJ Pnincare that
the franc Is to be legaiiv stabilized az
the preSsnt nSuFe al exchanze tahle."
tCepSyiZha 1p@S. hy Paul NJ ColliAal