Evening star., 1931-12-27
CAPITAL FLIGHT TO FRANCE
FEATURES FINANCIAL YEAR
Wealth of World Flows to Paris, but French Business
and Industry Show Steady Decline Despite
Increase in Gold Stocks.
Special Dispatch to The Star.

Special Dispatch to The Star.
~ ARIS, December 26-A strong
- contrast marked the French
financial and economic position
L in 1881 While Frances fnan-
cial strength reached its peak
in the closing weeks Of the year. the
commercial and industrial activity
showed a steady decline.
The curve of Frances financial pros
perity. which had begun to move up
ward in 1925. came near its peak during
the last year. France appeared as
q quiet haven for the worlds flcating
capital. Facing monetary crises in al
most all countries of Europe. fearing
banking difficulties in the United States,
money sought refuge in France, where
credit remained firm throughout the
year.
French capital which had been in
vested at sight or at lhort-term abroad
returned to France during the second
half of the year. This movement was
reflected by a transfer on large scale Of
gold bullion across the channel and
the Atlantic and piling up of idle
capital at current accounts in French
banks. In II months the gold stock
of the Bank of France was increased
by S554 900 and reached a total
of S2,654, 100000, beating all previous
records France now possesses S632
worth of gold an inhabitant, which is
by far the highest per capita holding
OF yellow metal in any country.
Short Term Liabilities Huge.
This. however. must by no means be
taken as proof of lasting financial
superiority of France. The inflow of
refugee capital piled up in the Paris
money market an enormous short term
liability estimated roughly at about
ST ,000,000,000) which can easily be
withdrawn from here as soon as con-
fidence Is restored in other countries.
In fact, Frances balance of payments
the influx of short-term credits put
aside-appears to be adverse. Receipts
from foreign, tourist and immigrants
expenditures and interests from invest
ments abroad gave in 1880 a favorable
balance of S208 100000; they now mark
deficit of $1040OO,000.
A similar situation was revealed in
the interior position, where receipt of
taxations were reduced by the economic
depression A deficit in the budget
could only be avoided by issue of Treas
ury bonds and reshifting of the fiscal
year which in 1882 will be made to run
from April to December 81. A deficit
OF s250.O0O,000 is forecast for 1888.
A strong blow was dealt to the
fall of sterling Holdings of the Bank
of France alone in British currency
we're estimated at some S32OOOO 600
At the beginning of December they had
undergone loss of about 80 per cent,
This accounted for the sharp drop on
the stock exchange of the Bank of
Frances share. which in year under
went q fall of so per cent. 1t also was
blamed for the failure of Banoue
Rationale de Credit, q leading Paris
bank which could be saved only by an
intervention of the treasury.
Favored by inflow of capital, France
made an effort this year to become a
distributor of loans abroad. She was
hampered in this task by her unflexible
banking apparatus and by the political
position she occupied since the war.
She nevertheless granted in 1881 the
following loans: $42,000,000 to Ru-
mania, $50,O00,000 to Czechoslovakia,
S40,000,000 to Polish railways, S42, 100000
to Jugoslavia-a total of $172,000, 900.
Moreover, she gave in short-term credits
$25, 100000 to Hungary, $325,0G0, 900 to
Great Britain to support the pound,
$25,000,000 to Germany, $12,000,O00 to
Spain and minor sums to Jugoslavia
and Poland. The total of short and
long term investments abroad thus came
near $500, 100000.
As everywhere else, prices of stocks
on the Paris Bourse drifted down
steadily during the year. The only
bright moment was marked by Presi-
dent Hoover's moratorium, when the
prices rallied swiftly. This rally, how
ever, was not of long duration and the
Bourse became particularly weak in
the Fall, following the decline in ster-
ling The slash in the value of stocks
during the year varied in different
groups; thus. banks lost 40 to so per
cent, coal mines, so to 10 per cent;
Schneider Steel, 80 per cent; rails, less
than 20 per cent, and Citroen changed
but little. Money conditions were per-
sistently ever easy on the Bourse.
The commercial situation showed in.