Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-07-24
BY JOHN A. CRONE.
ciat Dtcpatrb ~ The ctar

Special Dispatch to The Star.
NEW YORK, July 24.-The increase
in the rediscount rate from 2l2 to 3l2
per cent by the Bank of England caused
little surprise in informed international
banking circles here. 1t was preceded
by weakness in the pound sterling in
this center late Wednesday, when the
English bank lost $16,911, 700 of gold,
the most yellow metal it has ever lost
in single day in its long history
When the pound sterling dropped
2 9-32 cents on July Is to $4.833, its
lowest price since Great Britain re-
sumed the gold standard in April, 1925
it was generally felt that the Federal
Reserve Bank of New York, by both
direct and indirect means, was trying
TO support the English currency. Amer
lean bankers co-operated, because they
could have made a good profit had they
chosen to transfer gold from London to
New York.
Heavy Gold Withdrawals.
Sterling opened here Yesterday at
S4.84la, up 7-16 cent overnight, after
decline Of 11-16 wednesday. Mean
while, London cables stated that early
in the day another shipment, approx
mating $4,302.000 of gold, had been
sent to the continent
Within the last week the Bank of
England has lost around Sl25,000, 900 of
gold, which was slightly offset, however,
by receipts of gold from South Africa.
These heavy Withdrawals of gold may
be due to several causes. Huge foreign
balances always are maintained in Lon
don and they may be drawn against at
any time. A recent tax levied by France
On foreign securities may be responsible
for some of the French banks drawing
their money back home from London
Then the mere fact that the pound
sterling is cheap. in terms of the dollar,
French franc. guilder and Swiss franc,
as we'll as other monies, would induce
! a gold outflow.
Most gold arriving IN the form of
bars in London now comes from South
African mines which, through the
, agency of the South African Reserve
Bank, ship it to Southampton, from
where it goes to the Bank of England
vaults in London. Sale of this gold is
entrusted to an historic banking house
| each morning, where purchasers, such
as bullion brokers, buy the yellow metal
either in behalf of foreign banks or
of industrial users.
Rising Rates an Anomaly.
Two weeks ago the German Reichs-
bank as a first effort to halt the flight
from the mark" and shut off the heavy
drain of gold, principally to this coun-
| try, lifted its discount rate from to
10 per cent. Austrian, Hungarian and
few other minor European bank rates
! also are up.
/ Rising bank rates are an anomaly in
a trade depression. The Bank of Eng
| land lifted its rate to 6 per cent in 1929
| in an effort to stop the suction of funds
into the New York stock market boom.
Later this was followed by a higher
New York Federal Reserve Bank rate.
Since the stock market break in the
Autumn of 1929, heralding stern
| business depression, the trend of central
bank rates throughout the world has
been steadily downward. New York's
rate of IL per cent is the lowest on
record Bank of France at 2 per cent
| is the lowest for that institution. Bank
of England until recently had been
expected to cut its rate further to 2
per cent.
These reductions were manifestations
of a determined and agreed upon policy
! by the worlds three major central
! banks to force down money rates in an
effort to stif1le business depression and
: set trade recovery in motion. lacking
!
| this movement and tend further to de-
press British trade. if not trade OF
other nations Incidentally, Wall street
| is inclined to interpret this step as
meaning British expectation that moth
ing of consequence will be accomplished
at the present London conference on
German conditions.
Sale of Marks Large.
Greater trade activity has not caused
J the reversal. Trade is, in fact, worse
| than ever. Collapse of confidence In
German credit has started the difficulty
Foreign funds and German funds also
| sought to leave Germany in large vol
ume. This was done through the sale
Of marks for the purchase of dollars
francs, Swiss and Dutch currency anc
pounds, thereby lowering the quotation
fer marks and making it profitable Il
ship gold to other countries.
In the past week the same process:
has taken place in England, not through
! lack of faith in the pound sterling, bu
chiefly because the international shift
ing currents of money have washed
principally on sterling, French bank