Evening star., 1934-03-26
j. s. STAb|L|zAT|ON|
OF MONEY URGED
International Commerce
Group Warns Against
Currency Instability. II
BY the Associated Press.

BY the Associated Press.
A warning that governments should
hasten steps toward money stabiliza-
tion to prevent new wave of cur
rency instability" was published today
by the Monetary Committee of the
International Chamber of Commerce
The committee, composed Of 16
prominent industrialists, bankers and
economists, said the present affords a
'propitious opportunity" for such
action.
"It would be idle" it declared, "to
pretend that world conditions have
become so stable that all fears Of new
complications have been definitely
eliminated"
Money War Danger Seen.
1t added that if non-gold countries
sought further advantages in foreign
trade, there was danger of a new
world money war.
Other financial developments here
were:
l. The Federal Reserve Board
watched an unusual contraction of
eligible commercial paper. Board
members have said this shrinkage is
forcing the use of a considerable
volume" of Government securities to
back Federal Reserve notes.
2. The Reconstruction Finance Cor
poration has reduced by l per cent
the interest and dividend rates on
self-liquidating loans and preferred
stock and capital notes of banks and
insurance companies The new rate is
per cent for five years from April l.
In touching on the probability OF
new money war, the Chamber COM
mittee did not name countries, but
it was pointed out that France was
the major nation remaining on gold
and that she had had some difficulty
in doing so. Other major nations, the
United States and England in par
ticular. have attained a de facto
stabilization but that is not regarded
as a legal warrant that such Stabil-
ization will be maintained.
In fact. the Chamber intimated that
the contrary might be the case and
forecast the consequent departure
from the standard by present gold
countries.
Outlook More Promising.
1.-THE Chamber has no desire" the
report said. ito anticipate the course
of events and to picture the outlook as
gloomier than it actually is. On the
contrary, the Chamber firmly holds
the view that in some definite aspects
the outlook is more promising than 1t
has been since 1929
Nevertheless, it is impossible to
overlook the fact that new wave of
currency instability, due to the aban-
donment of the gold standard by any
important country now adhering to it,
would in all probability have the fol-
lowing consequences:
"A. A new pressure upon the level
of gold prices. - ' The effect of eX-
change depreciation has been, on bal
ance. an inflationary one.
"B. So far from the advent of
new era Of exchange depreciation as
sisting revival (of international trade)
the chamber believes that nothing
would be more fatal than such an
eventuality, for it would bring in its
train a new harvest of anti-dumping
exchange duties. new quota regulation
which would prove fatal to the recov-
cry for which all nations of the world
are hoping
&C. Apart altogether from the di-
rect effect to. be anticipated in the
sphere of foreign trade, the chamber
believes it would be disastrous to over
look the possible effect of the contin-
gencies under discussion upon the
general state of public feeling.
The prospects of a general intensi-
fication of the feeling of hostility and
Ill will produced by such measures
and counter measurers is one which
the chamber regards with profound
dismay."
The committee includes S. E.
Georges TheuniS. regent of the Bel
gian National Bank, chairman; Prof.
Charles E. Rist, honorary sub-gov-
ernor of the Bank of France: Arthur
Baldwin, president of the American
Chamber of Commerce in Paris, and
13 others.
Reserve Holdings Low.
The Federal Reserve Board, in Its
monthly bulletin. showed at the end
of February total holdings by the Re-
serve banks of bills bought and dis
counted were S127 10000, the lowest
figure since the war
In view of this small amount OF
eligible paper" it added, "the Reserve
banks were obliged to continue pledg-
ing a considerable volume of United
States Government obligations against
outstanding Federal Reserve notes"
Since the date mentioned by the
board, Reserve bank holdings OF COM
mercial paper have continued to
shrink. On March 81 they were only
$4,000 900, indicating a still greater
employment of Government securities
as backing for Reserve notes.
This condition was not interpreted
as indicating any shortage Of ready
currency. Gold certificate holdings
of the Reserve banks-now at a record
figure of s4,270, sos, ,000-were sufficient
to support a Reserve note circulation
exceeding $1,000, 100000 after allowing
for the IS per cent gold certificate
backing required on deposits.
Actual Reserve note circulation is
s2,984, 943 900, or far short of the po-
tential issue.