The Washington times., 1934-10-04

ana on our DO
nestle prices. aA..@ Z
The pound
has fallen from
q level where
it exch anged
for about $50 Lewis Haney
to a point where it gets only
about 1892. This is a drop of
about 18 cents in a few days.
The way to understand this
move is to note first that the
pound was too high and the dol.
lar too low. And the chief point
was the cheapening of the dol
lar during the summer.
Our inflationary policies, and
notably the injection Of silver at
an overvalued level, caused doubts
concerning the value Of the dol
lar. (When our Government buys
silver at fancy prices, it is SELL
ing dollars at reduced prices) {.
Foreign spectators sold dollars
short.
Also our exports were low COM
pared with imports, so foreign
buyers needed fewer dollars to
pay us, which reduced demand for
dollars abroad.
More recently, however, condi-
tons have changed. AS our Gov
eminent had to float bonds, it
began to soft-pedal initiation, and
went so far as to encourage gold
exports to support the dollar.
Very recently there have even
been a few signs of dallying with
the idea that maybe some della.
ton in prices and wages should be
considered.
Then those who had gone short
of dollars covered. Moreover. as
usual in the fall, our exports have
increased so that foreign buyers
need more dollars to pay us with.
,(Probably this increase in eX-
ports was greater because of the
preceding fall in the dollar, for
that made it cheaper for foreign
buyers)
So now the dollar is up. not
only in comparison with paper
pounds" but also as against gold
francs.
Many observers have felt all
along that the dollar has really
been undervalued-that it is
really worth more than the poll
$SnS0~na tRuSvAnr IN
make it. They maintain that
our favorable balance of trade
and other foreign balances in
sure a large demand abroad for
dollars. They also point to our
possession of huge stocks Of
gold. I'VE could put the dollar
back on the old gold Standard.)
While these things have tended
to put dollars up just now, the
pound has been weakened, and
England has clearly not chosen to
support it artificially. 1t seems
reasonable to suppose that she
expects the old par of exchange
of $4.86 to the pound. In fact,
England wants the pound to be
lower in foreign exchange in order
to stimulate her exports. She fig
ures that when foreign buyers can
get pounds cheaply and pay her
in these cheap pounds, they will
take more of her goods.
The results of all this are not
entirely clear. We can say that
temporarily, it will tend to stimu-
late England's exports and retard
our own.
Probably, too. it will tend to de-
press wholesale prices in this
country, or at least keep them
from rising. You will note that a
declining quotation for the pound
has usually gone along with lower
wheat and cotton prices.
This, think, will make it still
more difficult to start a buoyant
''credit initiation" as the Govern
ment has been trying to do.
1t seems to me reasonably
certain that this situation will
before very long cause a grow
ing demand for further devalu-
alton of the dollar or some other
kind of currency depreciation.
I doubt if this country is ready
yet to stand for deflatiOn, while
o resort to drastic natiOnalism
would mean such great regi-
mentatiOn. hardship, and pres
sure on standards of living that
1t is not likely.
In the background is the pos.
Sibility of renewed international
currency warfare. COR maybe an
early truce, with an attempt ia
stabilize foreign exchanges, may
be tried)
In any case. it is clear that the
dollar is not stable, and our cur
rency question is not settled.
Curb Has