The Indianapolis times. [volume] (Indianapolis [Ind.]) 1922-1965, 1934-11-21

Reserve Bank Loan
to Belgium Held
Significant.
By VINCENT 8. LYONS
lines Financial Editor

AA4Es AAaN@A@A L@tA"A
ID ECENT reports from Washing
N ton that the federal reserve
banks have EXTENDED a $4,000 900
credit 20 Belgium. ostensibly for
the purpose Of bolstering the lat
ter's foreign exchange situation. IS
one more tangible item added 70
the improving economic picture
both a. home and abroad
The manner in which the credit
originated vas as follows: Belgium
was short OF dollar balances which
u needed in the normal conduct Of
is affairs. the reserve banks we're
willing 70 create a SIS. 900 900 credit
for them; Belgium earmarked S25,-
100000 IN gold 10 back the loan
and the reserve banks extended
the fumes needed.
Il is significant that this piece Of
cooperation Is the first Of its kind
since the Roosevelt administration
has been in power. This IS not by
and means the first time since
March 4. 1898, that a central bank
OF Europe vas in need Of a helping
hand from another country. The
other occasions when cooperation
was needed the interested parties
didn't bother TO meet and discuss
their difficulties. but just gritted
thei- teeth and withstoOd the
shocks as well as they could.
A Nd as a consequence OF this
n lack Of concord between ma
tons huge boards Of gold IN me
last two years have been moving
back and forth across the Atlantic
as foreign exchange rates continued
their 1ittery performance BY swing
ing In a wide arc. first attracting
foreign gold TO these shores and
then turning about and making 10
cheaper to send gold, rather than
dollars, abroad TO meet obligations.
Under ordinary workings Of the
gold standard the export and i'm
port Of the precious metal from
one country TO another tends 70
correct the situation which brought
about the gold movement IN the
first place. But these are not or
binary times. as abandonment Of
the metallic base, first by Eng
land and then by the United States.
left both countries with monetary
systems somewhat different from
the full gold standard
France, Belgium. Holland and
Switzerland all remained on gold
throughout the economic upheaval.
Foreign exchange spectators. how
ever, reaped a harvest of profits
for themselves by starting rumOrs
that those nations were dangerously
close 10 the point where divorce
ment from the gold standard would
be announced.
TN this connection II is interest
4 ing to recall the many times in
the last two years that France. the
leader Of the European gold bloc,
has been reported as ready to flee
gold. At each fall of a cabinet
the story would be revived. Today
France still remains anchored to
the yellow gold base. although It
witnessed the rise and fall Of sew
eral governments.
In view Of the unheaval which
has taken place in foreign ex-
change rates during the last few
wears cooperation of the kind
which has lust been manifest be-
tween Belgium and the United
States is distinctly heartening.
These quasi-pacts can do much to
put a halt TO the Eighty perform
ance of moneys of the world.
In addition to this tangible item
there has developed in the last few
weeks several other factors indi-
cative Of a movement toward &C
cord that have been of a some
what less tangible nature. News
dispatches from abroad have told
Of trial balloons which have been
sent up by the administration in
the interest Of currency stabiliza-
ton.
7 Asst week. according to reports
l. in Washington. the treasury's
$1,000. OO0. 900 exchange sterilization
fund stepped into the foreign ex-
change market and acquired con-
siderable quantities Of French
francs. These purchases were
made at a time when the French
currency was below the point at
which 1t was possible for gold TO
flow from Paris 10 New York.
Operation of the sterilization
fund are kept a dark secret. so
there is no way OF checking up on
the story. The behavior Of rates in
the world markets. however. often
times gives a clew Of unusual de-
velOpmentS. This. undoubtedly. is
the reason for the birth Of the cur
rent report that the fund support
ed the franc
Whether the world Is definitely
nearer 10 accord on Sterilization
than il was several months ago Is
a question that only those in au-
thcrity can answer. There can be
no denying, however. that recent
events have permitted observers OF
the economic situation TO hitch
their ideas 10 something more than
idle hopes.