The Washington times., 1935-06-08

France at a rec
~ ord rate. Talk
~ of deva LUNG
- ~ the franc has
Lewis H"ney increased, and
the question as to what will be
the result on monetary conditions
! in other countries, is again a live
one.
The troubles in France some
what resemble our own. The
French governments budget is
unbalanced, as is ours, and this
arouses fear among the French
people. They know better than
we do that unbalanced budgets
lead to currency depreciation, for
they have been through the
process.
Then, too, they have been ex-
periencing the difficulty of de-
fIatiOn. But instead of trying
to "defIate," they have been
trying to get their prices and
costs into adjustment at de-
fIated levels. The difficulty has
been to get wages. and other ex-
penses of production down in
proportion to the prices of
products.
Some exporters want devalua'
ton of the franc to offset our
devaluation of the dollar. Such a
devaluation would probably give
them at least temporary Stimu-
lus. And those dependent upon
tourist trade have also CON-
planned, since the devaluation Of
the dollar has reduced the pur-
chasing power of American traV.
elers.
France has been trying to meet
the situation by restricting i'm
ports and helping her exporters,
in order to offset the stimulus
given to foreign exporters by de-
valuation.
More recently, she has attempted
to check the outflow of gold by
very rapidly raising her central
banks rediscount rate to 6 per
cent. This may somewhat check
spectators in going short VI
francs. 1t may even help by re-
stricting government borrowing.
But interest rates are not the
trouble. The trouble lies in the
fear of French citizens, and the
speculator rise in the discount
rate advertises trouble. Inciden-
tally, too, it hurts the banks and
tends to reduce the price OF gov
eminent bonds.
Raising the discount is the
orthodox" way to stop gold eX-
ports, but many doubt that it can
be effective under present condl-
tions.
The chief need is to balance the
budget, and, since French legis-
lators are loath to cut government
spending. the administration has
been seeking greater power. One
premier after another has fallen
in the effort to get such power
power to economic and thus bal
ance the budget. M. Laval is the
latest to make the attempt.
The chief bulWark against de-
valuation in France is the attitude
of the people. The average French
man is thrifty and is bitterly op-
posed to depreciating the value OF
money. Also, it can be said that
the French import surplus is now
small, so that normally her gold
exports would not be large.
Switzerland has recently voted
against devaluation, and Holland
remains strong for maintaining
the present gold standard, so that
gold bloc" still remains.
The question is, can France
balance her budget and meet her
public debt without writing it
down as we did? At present,
this seems to depend upon a
grant of greater power to the
executive branch of government.
Otherwise, the fears of the people
will continue to cause boarding
and gold exports, until French
gold reserves are seriously en-
udIlSCIcu. Az plCOCIlG CllCoC dAC
still ample, but gold is being
shipped out by French people
and others to England, United
States and even Belgium, in the
anticipation that it can be turned
into a larger number of francs
later on.
Incidentally, this has greatly
increased our gold holdings, and
our excess bank reserves have
thereby attained new high
record.
It seems fair to say that
1. France will not abandon
the gold standard, though she
may yet be forced to embargo
gold shipments temporarily.
2. She does not have to de.
value the franc, and will not
do so unless through the fear
of her own people, due to gov.
eminent Overspending, leading
to boarding and to exports Of
gold.
3. She will not devalue vol