Evening star., 1936-10-13
Three-PoWer Pact Designed
to Curb Speculation and
Stabilize Money.
EXPECT OTHER NATIONS
TO JOIN IN MOVEMENT
Great Britain and France Also
Enforce New Ruling With
United States.
BACKGROUND

tCorld hope since 1888, uhen the
London Economic Conference,
called to effect stabilization, COLI
ldpsed. The first step torDdrd came
1S days ago iDhen the United States
and Great Britain agreed NTH
France to protect the franc should
1t be deUdludted, Uhich it Uds.
Some European capitals felt that
this accord Mould break dolpn In
competition betUeer the dollar and
pound sterling. Yesterdays mope
eliminated this competition, but
still is not yet "the final pattern Of
the picture" OF stdbilizdtion.
Ey the Associated Press.
Declaring that its aim was more
normal trade relations, the United
States Government today put into
effect what Secretary of the Treasury
Morgenthau termed "a new kind Of
gold standard"
Great Britain and France took
similar action as the result of a three
power agreement. Officials here said
the pact was designed to curb cur
rency speculation. put a check-rein
on exchange fluctuations and estab-
lish a free movement Of gold among
the three governments.
Other nations were invited to join
the new gold bloc" and some Gov.
ernment economists predicted 1t
might spread within few weeks to
a large part of the world.
The understanding provided that
the stabilization funds Of the three
governments would exchange gold
with each other, buying or selling as
the occasion arises. Gold can no
longer be exported from the United
States by individuals, nor can it be
purchased by nations not a party TO
the agreement.
Other Nations Act.
About the time the accord was be.
ing announced, trade and money re.
lations also were the subject Of pro.
nouncements In other nations. Toxic
disclosed that Japan stands ready to
attend any international economic
conference which aims to stabilize
currencies and wipe out trade barriers
A Hitler lieutenant warned that Ger.
many might be forced into an inter.
national trade war if her lost colonies
were not returned.
While the Franco-British- American
accord did not establish fixed ratios
between the three currencies,
Morgenthau said he regarded it as q
long second step" toward ultimate
sterilization.
The first step was taken September
IS, when the same three nations made
a "gentlemen's agreement" to co.
operate in steadying the exchanges
while France devalued her currency.
Morgenthau characterized the first
understanding as complete sue
cess" He noted that seven other ma
| tions had followed France in devalua-
| ton, in some cases simultaneously
easing their tariffs and other trade
restrictions.
The Secretary said today's agree
| ment would have virtually no direct
effect on "the man in the street." be-
cause it will not influence the internal
| value of the dollar.
Immediate Results.
Immediate results, he said, would be
felt only by two groups:
l. Professional currency SPECTATORS,
who will no longer be able to influence
the market by shifting gold from one
country to another.
2. Business men buying and selling
abroad, who will be relieved of the
risk of violent exchange fluctuations.
Previously gold could be exported
by any individual or firm which OBJ
tanned a license from the Govern.
ment. Under the new arrangement.
gold will be sold only by the Federal
Reserve Bank of New York, acting as
the Governments fiscal agent.
Its only customers will be the sta
bilization funds Of Great Britain and
France-or of any other nation which
subsequently may join the agreement.
Price of gold today is $35 per fine
| ounce plus one-fourth per cent
handling charge. This price may be
changed, If necessary to protect the
tdluC Vi tAlC 0OAAdAy bAO 4sAOA
genthau indicated that such a shift
was considered highly improbable.
Gold prices may be changed, or the
agreement terminated by any Of the
three nations on "a hours notice.
Further Out Of Trade.
Today's arrangement removes gold
still further from ordinary CONNER
cial transactions, Government econo.
mists observed.
Under the new agreement, 1t is re.
moved from ordinary international
business, and becomes, in effect,
simply a kind Of counter for use In
bookkeeping between governments.
Commenting on the new move.
Morgenthau said:
1.-THE level of foreign exchange as
between the United States, Great
Britain and France may be thought
of as q triangular plane. Each cor
ner rests on the foundation Of .
sterilization fund. "a fund set up
| to steady currency by buying or SELL
ing in money markets..
Each country operates its own
stabilization fund to equalize its cur.
rency by buying and selling exchange
in terms Of other currencies. By that
I mean, in this market we buy sterling
or francs. In London they would be
buying dollars or francs.
mo country wishes through these
operations to accumulate too much
paper currency Of the other countries
and, therefore, we propose to permit
each country to convert the othsr
countries paper money into gold, the
| price being fxed each day."