Evening star., 1936-10-04
Few Signs of Liquidation
Appear at New York
After Advance.
OUTFLOW OF FOREIGN
GOLD UNLIKELY SOON
War Fears and Faith in U. s.
Trade Recovery Expected to Hold
Bulk of Funds in America.
BY CHARLES r. SPEARE.
Special Dispatch to The Star.

The French announcement was fol-
lowed by similar action toward the
Swiss and Dutch currencies. Germany
has given notice she will stay on gold.
Italy, apparently, Is without an i'm
mediate policy.
Great Britain has shown no dispo-
sition to return to the gold standard,
and there is a general belief that the
American dollar will remain on the
present 40 per cent discount basis.
With continental markets in Europe
closed the greater part Of the week,
the speculative effect of devaluation
did not have free range. Where it
was expressed, 1t reflected a natural
readjustment in prices of equities"
to a new rate for the franc. though
this, as in the case of the guilder, has
not been made exact.
Stocks in London, in Amsterdam
and on the Swiss exchanges were
buoyant. Just as in the American
market, bonds in Europe the last few
days have been rising with common
stocks in a period traditionally bearish
toward fixed interest securities.
First Reaction BuIlish.
Here, the market was first influ-
enced bullishly by the foreign news.
though principally because Of the en-
phasis given in the Morgenthau an
nouncement and to subsequent state
ments of the same tenor from Govern
ment officials, economists and news
paper editors on the benefits to world
trade and to world peace of the tri-
partite exchange agreement.
Subsequently, there was some reac-
ton and small transactions with scat
tering signs Of liquidation of American
stocks popular in France.
With devaluation Of the French
franc visible on the financial horizon
for SO long q time, there have been
many conjectures as to what might
happen to American securities held
here for foreign account and to the
vast sum Of gold received into the
United States in the past two years
when France finally took the action
officially sanctioned by her lawmakers
this week.
The Department of Commerce esti-
mates that at the end Of 1888 France,
Holland and Switzerland held q par
value of long-term American invest
ments of s1,465, 100000 OF this over
one-third was in common stocks
About 80 per cent was in bonds and
preferred stocks.
Inasmuch as some of the heaviest
buying of American equities" has
taken place during this year. the total
holdings of these three countries is
today probably well in excess Of the
1885 figure.
Two Billions Moved.
Since March, 1885, the Bank OF
France has lost approximately s2,000.-
600 900 gold. Most Of 1t has been ex-
ported to this country. One of the
early arguments made against reduc-
ing the excess reserves Of the Federal
system Of member banks was
that, in the event of devaluation of
the franc, much Of this gold would
return to France.
The basis on which French and
other continental investors, as well as
those in England, have been buying
American securities is the protection
this gives their capital in case of an
European war, plus the attractiveness
of common stocks created by the
American business recovery. The
European export of gold was in the
nature of flight of capital away
from the scenes of social and political
turmoil abroad and to the safest haven
that could be found anywhere in the
world.
Until, therefore, a more favorable
picture of European conditions can be
sketched, it is doubtful If either Amer
ican securities will be sold for foreign
account or gold repatriated on a scale
to upset the speculative or exchange
markets on this side of the Atlantic.
Pact Stabilizes Exchanges.
The biggest question involved in the
experimentation it is still
that's whether or not it makes for
recovery in world trade and for world
peace. The chaotic conditions that
were once predicted when and if
France devalued again have been
spared by the three e-party agreement
to stabilize the exchanges. The per-
manent success of this depends on the
strict cooperation between the par
ties in interest and the elimination of
all political maneuvering for advantage
from this delicate international situa-
ton.
An event of such great importance
as devaluation of the currencies of
France, Switzerland and Holland, and
following in countries of
lesser rank, could not fail to have its
influence on commodity markets. How
ever, the reactions there were rela-
lively mild. They were partially af-
fected by technical domestic condi-
lions, as in grain and cotton. As for
the commercial and industrial situa-
ton, 1t reflected the same bright pros
poets characterizing it for months.
Imports Still Increase.
With respect to American foreign
trade, the future is not so clear. The
August figures released this week in
dicate the growing surplus Of imports
over exports. The trend has long been
in this direction. Just how much de.
valuation Of the former gold curren-
cies Of Continental Europe will change
this Is an open question. Cheaper
francs and guilders will not accom-.
plish their fun purpose unless they
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