Evening star., 1938-11-27
Pound S Slump
May Threaten
U. 5. Trade
British Goods Aided
In Competition for
World Markets
By RAIDER WINGET,

British currency deprecated further
in terms of the American dollar to-
day, as Britain fought secret and
intricate battle of world currencies
as part of the contest for interna-
tional power.
The price of monetary metal
reached $50 shillings an ounce, up
~ pence, and it took only 4.63A
dollars to buy one pound sterling
the unit of British currency-com-
pared with more than in the early
months of the year.
On New York, after trading had
closed in London, the pound sterling
was quoted at s4627s, off y cent
from yesterday, and the lowest in
five years, with the exception of
short time during the demoralized
trading caused by the Czechoslovak
crisis last September %.
Wall Street Alert.
(Wall Street has been watching
closely the sag in sterling, because,
as a chief medium for world trade,
it tends to depreSs dollar prices of
international commodities, and to
cheaper British manufactured goods
in competition with American.
(The American dollar, since 1884,
has been pegged to gold by the U. S.
Treasurys fixed gold price of s35
an ounce. The gold price in the
London free market today, equiva-
lent to S3478 at the rate of eX-
change, is close to the level at which
it is profitable for Wall street
bankers to buy gold in London and
sell it to the treasury
The British Empire and Scandina-
Wan currencies are mostly linked to
sterling, and the North and South
American monies mostly tied to the
dollar.
Those two blocs, with the French
franc consti ute the international
free currency entente which is op-
posed to the closed economy and
blocked money devices of the dicta-
tor states and their allies.
Attempt to Save Franc.
Many London bankers believe the
French fiscal position is so precari-
Gus that break would mean the end
of the tripartite monetary agree
ment, but they have faith that
French Finance Minister Reynauds
reforms will stabilize French econ
omy. Britain consequently is doing
everything possible to save the
French franc and maintain stability
of the dollar pound franc rates.
(The tripartite agreement, entered
into by the United States, England
and France in October, 1886, calls
for use of the large foreign exchange
control funds of the three nations to
smooth out fluctuations in the ex-
change rates for their currencies,
and thus facilitate international
trade.
(The French franc has recently
been under pressure, attributed in
Wall street today to the vigorous
labor opposition there to projected
economic reforms. 1t closed in New
York at 2.59ls cents, of .0O1s of a
cent from yesterday
There are many reasons advanced
for the decline of sterling.
One outstanding reason is Brit
aims continued buying of more from
the United States than she sells
there.
Another is the rush to buy gold
with sterling in London, and sell the
gold for dollars in the United States.
Selling of sterling and buying dollars
makes sterling cheaper
Caused BY War Fears.
Most of that rush is caused by
fear of war, or fear that events such
as Hitler's Jewish purge might Lead
to war, and that dollars would be
the safest investment in war time.
Wall Streets recent market re-
vival also has been attracting for
eign money, which has been leaving
the London Stock Market, because
it has not followed the upward
trend.
Britain's secretly operated equali-
zation fund does not try to stem
any major movement as the current
one toward cheaper sterling, but
smoothes out abrupt swings by buy
ing or selling gold or any foreign
currency.
Roughly there is a three-point
purpose in British currency man
agement, upon which financial and
political authorities agree:
1. Maintenance of England's gold
reserves and protection of internal
monetary structure.
2. Adjustment of the dollar -ster-
ling rate to its natural" level.
3. Continuance of the tripartite
monetary agreement.
S1,500, 100000 Gold Held.
On March 81, last, the equaliza-
ton fund officially reported it was
holding gold worth, roughly, $780,
100000. In the next six months,
it is authoritatively but unofhcially
estimated, the fund lost about $685.
100000 in gold while defending
sterling.
That is not net loss, because
the fund holds an unrevealed
amount of sterling, dollar and other
currency. During the European
crisis which ended at Munich, the
fund is said actually to have made
a profit Of around $15,0O0,O00 IN
exchange transactions.
Financial experts believe the fund,
despite losses, holds "just enough"
gold to meet any future crisis and
with its ample sterling funds, stands
a good chance of getting back its
gold.
British foreign trade merchants
hope the pound will depreciate still
more until the underlined natural
level" is reached. AS the pound
goes down and the dollar goes up,
it costs less for Americans to buy
British goods and more for Britons
to buy in the United States.