Evening star., 1939-04-21
Steady Flow Of Funds
To j. ). Is Problem
For British
Financing Of Big Arms
Program May Cost
More as Result
By the Associated Press.

NEW YORK, April 21-Contin-
ued export of capital from European
countries affected by recent wal
scares may prove increasingly harm
full to them in an economic sense
even if hostilities are averted, some
Wall Street bankers believe.
This attitude was reflected in the
British House of Commons by the
chancellor of the eXchequer who, in
a written reply to questioner, said
measures had been taken to curb
English speculative purchases of
foreign securities, and that he hoped
mo such purchases will be made for
investment either"
The flow of funds to the United
States from Great Britain has al
ready caused some hardening in the
cheap money rates that have pre-
vailed there and caused a bit of
doubt as to whether the financing
of projected heavy armament ex-
penditures could be done at as low
an interest cost as had been ex-
pected.
Sterling at Discount.
Along with the boost in money
rates, the export of capital from
London has again put a heavy
strain on the pound sterling, and
while the equalization fund, with
considerable gold at its command
can hold the spot rate daily to a
narrow range, the discount for tu-
ture deliveries of the currency has
widened considerably and recently
has been running, on 90-day for
ward purchases. to little under 3
cents to the pound
Before the Munich agreement, 1t
was pointed out, sterling was seldom
at a forward discount and usually
commanded premium in terms Of
the dollar.
Continental European nations have
likewise felt the effect of the heavy
drain of capital funds. Private ad-
vices to bankers here have indicated
the possibility recently that Belgium
might be forced to devalue her belga
and the latest report of the Bank
of France showed big increase in
note circulation, indicating hoarders
were preparing for possible conflict
by withdrawing their money from
the banks and holding it in safe
deposit boxes.
French Regain Funds.
The report showed that from
March 16 on circulation had in
creased by the equivalent of about
$228, 100000. French capital, on the
other hand is still being repatriated
from abroad as result of economic
measures taken last fall by the
Daladier government The hoard
ing, however, has tended to dimin-
ish business activity to an extent
and to lower prices.
Export of capital from Holland
and Switzerland has continued at a
pretty nigh rate. bankers say, and
the central banks of some of the
smaller European countries likely to
be affected have transferred to the
United States for safekeeping a
large portion of the gold they held.
The desire to get gold away from
Europe has resulted in the repatria-
ton to its homeland of much of the
metal normally held in trade bal
ances in London. For example, the
Queen Mary arriving at New York
yesterday carried approximately
s1,90O,000 consigned to the New York
Federal Reserve Bank but eventual
ly destined, it was understood, to
Montevideo, Uruguay. Another
batch was en- route to Venezuela.
In the meantime European hoard
ers are continuing their heavy pur-
chases of United States currency to
be held in safe deposit vaults abroad
Last month a new high record of
$23, 100000 in paper dollars was ex-
ported and heavy shipments are
continuing. Most of the exports are
in bills of large denominations.