Evening star., 1939-08-28
Effects on L. S. Feared.

& IhCtbS UIi u .. CdICu.
NEW YORK. Aug. % Np.-The
sharp depreciation of the pound
sterling may have considerable ef-
fects on American economy some
Wall Street analysts believe, includ-
ing possible increase in imports
and stemming of the flow of gold
which has proven an embarrassment
in recent years.
1t all depends, they say, whether
it is temporary or a permanent
affair.
Acting Secretary of the Treasury
Hanes said Friday in Washington
the British had notified us in ad-
vance the peg" would be removed
from the currency in order to con-
serve gold resources, that he con-
sidered the devaluation which fol-
lowed non-competitive and that no
consideration had been given to any
adjustment of the dollar in COM
pensation
In other words. analysts inter-
preted his statement as meaning if
war is averted Britain may be ex-
pected to push the unit back to
about its former level of s4.68,
at which it has kept it since around
the first of the year. If England
engages in conflict the cheaper
pound. it is expected, will not per-
NIT her to compete on better terms
with us in world markets because
/ she will be too busy turning out
/ goods for her own armies and peo-
pie to manufacture them for sale
abroad.
Results Uncertain.
! The effect on our commercial re-
lations with nations Of the sterling
| bloc" whose currencies are tied to
! the pound remains to be seen.
They include Norway, Sweden, Dem
mark and France, which preferred
! to let their currencies fall in rela-
ton to the dollar rather than rise
IN terms of sterling Canada has
been regarded as only first
cousin" in the sterling bloc, but her
currency fell off sharply when the
British peg was removed.
A special adjustment must be
made with Argentina, with whom
we are about to enter negotiations
for a reciprocal trade treaty, Wall
Streeters said. The peso is pegged
to the pound and when the British
unit deprecated so quickly on Fri
day Argentine banks became so con-
fused they refused to quote other
currencies or sterling itself. 1t was
said, as result, the government was
considering ending the tie.
| Should the sterling bloc countries
and Canada permit depreciation, the
immediate effect probably would be
to increase imports from them, as
the United States dollar would buy
more unless sharp domestic price
rises occurred. Likewise our exports
to them might decrease because of
the higher cost to them of our
goods in their deprecated monies.
In case of war involving the major
industrial nations of Europe, how
ever, we would have few competi-
tors.
Canadian Rate Watched.
In the case of Canada deprecia-
tion might mean additional competi-
ton with our dairy, meat. lumber
and other Industries within our own
borders and fewer exports to a large
customer.
But, 1t is said in Wall Street, it
is by no means sure Canada would
permit her currency to be too heav-
lily discounted here. It is pointed
out that since 1888, when Canadian
money was off about 80 per cent,
it has since generally held at near
parity levels because of the natural
flow of trade between the two coun-
tries, and many times has been at a
premium
During the World War, with the
exception of a few fluctuations in
1914, the Canadian dollar held at
about the American rate and on
two occasions commanded a higher
price.
Under the charter of the Bank of
Canada a fund of about $65 900 900
is available as stabilization fund.
This has never been used, so far as
Is known.
One other consideration which
might keep Canadian money steady
in relationship to our own is the
fact that about $4,000, 600 900 in
Canadian borrowings are held in the
United States, with interest payable
In New York funds. A deprecated
monetary unit would mean . boost
In payments here.