Evening star., 1939-01-01
Dollar Is Almighty
In International
Exchange Value
Pound and Franc Drop;
Depreciation Roce
Is Possibility

The phase almighty dollar
takes on new meaning In spite Of
devaluation, steady deficits and our
soaring public debt. the dollar still
holds the questionably advantageous
honor of being the strongest none
tary unit in the world.
On September %, just before the
Munich pact was announced the
pound sterling slipped to $3.50. After
brief recovery, it dropped below
the $4.70 level in mid d-November and
the closing weeks of the year saw
1t struggling between 81 81 and $4.68.
Before the terms of the Anglo
American reciprocal trade were an
nounced it was rumored that this
agreement might fix a relationship
between the pound and a dollar.
The pact instead included a pro-
tective clause providing for termi-
nation of the agreement if the cur
rencies should get SO far apart that
one nation has an unfaiar trade ad-
vantage over the other.
Gold to New York.
Gold has been steadily flowing
from London to New York during
recent months partly because of
war fears, partly because British
Investors again see more hope of
safety and profit in our security
markets than in their own
The French government was forced
TO devalue the franc for the second
time on May 5, bringing its official
exchange value to 2,79 cents. Dur
Ing the summer and fall months
exchange observers had serious
doubts whether this rate could be
maintained.
In recent weeks the franc has
tended to move lower with sterling
but the appointment of Paul Rey-
maud as finance minister has in
creased confidence in French cur
rency slightly Reynaud, as a men,
ber of the Chamber of Deputies
when France was on the gold stand
ard, gave repeated warnings that
disaster would follow if the govern
ment insisted on maintaining the
franc on gold while pound and dol
lar were weak. Furthermore. he
warned that the devaluation would
have to be drastic and be accom-
panied by drastic economy meas
ures. French security markets
responded to his appointment with
a grant of decree powers by staging
q brisk rise.
Threat to Our Trade.
A weak pound presents the most
upsetting threat to American and
world trade, however. First. there
Is an advantage in being a British
customer rather than a buyer of
American goods when the pound is
cheap and the dollar dear. Second,
there is the influence of a weak
pound on world commodity prices,
an effect already noticeable in the
failure of prices to hold the ad-
vances made last summer.
A depreciation race between Eng
land and the United States is not,
however, strong possibility. Brit
lsh money managers might like to
zee the pound low in terms of the
dollar but American friendship is
being too assiduously courted right
now to make it probable that a
cut-price currency war is immedi-
ately ahead.
On the other hand, any real
stabilization of international ex-
change rates seems farther away
than ever. The United States holds
more than half of the worlds sup
ply of monetary gold and there is
no near term prospect of a redis-
tribution. To the British the bene-
fits of currency management still
appear to offset its disadvantages
under present conditions and while
this attitude persists managed cur
rency policies will not be discarded
by other nations.