The Franc

The franc reached the lowest point in its recorded history when it fell to more than 20 to the dollar.

The event gave rise to a prodigious amount of comment upon French finance:

A High Official of the Banque de France (speaking of the alleged --AngloGerman attempt to drive France to inflation) : "This is a vain hope. To whatever measures France is obliged to resort in order to complete her reconstruction, she will never imitate Germany. France is a rich country, in full prosperity, and will find her way out of the present financial difficulties. The urgent thing to be done now is to prevent the people at home and abroad from speculating on those difficulties."

L'Intransigeant, Paris evening journal: "There is much to be done. . . For instance, why does the Government tolerate the action of the defeatist Frenchmen, having no purchases to make abroad, speculating on the dollar against the franc? Why tolerate that in France, notably Alsace-Lorraine, important contracts are signed between French industrials payable in dollars, as if the franc had ceased to be the only currency having official circulation in France? Whatever way we turn, we find the need for a strong Premier to steer the country through its difficult task. M. Poincare as Minister of Foreign Affairs has been admirably firm, dauntless and energetic in the conduct of the battle of the Ruhr, but as President of the Council of Ministers he has found internal politics nauseating and has been reluctant to take action because it required a certain kitchen cleaning which is repugnant to him."

Le Temps, Paris semi-official daily: "We may be permitted to observe, without a desire of discouraging the good-will affirmed, that the real remedies for the foreign exchange situation lie neither in the domain of repression nor of regulation. Measures of the kind adopted in foreign countries, notably Germany, have given most deplorable results. There is no possibility of hiding the fact that the present movement of the depreciation of the franc began this time from the interior. This is indisputable. There has developed in the last few days among the French public an unjustified panic, causing excessive purchase of foreign currencies unwarranted by our commercial requirements."

The real reason for the fall is that the French budget is in a very unsatisfactory condition. Although the ordinary budget has been balanced by a transfer from the "extraordinary budget," the actual deficit for last year in the profit and loss account of the French Treasury was stated to be 23,000,000,000 francs. This was, of course, largely for reconstruction work in the devastated areas and the money was, or has to be, found by another issuance of government bonds. Thus it was said that "95% of the assets of the Bank of France are obligations of the Republic of France"--a fact not likely to induce confidence in French finances.

On top of this came the baleful news that in the last week of last year the paper franc circulation rose by 1,200,000,000 francs, bringing the total up to 39,114,000,000. This was explained by the euphemistic phrase, "end-of-year settlement." It was thought possible, however, that the Banque de France would be forced eventually to raise the banknote circulation over 41,000,000,000, the present authorized figure. This would immediately imperil the gold ratio of 25% and cause a further period of depreciation.