Again Gold: Perfidious Paris

INTERNATIONAL

Again Gold: Perfidious Paris

The "real reason'' for current weakness of the British pound on the New York exchange was discovered last week to the satisfaction of London's Daily Herald, organ of the Labor Government.

Reason: a ''very serious" quarrel between biggest U. S. and British banking interests. According to the Daily Herald, the quarrel began when British bankers secured a lion's share of recent "profitable foreign financing business."

Result: according to Labor's Daily Herald, disgruntled U. S. financiers, who got the lamb's share, have been punishing the Bank of England, landing with both feet on Sterling.

Neither specific nor satisfactory, the Daily Herald's story was nevertheless a bold first attempt to plumb the mystery of what Governor Montagu Collet Norman of the Bank of England and Governor George Leslie Harrison of the Federal Reserve Bank of New York did differ about last November. Mr. Norman had joined Mr. Harrison on the S. S. Bremen at Southampton, seemingly to accompany him to New York. But when the Bremen reached Cherbourg the Governor of the Bank of England got off with his valet and his bags, rushed back to London, has not since been to Manhattan (TIME. Dec. 15). Even last December the Bank of England was facing such heavy gold withdrawals (which have continued) that U. S. "cooperation" (support) was being eagerly mentioned by British financiers.

Significant, in view of the London Daily Herald's outburst, was another last week ''From the Paris-Midi:

"The United States is recalling capital from Europe," declared the Paris-Midi, "in preparation for organizing another speculative rise in Wall Street.

"The Americans are already announcing that it is with them that the first speculative opportunities will be found, and that is why the United States, according to reports, has recently canceled European credits already decided upon in principle and also withdrawn funds from this side. In acting thus, the United States is endeavoring to attract foreign capital in search of remuneration. . . .

"The United States likes records, and boasting of the largest number of bank failures in the world is merely a preliminary to adding immediately afterward that it has also beaten the speed record for financial and Stock Exchange recovery."

Vexed though British and French fiscal circles may have been at the U. S. last week, the British and French treasuries were far more vexed at each other. Ever since testy Philip Snowden took office as Chancellor of the British Exchequer (TIME, June 17, 1929) he has been trying to browbeat the French Treasury into paying interest and principal to British holders of France's War loan bonds in gold francs instead of paper.

The pre-War franc was worth 19.3-c-, the present franc is worth 3.9-c-. If the French did as Mr. Snowden has repeatedly demanded that they must do. they would repay British bondholders the equivalent of $327,500,000. But in a final, stiff note to Mr. Snowden the French Treasury has just: i) refused to submit the dispute to arbitration; 2) postulated again and for the last time that the British bondholders will be paid in the revalued franc. On this basis they would receive not $327,500,000 but $65,000,000.

In dealing with certain smaller powers who borrowed from her in pre-War francs, France has successfully demanded that they repay her at the pre-War rate of 19.3-c-gold per franc. But she will not pay Britain more than 3.9-c- she defies Mr. Snowden, and he last week appeared to be powerless. Said London's Financial Times:

"Fortunately for France, she is in no present need of financial assistance from without her borders. Were it otherwise she would find that the foreign investor has learned his painful lesson. Nothing short of a complete, unequivocal obligation in the bond to redeem in gold will satisfy the foreign investor for at least a century."

French thesis: the majority of French War bonds are held by Frenchmen who have quietly taken their loss, let the British minority holders take their loss as quietly, make good the ancient boast that "Englishmen are better sportsmen than Frenchmen."

A French revolution would probably follow any attempt by the French Gov ernment to give "preferential treatment'' to British holders of these bonds, for the numerous French holders are all resolute citizens who will stop at nothing to get their 19.3-c- on the franc if anyone gets it.

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