Pressure on Gold

Bedrock facts beneath the billows of press pother last week about the Gold Standard:

France. As to the flight of capital from France provoked by the fall of Premier Doumergue's "Truce Cabinet," the Bank of France was seen last week to have lost gold worth 360 million francs, or less than one-half per cent of its reserves of over 82 billions.

Thus pressure on the franc last week was "psychological, not actual," in the opinion of foreign exchange experts. They pointed to the success of new Premier Flandin in winning huge votes of confidence from Chamber and Senate on a program of rock-ribbed gold standardism (seep. 21). The gold cover behind French currency stood at over 80%. Even so, psychological pressure was great. After-effects of the French crisis fortnight ago kept the currencies of four gold bloc countries (France, Belgium, Netherlands, Switzerland) fractionally below the gold export point all week. President Roosevelt, by relaxing completely the lax treasury restrictions on export of U. S. capital, convinced Europeans that the U. S. is now a better place to which to send their money than heretofore.

Belgium. Tall, curly-haired young King Leopold III faced the first grave crisis of his reign last week when the Catholic-Liberal Coalition Cabinet of patrician old Premier Count Charles de Broqueville was upset by that fiery anti-inflationist and anti-devaluationist Finance Minister Gustave Sap.

Since both the Catholic and Liberal parties have pledged themselves to maintain the belga on gold, Dr. Sap should have been popular among his colleagues. He balanced the budget last month, and, with Foreign Minister Henri Jaspar, rallied all the gold bloc countries to stand together at the Brussels Conference (TIME, Oct. 29). In the end, however, Dr. Sap's economies, imposed on each and every Minister, made him the Cabinet's Simon Legree. When, having already cut civil servants' salaries 24%, Dr. Sap insisted last week that he must cut them 5% more, the Cabinet resigned amid rumors that "the Ministers were divided between the wisdom of inflation or further deflation."

Promptly His Majesty asked Gold-Standardist Henri Jaspar to form a Cabinet. M. Jaspar at once tried to get as Finance Minister Belgium's squat old Copper King and No. 1 banker, M. Emile Francqui, stabilizer of the Belgian franc in 1926. Before the Cabinet slate was announced last week, Brussels proletarians heard that it would contain a director of the Liege National Arms Factory, began murmuring against "The Gun Makers' Cabinet."

Even a king as young as Leopold III could not miss that cue. Next day the mob was saying that His Majesty had sent M. Jaspar packing and M. Jaspar was saying that he had voluntarily returned the royal mandate because he could not get M. Francqui into his Cabinet.

Over the week-end King Leopold sent for choleric Colonel Georges ("Red Head"*) Theunis, negotiator of Belgium's debt settlement with the U. S. in 1925. Now a ranking Belgian elder statesman, former Premier Theunis emerged from retirement with reluctance. "The task is not simple," said he, "but I will do my best." His best, completed after three days, included M. Francqui as Minister Without Portfolio.

Meanwhile sources close to Chicago's Federal Reserve Bank rumored that on Nov. 7 forehanded Count Charles de Broqueville prepared for the crisis of last week by arranging with the U. S. Federal Reserve System to supply up to $25,000,000 of quick credit to resist pressure against the belga. From Washington the Treasury would neither affirm nor deny that a "foreign loan" had been made to Belgium, indicated that if it were so the Bank of Belgium would eventually have to ship gold to cover as much of the quick credit as was used.

Switzerland. A spectacular promotion stunt by Swiss hotelkeepers backfired last week, sending the Swiss franc down below its gold point for the first time in months. To attract British winter sportsmen, the stunting bonifaces advertised that in settlement of Swiss hotel bills the pound sterling will be accepted as worth 16 Swiss francs flat. Last week the pound was worth 15.31 Swiss francs on international exchange. In effect the Swiss hotelkeepers had merely cut their rates. But Paris seethed with angry talk: "The Swiss, like the Germans, are creating an unfair cut-rate currency. What is the difference between the 'tourist franc' in Geneva and the 'blocked mark' in Berlin?"

There is every difference, the Swiss Government pointed out: 1) No 'tourist franc' has been created; 2) the actual Swiss franc remains fully convertible into gold; 3) the Swiss Government deplores the conduct of its hotelkeepers but is naturally helpless to prevent them from talking about a price reduction as if it were an innovation in exchange.

Netherlands. If other money-masters were too nervous, Queen Wilhelmina's square-headed, imperturbable Finance Minister Pieter Jacobus Oud was decidedly too calm.

Last week was no time for a statesman in his position to make a speech in which the biggest word was IF, a speech calmly toying with the question of what Holland ought to do IF the dollar, pound, yen and other flexible moneys should one fine day be stabilized.

In that event, observed Dr. Oud at Amsterdam, Her Majesty's Government would certainly have to consider at what value Holland's guilder should be dovetailed into the world monetary stabilization pact. He implied that once the Dutch are sure that other countries have really stabilized they should bring their guilder in at about the average level of devaluation.

Ideas as complex as Dr. Oud's easily get mixed. Hardly had he uttered his careful IF, than Wall Street was reading that "HOLLAND MAY DEVALUE FLORIN, Dutch Finance Minister Sounds Warning."

When this was cabled back to The Hague, wrathful Finance Minister Oud declared: "Her Majesty's Government is more convinced than ever that the stability of the guilder is a necessity as long as world stabilization remains in the far future." In London the Oud incident was cited as tending to confirm Europe's suspicions that President Roosevelt is secretly sounding out foreign governments on the question of world monetary stabilization.

--Of bald Statesman Theunis, the official interpreter at the Cannes Conference, M. Georges J. Mathieu, wrote: "I noticed a very remarkable difference between M. Theunis' anger and M. Jaspar's. When M. Theunis was getting angry he used to show a very conspicuous danger signal: the skin on top of his head became bright red. While M. Jaspar, next to him, showed it in his face."

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