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The Financial SituationTHE rather puzzling trend of general business con-ditions, and a new attitude of mind in certainsections of the business community, which havebeen gradually developing for a number of weekspast, have reached a distinctly more advanced stageduring the past week or two. The retail demand forautomobiles has continued to retain its force iWun-expected degree. Somewhat the same is to be saidof a number of other branches of industry. Oneresult is that the current rate of operations in thesteel industry is showing a marked tendency to riseat a time of the year whenit is &usually declining.These and other currentfactors, particularly, per-haps, the encouragementengendered by the pros-pect of having the courtsinvalidate a very substan-tial further portion of theNew Deal during the nextfew/ months, have pro-duced a buoyancy in thesecurities markets, particu-larly in the more specula-tive sections of them, thathas not been in evidencefor a good while past.The usual stock aver-

ages, having successfullyeffected a very markedincrease during the pasthalf-year, now stand at fig-ures that have not beenmatched since fairly earlyin the depression. Govern-ment bonds have falteredsomewhat on occasion dur-ing the past week, and anumber of the recent offer-ings of new securities havenot been taken avidly atthe very high prices fixed.But these latter develop-ments have not served todampen the spirits of theoptimists, whose numberappears to be increasingnotably. Nor do all thesemovements in the securi-ties markets seem the prod-uct of an expectation of in-flationary developments, inthe sense that investors and others are buyingequity securities for the purpose of avoiding lossesthat they fear might otherwise be inflicted uponthem by violent:price movements.

same as it was in the days when so much that wasdiscreditable was occurring in the financial dis-trict. Of course these practices have not attainednearly their former proportions, and we sincerelyhope that the exchanges and other organizationswill continue, as they have during the past fewyears, to do what they can to prevent a furthergrowth of this sort of behavior among elementsin the securities markets that never do the mar-

who make their living in them, theanybody else any lasting good.

It is difficult now, as italways is, to arrive at anydependable judgment con-cerning the extent to whichskillfully disseminated"opinions" by selfishly dis-posed interests are affect-ing sincere, if mercurial,sentiment in financial, andespecially security market,circles, and, indirectly, thatof the public at large. Itis equally difficult to becertain just how large apart the mere fact of risingsecurity prices influencesthe judgment of the com-munity. Nor are we ableto estimate accurately howfar the ebullient spirit thatseems to pervade the stockmarket at present hasspread to industry andtrade. Yet there can be lit-tle doubt of the fact that thesecurity markets and prob-ably the country at largeare giving evidence ofgreater optimism than theyhave at any time since theravages of the New Dealbegan to make themselvesfelt in earnest.

kets, thosecountry, or

An Indefensible Bill"It was at first proposed that the Federal

Reserve banks should be stripped of everyparticle of local self-government and that weshould establish here in Washington prac-tically a central bank to be operated by peoplewho are not bankers and who have no tech-nical knowledge of the banking business."That suggestion was so repugnant to the

original purpose and intent of the FederalReserve banking system that those who pro-pounded the suggestion soon found it con-venient to abandon their indefensible atti-tude."Senator Glass, the redoubtable defender of

the faith, from whose speech in the Senateon Wednesday on the proposed Banking Actof 1936 we have taken the sentences justquoted, did not add, although he might wellhave done so, that the plan as originally pro-posed contemplated a central bank to bekept under the thumb of a group whose ideasare shot through with the belief that creditand currency can be safely and successfullyemployed as instruments for the removal ofmoat of the ills to which the business worldis heir.

It is because it seems to us that the pro-posed Banking Act of 1936, both in its originalversion and in the form in which it wasadopted by the House, is open to both theobjections raised by Senator Glass, and thosewhich we ourselves have just raised, that webelieve the measure is repugnant not only tothe "original purpose and intent of theFederal Reserve banking system" but to allsound conceptions of banking.Even with the highly constructive and help-

ful changes that have been made in the billby Senator Glass himself, the measure seemsto us to be genuinely undesirable. We shouldmuch prefer to see legislation on most of thesubjects with which the measure undertakesto deal deferred to some future date whenpolitical conditions will be such as to givereasonable ground for believing really soundpermanent legislation can be effected.In its original form it is reminiscent of

nothing so much as the proposals of JohnLaw which so successfully laid the basis forthe disastrous Mississippi Bubble. To adoptit in this form would of course be to invitedisaster.

Some Controlling Factors

They appear rather to be traceable to otherfactors. We regret that we are obliged to takenotice of evidence, now too plain to be ignored,of a recrudescence of manipulation of securityprices in some instances. The technique appearsto have been modified to conform to new condi-tions, but the essence of the matter is about the

A Time for Fact-Facing

It is certainly no part ofour duty to offer advice tothe public about its in-vestments, or its specula-tions, either. We shouldcertainly never knowinglydo or say anything to

lessen the force of well-founded hope or sound confi-dence in the business community anywhere. Yet itseems to us peculiarly important at this time thatwe, all of us, look the facts, all of them, carefully andrealistically in the face, and make doubly certainthat we do not permit our emotions to sway ourjudgments unduly. The danger of some suchblunder is the greater by reason of the fact that wehave for so long been unavoidably and deeply de-pressed. Since the pitfalls that now await the un-wary are so numerous and so serious, the penaltyof over-optimism at this time would in the longrun be severe indeed, we are afraid.

Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

482 Financial Chronicle July 27 1935

There are two substantial causes of currentoptimism. The first and the most important iswhat appears to be a plain trend of public sentimentaway from destructive radicalism and costly pana-ceas. Although apparent at least in nascent formprior to that time, this change in the public opinionseems to have rallied around the highly intelligentand constructive Supreme Court decisions in suchcases as those involving the Railroad Pension, theNational Industrial Recovery Act, and the Frazier-Lemke law. It has made itself manifest upon severaloccasions in Congress, even though the Adminis-tration has been able, far more frequently than couldbe desired, in one way or another to persuade ourlegislators to do its bidding during recent weeks, orapparently bids fair to be able to do so in the future.Yet few, if any, doubt that the policies which, takenall together, constitute the New Deal have lost castevery materially during the past month or two.

Remarkable Vitality

The second factor is the really remarkable abilitythat business has shown to proceed in relatively sat-isfactory manner despite the cruel burdens that ithas been required to bear. A relatively few weeksago it was almost universally expected that by thistime business activity would be at a very low ebb.Summer dullness was thought likely to be markedlyintensified by adverse national policies. The outlookfor the autumn was a subject about which consider-able difference of opinion existed, but few were par-ticularly enthusiastic about the outlook. However,business activity for several weeks past has showna tendency on the whole to resist seasonal influenceand even, as is the case with steel, to move forward.Earnings reports, which have been making their ap-pearance in substantial numbers for some weekspast, are showing that costs are being held withinbounds remarkably well considering the burdensplaced upon industry by a number of the programs ofthe national Administration. All this bears eloquentwitness to the vitality of American business.Both of these factors have real substance. We

should not for the world erase one jot or one tittlefrom their value. We have long believed that theAmerican business community possessed a vitalityand a toughness that would enable it to survive theassaults that were being made upon it. Had we nothad this faith we should have lost hope long ago.We are still firmly convinced that at worst all thevicious measures of the Utopian dreamers in Wash-ington can accomplish is to retard and perhaps topervert the natural tendencies of recuperation exist-ing in the business community. We believe, more-over, that a beginning has been made in the long,long march back to sanity in national policies. Oncesubstantial progress has been effected in the returnjourney, and pan i passu with that progress, a veryfirm foundation will have been laid for sound busi-ness recovery.It is only because we see, and it seems to us that

all thoughtful people must be able to see, that theroad stretching out before us is long and stony, andthat from it lead many by-paths of much external at-tractiveness to the superficial eye, that we feel atthis time constrained to utter a word of caution. Inthe first place the final results of this year's nationallegislative activity are at this moment far from clear.The "reverses" of the Administration have occurredfor the most part in only one house of Congress, leav-

ing the other largely subject to White House dicta-tion as far as the particular matter in hand is con-cerned. This means of course that in each instancethe divergent measures must go to conference com-mittees where it is certain that the Administrationwith the many weapons at its disposal will exert it-self to the utmost to have its way. It would be haz-ardous indeed to predict the outcome in detail inany of the several conflicts of this sort now pending.Certainly he would be rash indeed who supposedthat the constructive elements in Congress wouldwin a complete victory in any of these instances.Moreover, as we have repeatedly pointed out in thesecolumns, the measures even in their least objection-able forms, such for example as the House versionof the public utility holding company legislation andthe Senate edition of the proposed Banking Act of1935, are highly undesirable and in ordinary circum-stances would be easily and 'promptly recognized assuch by the people at large. We venture the opinionthat when this session of Congress, and possiblyanother session later in the year, have adjourned, weshall find that any realistic appraisal will pronouncethe legislation enacted this year to be of distinctlyharmful sort on net balance, when judged by ordi-nary standards, and not measured by what mighthave been had the Administration met with no vig-orous opposition.The business community at that time will be faced

with the necessity of adjusting itself to new and dif-ficult conditions imposed by the legislation just car-ried to the statute book. It must also of course con-tinue to carry those burdens that have already beenimposed, the removal of which is certainly not im-mediately in prospect. In certain instances, it istrue, there is a strong likelihood that the SupremeCourt will invalidate very important parts of theharmful legislation of the past two or three years.But in this connection two facts must be borne con-stantly in mind. The first is that the mere invalida-tion of some of these enactments, however helpfulin the long run, will inevitably bring temporary dif-ficulties of a serious sort in some instances. Thesecond is that in several instances amendments arenow being pushed through Congress so that, shouldthe Supreme Court take the position expected of it,the decisions rendered would apply to the law in itsold form, thus leaving the troublesome problem ofdealing with the law in the version then in effect. Thesituation in these respects seems to us to be excep-tionally complex and difficult, and its outcome isvirtually impossible to predict at present, particu-larly as to the effects likely to be produced in theinterim.Meanwhile the budgetary situation is not improv-

ing and shows no indication at present of improve-ment in the near future. We have been heartenedduring the past week to learn of the movement inthe agricultural West that is taking able-bodied menentirely off the relief rolls as long as there is plentyof work in the harvest fields. Of course it wouldhave been absurd to continue a condition, said tohave existed, in which these employalles could ob-tain as much money from relief agencies as theycould by working in the fields. But, after all, this isa temporary matter which can be expected presu-mably to continue only during the harvest season. Itmoreover has as yet no counterpart in other sectionsof the country. So far as can now be foreseen the


Volume 141 Financial Chronicle 483relief problem will be as great next winter as it hasever been, or practically so. This means that underexisting Washington policies there is little hope ofany important reduction in Federal outlays nextwinter, or for that matter much hope of any for thenext fiscal year. We must refrain from further elab-oration of the difficulties by which business is stillfaced, in part resulting from New Deal activities andin part an outgrowth of many years of neglect ofimportant problems such for example as the tariffand related questions. No one who thinks carefullyabout current affairs will doubt for a moment thatthere are many of them and that, like the state ofthe world currencies, they are of serious import.But in many respects it seems to us at the moment

that it is not the rough nature of the path beforeus that most needs attention, but the enticing by-paths that tempt the unwary to disaster. The mosthazardous of these are to be found in the bankingand credit field. What we have in mind at the mo-ment is not the fact that the banks of the country to-day hold enormous quantities of Government andmunicipal obligations of a long term variety, a situ-ation that sooner or later must inevitably bringtrouble. We are thinking rather of certain effects ofpast bank borrowing by the Federal Government,which are likely to be overlooked by those who arenot familiar with /banking processes in their modernform. Much is said from time to time about the im-mense volume of excess bank reserves in the country,and about the further almost equally as large accre-tions to these reserves that can certainly be visu-alized as a distinct possibility in the months andeven years immediately ahead. There can be nodoubt of the highly hazardous nature of the situationthus created. Nor is there the slightest evidence ofany understanding of the problem in Washingtonwhere a solution must at one time or another befound.But what we have in mind at the moment is this:

The Treasury during the past two or three years hasborrowed several billions of dollars from the banks.The bonds and other obligations representing this in-debtedness were paid in the first 'place by the banksby the creation of deposits to the credit of the Gov-ernment. What has become of all these deposits (inmany respects, the money of modern business) thathave been created in the process of Treasury financeduring the past few years? The answer is simple. Asthe Treasury disbursed the funds thus obtained, itpassed these deposits to the general public. Theystill remain in the hands of the public at the presentmoment. It does not matter whether the originalrecipients of the Government payments bought gro-ceries, paid outstanding debts, or placed their incometo their credit in their banks. The deposits still existand are at the disposal of some person or other. Itis a commonplace that during the past few years theindividual, whether he had only a few dollars or amillion or two, has been inclined to spend only spar-ingly. If as a result of anything that has happenedor does happen during the next few months, amarked change should come in this attitude of theowners of funds many of which owe their existenceto the activities of the Federal Government, a situ-ation could easily develop that would have all theearmarks of what is popularly known as inflationwithout active use of a dollar of existing excess re-

serves. It moreover could assume very large propor-tions. Let it not be forgotten that the excesses of thelast few years of the 1929 inflation were carried for-ward without increase in bank credit or enlargementof bank deposits. The phenomenon popularly knownas inflation always flourishes most when the publicsupposes that nothing of the sort is occurring. Thisit seems to us is one of the most serious dangersagainst which we must guard ourselves during thenext few months, particularly in the securitiesmarkets.

Federal Reserve Bank Statement

LTTLE of interest appears in the current conditionstatement of the 12 Federal Reserve bankscombined. The seasonal downward tendency ofmoney in circulation again is in evidence and affordsa satisfactory indication that the normal cycle is inprogress. Although the monetary gold stocks of thecountry advanced $8,000,000 in the week covered, thereport shows a small decline of Federal Reserveholdings of gold certificates. The Treasury is com-mitted to deposit of such certificates as nationalbank notes are retired from circulation, and it ishardly to be doubted that some notes actuallyreached the Treasury during the week. This makesit appear that the Treasury will make such adjust-ments at its own discretion, much in accordance withthe erratic adjustments for gold imports and domes-tic receipts that have been common for more than ayear. This apparent decision will make even moredifficult any exact tracing of Treasury transactionswith regard to gold, and it is to be regretted for thatreason. Member bank deposits with the system onreserve account increased over $20,000,000, but re-serve requirements apparently advanced a little aswell, for the official estimate of excess reserve de-posits over legal requirements is unchanged at$2,340,000,000.

Gold certificate holdings of the Federal Reservebanks were reported at $6,226,004,000 on July 24,against $6,226,200,000 on July 17, but currency con-tinued to return to the banks and an advance inother cash caused a modest increase in total reservesto $6,513,247,000 from $6,499,594,000. Federal Re-serve notes in actual circulation fell to $3,242,240,000from $3,258,418,000. Deposits of member banks onreserve account moved up to $4,944,603,000 from$4,924,402,000, and Treasury deposits on general ac-count also increased, but other deposits declined,possibly because some funds were used by the Ex-change Stabilization Fund in support of Europeangold currencies. Total deposits aggregated $5,491,-765,000 on July 24, against $5,477,332,000 a weekearlier. Total liabilities were not much changed,since the decline in note circulation offset the in-crease in deposits, and as total reserves increased,the ratio moved up to 74.6% from 74.4%. Discountsby the system dropped slightly to $6,109,000 from$6,665,000, but industrial advances continued theirslow climb and attained a figure of $28,358,000 onJuly 24, against $28,268,000 on July 17. Open mar-ket bankers bill holdings were $3,000 lower at $4,676,-000, while holdings of United States Government se-curities fell $12,000 to $2,430,235,000.

Corporate Dividend Declarations

DIVIDEND declarations of the current week againwere largely of a favorable nature. ChryslerCorp. declared an extra dividend of 25c. a share and



the regular quarterly of like amount payable Sept.30; in addition to the usual quarterly of 25c., extrasof 25c. were also paid on June 29 last and June 301934. Monsanto Chemical Co. declared an extra div-idend of 25c. a share in addition to the regular quar-terly of like amount on the capital stock, both pay-able Sept. 15; a similar extra was paid last Dec. 15.Bethlehem Steel Corp. declared a dividend of $1.75a share on account of accruals on the 7% cumulativepreferred stock, par $100, payable Oct. 1; a like pay-ment was made on Oct. 1 1934, which was the firstsince July 1, 1932, when the regular quarterly of$1.75 was paid. Virginia Carolina Chemical Corp.declared a dividend of $8 a share, payable Aug. 12 onaccount of accumulations on the 7% prior preferredstock; this is the first distribution on the shares in31/2 years and leaves accruals at 161/2%.

The New York Stock Market

TRADE improvement at length is becoming morewidespread and in the stock market thesegains were reflected by a rather vigorous upswingearly this week. Some profit-taking was in evidenceThursday and yesterday, but levels held well andthe leading stock price indices show improvement forthe week. Political developments added to the ordi-nary liquidation of the last few days, for the prepa-ration of a bill in Washington providing for in-creased income, inheritance and corporation taxeswas anything but cheering. Nor were the hearingson the utility lobby stimulating. But these adversefactors were of secondary importance, as comparedto the upward trend of steel operations, railroad car-loadings and electric power consumption, and evena renewal of the uncertainty regarding the Euro-pean gold currencies failed to halt the market. Theirregular upward movement of recent months wascontinued, again on a small scale, and it is note-worthy that activity also was greater. Increasedpublic interest in the stock market clearly is re-flected in trading on the New York Stock Exchangethat ran consistently over the 1,000,000 share levelduring the full sessions of the week. The largest vol-ume of trades was recorded Tuesday, when 1,734,150shares were turned over. A number of large corpora-tions made their earnings reports for the first halfof this year available during the week, and thesestatements also were mostly quite cheerful.Trading in the brief session last Saturday was at a

well-sustained pace, and movements were mostly up-ward. This tendency was accentuated on Monday,when a report of improved steel-making operationsstimulated the steel stocks and occasioned highestlevels of the year in most issues of that group. Motorstocks also were in good demand, while many special-ties likewise advanced. Realizing sales were absorbedeasily on Tuesday, and new advances were recordedin many stocks. Steel issues held their previousgains, but motor issues reacted a little. Silver issuesadvanced sharply, owing to renewed talk of infla-tionary legislation in Washington, while many spe-cialties again improved broadly. Railroad stockswere in better demand, owing to pressure for earlypassage of a measure co-ordinating Federal controlof competing modes of transportation. The sessionon Wednesday was marked by new gains in numer-ous sections of the list. Steel and motor stocks againwere prominent in this movement, while merchandis-ing and farm implement issues also gained. Modeststrength was displayed by the oil and utility groups,

but railroad stocks were easier. Liquidation wasmore prominent on Thursday, and stocks sold offsomewhat in that session. Almost all groups of is-sues were affected and the early gains of the weekwere modified by this tendency. Movements yester-day were small and erratic. After an early advance,small recessions appeared in the majority of stocks,and closing levels were not much changed from pre-vious figures.In the listed bond market, movements for the week

were somewhat uncertain. United States Govern-ment securities drifted lower at first on rumors thatinflationary measures would 'be tacked on to thetax and gold clause bills, which the Administrationhas listed as "must" legislation. An upward move-ment followed on Thursday, but it was halted inturn by announcement of a further competitive saleof $100,000,000 long term bonds. The net changes inlong-term Treasury bonds were very small, however,and the price structure was not materially affected.Italian bonds fell drastically on the decree permit-ting the Bank of Italy to disregard the 40% reserverequirements hereafter. The dollar securities of thatcountry tumbled 4 to 8 points in single sessions, andno recovery of any consequence ensued. Other for-eign dollar issues were steady. In the domestic cor-porate list, high grade bonds held well, but specu-lative issues were irregular. The inflationary rumorsfrom Washington turned attention to stocks, ratherthan bonds, and the latter suffered in comparison.Commodity prices were somewhat uncertain, but inmost cases advances were scored for the week, andthis tendency aided the upswing in stocks materially.In the foreign exchange market much irregularitywas apparent. Holland guilders fell rapidly to thegold export point, when leading parties refused topermit deflationary legislation to pass, and fall ofthe Colijn Cabinet yesterday was the consequence,with the effect on the guilder still somewhat Obscure.Other European gold units also were soft, whileItalian lire dipped sharply on the new decree regard-ing reserves. The sterling group of currencies showedfirmness. Our security markets, however, are nowless sensitive than formerly to the possibility of fur-ther currency unsettlement.On the New York Stock Exchange 211 stocks

touched new high levels for the year and 18 stockstouched new low levels. On the New York CurbExchange 88 stocks touched new high levels andnine stocks touched new low levels. Call loans onthe New York Stock Exchange remained unchangedat 1/4%, the same as on Friday of last week.On the New York Stock Exchange the sales at

the half-day session on Saturday last were 429,500shares; on Monday they were 1,369,090 shares; onTuesday, 1,734,150 shares; on Wednesday, 1,305,490shares; on Thursday, 1,334,400 shares, and on Fri-day, 986,380 shares. On the New York Curb Ex-change the sales last Saturday were 71,550 shares;on Monday, 162,640 shares; on Tuesday, 258,570shares; on Wednesday, 168,940 shares; on Thursday,212,650 shares, and on Friday, 201,055 shares.The stock market this week continued to give a

good account of itself despite profit-taking and otherfactors of a political nature. This was especiallytrue of the market on Tuesday, when heavy sellingmet with resistance and prices closed irregularlyhigher for the day. On Friday, after a rather dullsession, prices at the close were firm and in manycases higher than on the same day one week ago.


Volume 141 Financial Chronicle 485General Electric closed yesterday at 281/2 against273/8 on Friday of last week; Consolidated Gas ofN. Y. at 27 against 251/8; Columbia Gas & Elec. at71/s against 63/4; Public Service of N. J. at 373/4against 361/4; J. I. Case Threshing Machine at 661/2against 601/; International Harvester at 51 against49%; Sears, Roebuck & Co. at 5o7/8 against 49;Montgomery Ward & Co. at 311/2 against 293/4 ;Woolworth at 617/8 against 621/2, and American Tel.& Tel. at 128 against 127%. Allied Chemical & Dyeclosed yesterday at 157 against 1591/4 on Friday oflast week; E. I. du Pont de Nemours at 107 against105; National Cash Register A at 17 against 17;International Nickel at 27% against 261/2; NationalDairy Products at 16% against 17; Texas Gulf Sul-phur at 341/2 against 33%; National Biscuit at 301/4against 315/8; Continental Can at 881/2 against 88%;Eastman Kodak at 147 against 147; StandardBrands at 16 against 151/2; Westinghouse Elec. &Mfg. at 61% against 601/4 ; Columbian Carbon at 92against 92; Lorillard at 23% against 21'7/8 ; UnitedStates Industrial Alcohol at 41 against 45; CanadaDry at 10% against 10%; Schenley Distillers at 297/8against 32%, and National Distillers at 26against 26%.The steel stocks again show a rising tendency for

the week. United States Steel closed yesterday at401/2 against 383/8 on Friday of last week; BethlehemSteel at 341/4

against 31%; Republic Steel at 16%against 15, and Youngstown Sheet & Tube at 22%against 21. In the motor group, Auburn Auto closedyesterday at 22 against 22% on Friday of last week;General Motors at 371/8 against 361/2; Chrysler at56% against 53'7/8, and Hupp Motors at 2 against1%. In the rubber group, Goodyear Tire & Rubberclosed yesterday at 197/8 against 18% on Friday oflast week; B. F. Goodrich at 81/4 against 77/8, andUnited States Rubber at 13% against 121/2. Therailroad shares touched higher levels as comparedwith a week ago. Pennsylvania RR. closed yester-,day at 251/2 against 241/2 on Friday of last week;Atchison Topeka & Santa Fe at 543/4 against 51;

New York Central at 181/4 against 171/8; UnionPacific at 105 against 106; Southern Pacific at 187/8against 18; Southern Railway at 71/4 against 61/2,and Northern Pacific at 191/4 against 19. Among theoil stocks, Standard Oil of N. J. closed yesterday at46% against 45% on Friday of last week; ShellUnion Oil at 10 against 9, and Atlantic Refining at23 against 221/8. In the copper group, AnacondaCopper closed yesterday at 16 against 151/2 on Fridayof last week; Kennecott Copper at 201/8 against 191%;American Smelting & Refining at 437/8 against 421/4,and Phelps Dodge at 183/4 against 181/4.Leading trade and industrial indices gave the im-

pression this week of material recovery, and thestock market upswing was due in good part to suchcheerful tidings. Steel-making for the week endingto-day was estimated by the American Iron and SteelInstitute at 32.2% of capacity against 39.9% lastweek, 37.7% one month pp, and only 27.7% in thecorresponding week of last year. This represents anincrease of 2.3 points, or 5.8%, from the precedingweek. Production of electrical energy amounted to1,807,037,000 kilowatt hours in the week endedJuly 20, according to the Edison Electric Institute.This compares with 1,766,010,000 kilowatt hours inthe preceding week and 1,663,771,000 kilowatt hoursin the same period of last year, or an increase of

8.6%, and is the first time that output has exceeded1,800,000,000 kilowatt hours since the week endedFeb. 1 1930. Car loadings of revenue freight alsoare showing some improvement, the American Rail-way Association reporting loadings of 593,366 carsin the week ended July 20 against 566,488 cars inthe preceding week.As indicating the course of the commodity mar-

kets, the July option for wheat in Chicago closedyesterday at 8978c. against 84c. the close on Fridayof last week. July corn at Chicago closed yesterdayat 837/8c. as against 831/2c. the Close on Friday of lastweek. July oats at Chicago closed yesterday at361/2c. as against 33%c. the close on Friday oflast week.The spot price for cotton here in New York closed

yesterday at 12.15c. as against 12.30c. the close onFriday of last week. The spot price for rubberyesterday was 11.81c. as against 11.94c. the closeon Friday of last week. Domestic copper closedyesterday at 8c., the same as on Friday of last week.In London the price of bar silver yesterday was

30 3/16 pence per ounce, the same as on Friday oflast week, and spot silver in New York closed yester-day at 67%c., unchanged from Friday of last week.In the matter of the foreign exchanges, cable trans-fers on London closed yesterday at $4.96% asagainst $4.96 the close on Friday of last week, whilecable transfers on Paris closed yesterday at 6.611/2c.as against 6.63%c. the close on Friday of last week.

European Stock MarketsMUCH uncertainty prevailed this week on stock

exchanges in the foremost European finan-cial centers. Movements were irregular at London,Paris and Berlin, largely because currency diffi-culties once again reappeared, and in some instancessharp recessions in quotations were reported. TheLondon market remained fairly calm, while the Ber-lin Boerse was affected mainly by internal Germandevelopments, but the Paris Bourse was affectedquite decidedly by the renewal of currency difficul-ties. Opposition to the Laval deflation programwas voiced over the last week-end, and the ability ofFrance to maintain the franc without impairmentwas additionally compromised by the threatened de-fection of Holland from the gold bloc. A programof Government retrenchment was proposed early thisweek in Holland by Premier Hendryk Colijn, butimportant party groups objected to the procedure,awl while the matter was under debate the guilderfell drastically in exchange markets, necessitatinggold exports in order to maintain the quotation.The Netherlands Bank raised its discount rate onWednesday from 3% to 5%, and on Thursday afurther advance to 6% was announced. Almostequally unsettling was an Italian decree, issuedTuesday, permitting the Bank of Italy to disregardthe requirement for a 40% reserve in gold againstcirculation liabilities. This action was generallyheld to mean the doom of the lira. German economicpublications admitted this week that the Reich Gov-ernment has incurred a deficit which is vast, if con-cealed, and on this ground also currency fears wereentertained. With such adverse factors in evidence,signs of economic improvement in Europe played nomarket role, and price trends were irregular every-where.Uncertainty marked the dealings on the London

Stock Exchange from the start of trading last Mon-



day. There was little activity in the initial session,and British funds led the gilt-edged market toslightly lower figures. A few issues in the industrialsection reflected demand, but the majority of stocksdeclined slowly but steadily. International securi-ties were lower at the opening and improved a littleduring the day. A more cheerful tone prevailed onTuesday, notwithstanding very light business. Brit-ish funds again drifted downward, but most issuesin the industrial department registered advances.Some of the commodity stocks also improved, whileinternational securities reflected the favorable over-night reports from New York. Trading on Wednes-day was devoted largely to the international issues.Anglo-American trading favorites resumed theirrise, while Dutch stocks came into demand on thepossibility that the guilder might be devalued.British funds were unchanged, and industrial stocksalso were quiet, with alterations fractional. Atten-tion on Thursday was centered almost entirely onthe currency possibilities, and very little activity wasreported at London. British funds again were un-changed, but some advances occurred in home rail-way shares because of good dividend declarations.Industrial stocks were neglected, as attention againwas directed to international securities, most ofwhich moved upward readily. Small advancesoccurred yesterday in gilt-edged issues and indus-trial stocks, but home rail shares were easy.

Currency uncertainties were the primary influ-ence on the Bourse, Monday, and the possibilitiesof new difficulties caused liquidation of all typesof securities. Rentes fell sharply, while Frenchbank, utility and industrial stocks also showed largerecessions. Increased opposition to the deflationaryprogram within France was an important factor,and the weakness of the Dutch guilder also affectedthe French market. Very little business was doneon the Bourse, Tuesday, and the price level wasmaintained. The Italian suspension of the 40% goldcover caused nervousness at first, and rentes de-clined sharply in the initial dealings. Recovery fol-lowed, however, and closing levels showed no changesof importance. French equities were dull andalmost motionless, while foreign securities turnedirregular. The session on Wednesday was markedby an early fall in rentes, but these issues regainedpart of the decline and closing losses were small.Bank and industrial stocks moved in a narrow com-pass, but foreign issues advanced easily on heavierbuying. The trend on Thursday again was uncer-tain. Rentes drafted a little lower, and most Frenchequities also weakened. In the international sectiondeclines were noted among Dutch issues, but othersecurities advanced. The session yesterday was dulland small losses appeared in rentes and Frenchequities, but foreign issues were better.The Berlin Boerse was very quiet when activities

were resumed for the week, last Monday. Mostsecurities were lower at first, but a subsequent ad-vance wiped out most of the losses and net changeswere small for the day. Chemical stocks were infavor and ended with modest advances. More activ-ity was reported on Tudsday, with inflationary senti-ment plainly in evidence as a consequence of theItalian action on the gold cover for the lira. Stockswere marked generally higher in the Berlin market,with advances of 2 to 3 points common, but fixed-interest issues declined. Some specialties receded,however, owing to a belief that dividends would be

curtailed. The Berlin market was generally firmon Wednesday, when attention was centered on thedevelopments in Holland. Equities of all descrip-tions were in demand, and gains appeared through-out the list. Bonds again were liquidated, however,since they appear to offer less speculative opportuni-ties in the event of inflationary developments. Fluc-tuations were small on Thursday, with the trenduncertain despite renewed concern regarding thecurrency position of Italy and Holland. Some ofthe speculative favorites advanced a point or two,but the majority of issues remained close to previouslevels. Trading was very quiet on the Boerse yester-day, but fractional gains were recorded in mostissues.

International Currency Problems

'THE short period of relative quiet in the inter-'. ional currency situation came to an abrupt endthis week, with distinct fears entertained regardingmaintenance of the guilder at its ordinary paritywith gold. Unsettling developments appeared alsoin numerous other directions, but the possibility ofdevaluation by Holland overshadowed other inci-dents, since any such action would seriously affectthe ability of France and Switzerland to remain onthe gold standard. Premier Hendryk Colijn lastweek proposed Government retrenchments amount-ing to approximately 70,000,000 guilders, so that thenational budget might be brought nearer to a bal-ance. Government bills, introduced at The Hague,were expected to pass after a brief debate, but strongopposition quickly developed and the fate of theColijn Cabinet soon was involved. Early this weekit was made plain that the deflationary measureswould not receive the support of the Catholic partyor the Socialists. The opposition of these powerfulfactions would insure defeat of the Government, andthe matter was not pressed to a vote. PremierColijn, as an unyielding advocate of deflation and anunimpaired currency, decided early yesterday totender the resignation of the Cabinet to Queen Wil-helmina. The uncertainty occasioned by these eventscaused heavy pressure on the guilder in leading mar-kets, and gold exports on a large scale were foundnecessary. The Netherlands Bank raised its dis-count rate on Wednesday from 3% to 5%, and afurther increase to 6% was effected Thursday.Although Holland still has plenty of gold to defendits currency, most observers now are of the opinionthat Dutch devaluation will prove almost inevitablehereafter, since the leading political parties are notwilling to vote for the alternative deflation program.The French deflationary program, announced by

Premier Pierre Laval on July 16, has been acceptedin that country without much commotion, butstrenuous objections are held likely to develop asthe measures take effect. A huge demonstrationagainst the salary reductions decreed for civil serv-ants was held in Paris, late last week, and some1,500 of the malcontents were arrested. Most ofthem were released, subsequently, and the incidenthas not been repeated, but it remains indicative. Ofmore immediate importance are grave doubts regard-ing the Italian lira, occasioned by a Governmentdecree, made known on Tuesday, permitting theBank of Italy hereafter to disregard the requirementfor a 40% gold cover against note circulation. Thisaction was taken, the decree states, in view of thenecessity and urgency of procuring means for mak.


Volume 141 Financial Chronicle 487ing foreign payments of exceptional character. Thepayments referred to obviously are those caused bypreparations for war with Ethiopia. There havebeen indications recently that Italy sought externalcredits in various ways, but without success, andthe action now taken can only mean that gold willbe shipped abroad in order to obtain necessary warsupplies. Devaluation of the lira clearly may beinvolved in any such proceeding, if carried out on alarge scale. Already various kinds of lire are quotedin the market here, some of them at substantial dis-counts from nominal parity. The German situationalso is causing some concern, since internal bud-getary inflation appears to be proceeding apace inthat country. The "Deutscher Volkswirt," whichreflects closely the views of Dr. Hjalmar Schacht,admitted in its last issue that a huge floating debthas been incurred by the German Governmentrecently, but without disclosures in the officialstatistics.

Naval Ratios Discarded

AN END was put by the British Government,Monday, to the possibility of further limita-tion of world navies by the ratio principle, afterexpiration of the Washington and London navaltreaties at the end of 1937. The difficulties in theway of naval limitation by any means whatever madethe British action almost inevitable, and no surprisewas occasioned when Sir Bolton Eyres-Monsell, theFirst Lord of the Admiralty, declared before theHouse of Commons that naval limitation will besought hereafter by methods other than applicationof the ratio principle. Japanese denunciation of theWashington treaty in December 1934, after a longdiplomatic dispute over the Tokio demand for anequal ratio withY Great Britain and the UnitedStates, disclosed some of the difficulties inherent inratios. More recently, it is indicated, France andItaly have voiced objections to the modest ratiosassigned to them in the existing naval accords. SirBolton announced abandonment of the ratio prin-ciple last Monday with "sincere regret," but headded that the action could not be helped, since someof the other countries concerned considered theirratios injurious to their pride. Some other methodof curtailment or control will have to be devised, hesaid, unless naval limitation is to be given up alto-gether. Notwithstanding these declarations, it maybe remarked that the ratio principle is not con:sidered by Great Britain as entirely inapplicable,since Germany was accorded a ratio of 35% of theBritish fleet in the recent naval treaty between thosecountries.The British Government's declaration was made

in the Commons during the first full-dress debateon naval matters since the treaty with Germany wassigned. London now proposes to proceed with navaldiscussions on a basis of the building programs ofall naval Powers during the period up to 1942, witha general conference foreshadowed at that date.Each naval Power is to be asked what size navy itwants to have by 1942, and the replies are to be"pooled," Sir Bolton said. "If we can by agree-ment accommodate these various naval programs toprovide adequate naval strength for each country,while making it extremely unlikely that any countrycan attack with ultimate success, I think we shallhave arrived, at something unparalleled for the tax-payers of all countries, and we shall have contributed

to the general pacification of the world," the BritishGovernment spokesman explained. He made it clearthat recent diplomatic exchanges on the naval prob-lem have been along that line. The agreement withGermany has made possible this advance toward anew curtailment principle, it was held, since othernaval Powers could not be expected to arrive atdefinite conclusions until they knew what limita-tion, if any, would be put on German construction.Some disappointment was felt in Washington overthe British declaration, and it was admitted thatthere is no longer any hope for renewal of the exist-ing limitation pacts. But the view prevailed thatGreat Britain had no choice in the matter and wasmerely accepting the inevitable when the ratio sys-tem was abandoned. Limitation by other meansprobably will prove quite as difficult as the ratiomethod, it was pointed out, since provision for navaldifferentials would have to be made in any navaltreaties. The formula likely to gain prominence infurther naval conversations is "equality of security,"according to views entertained in Washington.Tokio reports made it plain that Japanese authori-ties felt gratified over the British abandonment ofthe ratio principle.

Italy and Ethiopia

WAR preparations were rushed this week by Italyand Ethiopia, and an armed conflict is allbut certain when the rains cease in East Africa nextSeptember and military operations become possible.The Italian Government, obviously anxious to avoida general airing of the matter by the League of Na-tions Council, moved late on Thursday for a renewalof arbitration by the special commission appointedunder an Italo-Ethiopian treaty of conciliation andarbitration. At its last session the Council entrustedthe matter to the commission and agreed to meet onJuly 25, if a dispute made it necessary and the fourmembers had failed to agree on a fifth to reconcilethe differences. The commission split at Schevenin-gen, Holland, when Ethiopian delegates insisted thatUalual, where a border conflict occurred last De-cember, is in Abyssinian territory. Delay by theLeague followed, and in the interim it would appearthat the leading European nations were seeking someface-saving device for the Council. It is now re-ported that the Council meeting will be held July 31,but will be restricted to the naming of a fifth neutralmember of the arbitration commission. Rome reportsof last Saturday suggested that some such methodprobably will be used in order to min time for theItalian Government, which is anxious to get 400,000troops to the Abyssinian borders by mid-September.The further diplomatic maneuvers will prove inter-esting, since the League Council agreed to meetAug. 25, if the arbitration commission fails by thattime to agree on a program for settlement of the"border dispute." Great Britain and France, whichdominate the League, clearly are anxious to main-tain for the League what little prestige that bodystill retains. Paris dispatches suggest that consid-erable pressure was brought to bear on Ethiopia inthat connection, for the Government at Addis Ababais said to have agreed to limitation of the subjectsto be discussed at the forthcoming meeting.The Italian Government continued, this week, to

ship troops and technical experts to its East Africancolonies. Shipping facilities are proving inadequate,and purchases of vessels that can be used as trans-


488 Financialports were reported from various parts of the world.Highly significant is an Italian decree, issued Tues-day, which permits the Bank of Italy to disregardin the future the requirement for at least 40% cover-age in gold of the circulation and other liabilitiesof the central bank. The decree was issued "in con-sideration of the necessity and the urgency of obtain-ing means to make foreign payments of an excep-tional character." It was generally agreed in Lon-don and New York that the ruling signifies an inten-tion of paying in gold for Italian purchases of warmaterials. London reports have suggested thatcredits for Italy were sought there and in Paris,without success. It is now reported here that Italiancorporations put out feelers for bank credits, sincethe Italian Government cannot borrow in the UnitedStates under the Johnson Act, which prohibits loansto countries in default on their war debts. Italianexpenses for the campaign against Ethiopia arereported in Rome dispatches at $82,500,000 to date,and it is suggested that the projected war may wellcost 10 times that much. It is not believed in Lon-don and New York that the war could be fought toan end by Italy without sacrifice of the currency,and already quotations for various kinds of lire arereported. Italian bonds slumped sharply on theNew York markets this week.The Ethiopian Government insisted on all occa-

sions this week that it is anxious to find a peacefulsolution of the dispute with Italy. Emperor HaileSelassie declared categorically last Saturday, how-ever, that no solution would be considered whichinvolves an Italian protectorate or mandate affect-ing the independence or sovereignty of the Abys-sinians. "We are confident in the justice of ourcause," he said. "And knowing our Government hasomitted no effort to obtain a peaceful settlement andintends to continue the same policy until the ex-pected attack, which we shall resist with determina-tion, we have deemed it necessary fully to acquaintour people with the circumstances leading to thepresent grave situation, thus enabling them to facewhatever the future may bring." War drums weresounded in Ethiopia, and by other equally primi-tive means of communication, leaders of the semi-independent tribes were summoned to the capitalfor councils of defense. The Ethiopian Minister toLondon was reported anxious to negotiate a loan,and he indicated that he would attempt to sound outJ. P. Morgan, who is now in England. But Ethiopiaapparently will be no more successful than was Italyin the endeavor to obtain foreign financial assistance.There is now every indication that the British,

French and other interested Governments will letmatters take their course in the Italo-Ethiopian dis-pute. The British Government, alarmed over thepossible effect of a war on the black peoples ofAfrica, acted energetically at first for a peacefulsettlement. Prime Minister Stanley Baldwin againinsisted, Tuesday, that the London Governmenthopes to find a peaceful solution. Announcementwas made in the House of Commons, Thursday, bySir Samuel Hoare, the Foreign Secretary, that armsshipments both to Ethiopia and Italy will not bepermitted. The Continental European countrieisappear quite generally to have taken the same atti-tude, but Japan is insisting on the right to shipmunitions to Ethiopia, and some antagonism hasdeveloped between Italy and Japan. The reminderas to the existence of the Bellogg-Briand pact, issued

Chronicle July 27 1935last week by Secretary of State Cordell Hull, appar-ently will prove of no particular importance. TheBritish Foreign Secretary indicated on Wednesday,however, that he had expressed his satisfaction tothe United States Government over the utterances."We are always ready to co-operate with the UnitedStates in seeking to preserve peace," he said. Thecorrespondent of the New York "Times" unearthedin Geneva, last Sunday, a treaty signed in 1891whereunder Great Britain and Italy agreed to divideEthiopia into spheres of influence. But subsequentdispatches from London state that the old documentshave long since been superseded by later pacts call-ing for preservation of Ethiopian independence.

Whither Germany?

WILD and furious attacks against their helplessopponents again were made this week by theGerman Nazi authorities, who now have been om-nipotent in the Reich for more than two years, andthe incidents continue to arouse wonderment inother countries as to the real significance of the newrepressive measures. Anti-Semitic disturbances inBerlin were repeated late last week, and the inten-tions of the Nazi authorities were made additionallyplain through the appointment of Count Wolf vonHelldorf, a violent anti-Semite, as chief of the Berlinpolice. Notice was served last Saturday that theNazi creed must be made the faith and religion ofGermany. Warnings were issued that Catholicpriests and Protestant men of the cloth who pro-tested against the new wave of repression would beprosecuted for "insidious attacks on the State."These warnings were heeded everywhere but in Frei-burg, Baden, but as no newspapers are circulatedthere on Saturday evenings and the notices thusreceived no attention, no action against the clergywas taken. Organizations of Catholic veterans ofthe World War were suppressed on Tuesday, andnew statements were issued the same day by leadingNazis that "the Jews must be put in their places."In other countries these activities are viewed as por-tentous, to a degree. In London, for instance, it isassumed that a financial crisis is being hidden fromgeneral notice by such measures, and it may be sig-nificant that responsible German financial publica-tions now admit the existence of a huge hiddendeficit in Government operations. The Nazi perse-cutions once again are arousing resentment else-where, and there have been suggestions in Washing-ton for severance of diplomatic relations. WilliamE. Dodd, United States Ambassador to Berlin anda diplomat of the highest order, declared in a publicaddress in Berlin, Wednesday, that excessive propa-ganda is "one of the errors of our time." He madethe American viewpoint plain by praise of the prin-ciples of free commerce, religious freedom and fair-ness toward minorities.

Colombian CongressTN MORE than one sense, great importance attaches1 to the session of the newly-elected ColombianCongress, which started last Saturday on the 159thanniversary of Colombian independence. Duringthis session, which is expected to continue about fourmonths, the Congress probably will be asked toratify a reciprocal trade treaty, now under negotia-tion between the United States and Colombia. Thepact for adjustment of the Leticia dispute with Peru,which was defeated in the last Colombian Congress,


Volume 141 Financial Chronicle 489promptly was re-submitted for ratification lastSaturday, and no difficulty now is anticipated inthat connection. Negotiations for settlement of thedefault on Colombian dollar bonds probably willfollow promptly, when both Colombia and Peru haveratified the Rio de Janeiro convention on Leticia.In his message to the newly-assembled legislators,President Alfonso Lopez suggested the formulationof a program that is liberal but far short a Statesocialism, with emphasis on a sensible land policy.Wide revisions of the Constitution should be effected,the President held, and the Executive relieved ofexcessive responsibilities. Improvements in agri-culture must be brought about, he said, and thecountry brought nearer to self-sufficiency througha restriction of imports. Depreciation of the pesois likely to be one method for adjustment, he held.No objection is entertained by the Colombian Ad-ministration to the investment of foreign capital inmining enterprises, it was made clear, provided suchforeign developments are not privileged over nativeenterprises. The highway building program, whichnow is well advanced, is making Colombia an eco-nomic unit for the first time in that country's his-tory, the President declared.

Japanese Policy

RECENT changes in the Japanese military align-ments have introduced a hope that a moremodest policy will be followed hereafter by the Japa-nese Government in the Eastern Asiatic expansionistprogram. The vigorous and aggressive tactics of theJapanese militarists in Manchukuo have keptAsiatic affairs in turmoil lately, with the Japanesereported at various times on the brink of warfarewith China, on the one hand, and Soviet Russia, onthe other. It is no secret, of course, that the so-called"progressive faction" of the Japanese army com-mand sometimes embarrassed the Japanese ForeignOffice by unwarranted advances into nominallyChinese territory. The leaders of that progressivefaction now have been relieved of their commands,and it is possible that the Japanese army hereafterwill play a much less active political role. Thesechanges were effected by War Minister SenjuroHayashi, whose actions were supported by theSupreme Military Council in Tokio. Incursions ofJapanese troops into Siberian territory early thismonth provoked a diplomatic incident and an acri-monious exchange of notes between Moscow andTokio, but an agreement finally was reached for theformation of a frontier commission to regulate dis-putes. Relations between China and Russia remainpoor, however, owing to Japanese encroachments inOuter Mongolia. Close relations are maintained byMoscow with the People's Republic of Mongolia, andit has been intimated in Russian circles that theSoviet Government is prepared to resist if Japanshould attempt to take any Outer Mongolian terri-tory. A Japanese demand for permission to installa military mission in Outer Mongolia was rejectedlast Monday, clearly on the advice of the RussianGovernment. Japanese intentions as to NorthernChina, proper, remain uncertain. The recent Japa-nese expedition to Peiping produced a tension thatstill prevails, and it is now reported that Chineseauthorities are to be given only a short furtherperiod in which to become "friendly to Japan," withwar as a possible alternative.

Canadian-Japanese Trade Relations

SURTAXES and retaliatory duties, imposed overthe last week-end by Canada and Japan onimports from each other, bid fair to diminish sharplythe trade between these countries. The dispute thatterminated in the increased tariff barriers resultedfrom Japanese yen devaluation and the increasedcompetition for world trade that followed. TheCanadian Government long has made it a practiceto impose dumping duties against exports of coun-tries with depreciated currency units. This methodof protection was carried out with such uniformitythat even British goods were subjected to the dump-ing duties for a time when the British pound ster-ling fell considerably under nominal parity. Theduties were applied on Japanese merchandise as amatter of course, and entries had to be paid for atrates based on the 49c. yen, even though the Japaneseunit is far under that level in the exchange markets.To this Canadian practice the Japanese Governmentmade fruitless objection, and Tokio announced latelast week the imposition of a 50% surtax on certainCanadian goods, including lumber, wheat, pulp andpaper products and gluten. The contention in Tokiowas that undue discrimination was exercised byCanada in the system of dumping duties. The Cana-dian authorities made an effective rejoinder lastSaturday, in the form of a 331/3% ad valorem surtaxon Japanese goods entering Canada. Prime MinisterR. B. Bennett issued a statement in which he de-clared that it was impossible to accede to Japaneserequests for the abolition of anti-dumping and ex-change compensation duties and fixed valuations,since such a course would involve discriminationagainst other countries, including Great Britain, andplace Japan in a privileged position in the Canadianmarkets. It was indicated in Ottawa reports thatfurther conversations are to be held in an effort toadjust the trade differences.

Discount Rates of Foreign Central Banks

THE Bank of The Netherlands on July 24 raisedits discount rate from 3% to 5% and on July26 to 6%. The 3% rate had been in effect sinceJuly 17 1935, at which time it was reduced from332%. Present rates at the leading centers areshown in the table which follows:

DISCOUNT RATES OF FOREIGN CENTRAL BANKS

CountryRate inEffectJuly26

DateEstablished

Pre-MousRate

CountryRate inEffectJuly26

DateEstablished

Pre-otousRate

Austria__ 334 July 10 1935 4 Hungary 434 Oct. 17 1932Batavia _ _ 4 July 1 1935 434 India 334 Feb. 16 1934 4Belgium_ _. 2 May 15 1935 234 Ireland_ _ 3 June 30 1932 334Bulgaria__ 7 Jan. 3 1934 8 Italy 334 Mar. 25 1935Canada__ 234 Mar. 11 1935 __ Japan 3.65 July 3 1933Chile 4 Jan. 24 1935 434 Java 434 June 2 1935 334Colombia__ 4 July 18 1933 5 Jugoslavia_ 5 Feb. 1 1935 635Czechoslo- Lithuania 6 Jan. 2 1934 7vakia____ 334 Jan. 25 1933 434 Morocco.__ 634 May 28 1935 434

Danzig_ _ __ 6 May 3 1935 4 Norway.... _ 334 May 23 1933 4Denmark_ _ 234 Nov. 29 1933 3 Poland_ _ _ _ 5 Oct. 25 1933 6England_ _ _ 2 June 30 1932 234 Portugal 5 Dec. 13 1934 .534Estonia__ 5 Sept. 25 1934 534 Rumania _ _ 434 Dec. 7 1934 6Finland ___ 4 Dec. 4 1934 434 SouthAtrica 4 Feb. 21 1933 5France_ _ _ _ 334 July 18 1935 4 Spain 5 July 10 1935 534Germany __ 4 Sept. 30 1932 5 Sweden____ 234 Dec. 1 1933 3Greece__ _ _ 7 Oct. 13 1933 734 Switzerland 234 May 2 1935 2Holbi rid _ 6 July 26 1935 5

Foreign Money RatesIN LONDON open market discounts for short bills

on Friday were 9-16@%% as against 9-16@%%on Friday of last week, and %% for three-months'bills as against 5A% on Friday of last week. Moneyon call in London on Friday was 3/2%. At Paris theopen market rate remains at 434%, and in Switzer-land at 3%.


490 FinancialBank of England Statement

THE statement for the week ended July 24 showsa gain of 20,559 in bullion, but as circulation

expanded 1,242,000, a loss of 1,222,000 in reservesresulted. Gold holdings now aggregate 193,259,893as compared with 192,154,427 a year ago. Publicdeposits rose 088,000, while other deposits decreased5,005,143. Of the latter amount, 2,767,321 wasfrom bankers' accounts, and 2,237,822 from otheraccounts. Little change occurred in the reserveratio, which is now 35.85%, in comparison with35.70 last week; a year ago it was 44.92%. Loans ongovernment securities decreased 3,145,000 and thoseon other securities rose 386,804. The latter consistsof discounts and advances which increased 1,045,472and securities which fell off 058,668. No changewas made in the 2% discount rate. Below we show acomparison of the various items for five years:

BANK OF ENGLAND'S COMPARATIVE STATEMENT

July 241935

July 251934

July 261933

July 271932

July 291931

Circulation 400,809,000 383,948,994 377,220,352 369,285,637 359,361,869Public deposits 8,870,000 10,939,003 14,136,414 11,242,945 15,219,417Other deposits 137,421,993 140,881.939 156,169,961 122,747,283 89,484,932Bankers' acc000ts.. 100,815,039 104,788,388 98,510,742 88,186,076 55,798,330Other accounts_ _ 36,606,954 36,093,551 57,659,219 34,561,207 33,686,602

Govt. securities 88,742,044 83,467,071 90,595,963 68,770.765 52,560,906Other securities 23,213,190 18,277,583 23,663,012 39,047,622 36,300.633

Disct. & advances_ 10,322,373 7,531,738 11,243,296 15,280,114 9,696,484Securities 12,890,817 10,745,845 12,419,716 23,767,508 26,604,149

Reserve notes & coin 52,450,000 68,205,428 74,159,782 44,290,821 33,947,794Coin and bullion 193,259,893 192,154,427 191,380,134 138,576,458 133,309,663Porportion of reserve

to liabilities llonlr rafa

35.85%2%

44.92%2%

43.54%2%

33.05%2%

32.40%434 %

Bank of France Statement

THE weekly statement dated July 19 shows adecline in gold holdings of 174,835,980 francs.The total of gold which is now 71,176,523,425 francs,compares with 79,992,184,654 francs last year and81,728,872,266 francs the previous year. Frenchcommercial bills discounted iegister an increase of265,000,000 francs and creditor current accounts of508,000,000 francs, while advances against securitiesshow a loss of 48,600,000 francs. Notes in circulationrecord a loss of 492,000,000 francs, bringing the totalof notes outstanding down to 81,235,685,845 francs.Last year circulation stood at 80,696,467,045 francsand the previous year at 82,253,696,540 francs.The proportion of gold on hand to sight liabilitiesis now 74.72%, compared with 79.84% a year agoand 78.50% two years ago. A comparison of thedifferent items for three years appears below:

BANK OF FRANCE'S COMPARATIVE STATEMENT

Changesfor Week July 19 1935 July 20 1934 July 21 1933

Gold holdings Credit halo. abroad_a French commercial

bills secured b Bills bought abr'dAdv. against securs_Note circulation Credit current accts.Propor'n of gold onhand to slzht Ilab_

Francs174,835,980

No change

+265,000,000No change

48,000,000492,000,000+ 508,000,000

0.19%

Francs71,176,523,425

9,875,002

7,080,308,5761,202,348,1953,227,560,780

81,235,665,84514,025,273,660

74.72%

Francs79,992,184,654

15,177,314

3,716,231,9641,140,843,1393,089,011,159

80,696,467,04519,493,034,741

79.84%

Francs81,728,872,2662,572,893,500

2,965,628,0901,402,909,7182,684,202,917

82,253,696,54021,853,437,433

78.50%

a Includes bills purchased in France. b Includes bills discounted abroad.

Bank of Germany Statement

THE quarterly statement dated July 23, shows aslight increase in gold and bullion of 18,000marks. The Bank's gold now aggregates 93,948,000marks, in comparison with 74,709,000 marks lastyear, and 228,387,000 marks the previous year. Anincrease also appears in reserve in foreign currencyof 24,000 marks, in silver and other coin of 58,009,00dmarks, in notes on other German banks of 2,157,000marks, in investments of 334,000 marks, in otherassets of 23,497,000 marks and in other daily matur-ing obligations of 3,211,000 marks. Notes in circu-

Chronicle July 27 1935lation record a contraction of 120,402,000 marks,bringing the total of the item down to 3,546,120,000marks. A year ago circulation aggregated 3,472,-216,000 marks and two years ago 3,261,162,000marks. The reserve ratio is now 2.88%, in com-parison with 2.2% last year, and 9.6% the previousyear. Bills of exchange and checks, advances andother liabilities register decreases of 195,423,000marks, 7,657,000 marks and 1,850,000 marks,respectively. Below we furnish a comparison of thevarious items for three years:

REICHSBANK'S COMPARATIVE STATEMENT

Changesfor Week 'July 23 1935 July 23 1934 July 22 1933

Assets Reichsmarks Reichs marks Reichsmarks Reichsmark:Gold and bullion +18,000 93,948,000 74,709,000 228,387,000Of which depos. abroad No change 22,109,000 23,638,000 27,681,000Reserve in foreign cum +24,000 8,397,000 3,168,000 84,040,000Bills of exch. and checks 195,423,000 3,376,616,000 3,131,171,000 2,972,648,000Silver and other coin_ _ _ +58,009,000 280,699,000 293,542,000 302,612,000Notes on other Ger. bks. +2.157.000 15,007,000 15,350,000 13,101,000Advances 7,657,000 40,492,000 59,127,000 59,056,000Investments +334,000 660,937,000 709,180,000 319,830,000Other assets +23,497,000 688,619,000 593,778,000 479,722,000

LiabilitiesNotes in circulation__ _ 120,402,000 3,546,120,000 3,472,216,000 3,261,162,000Other daily matur. obl-ig +3,211,000 746,014,000 620,229,000 395,843,000Other liabilities 1,850,000 215,297,000 163,783,000 179,755,000Propor. of gold & torn

emir in itnin nlinnla'n -1-0.09% 2.88% 2 9 01 0 f l.f-

'New York Money Market

NO VARIATIONS whatever were shown in theNew York money market this week as againstformer transactions. Dulness prevailed in all de-partments and rates were continued at the exces-sively low levels occasioned by the official easymoney policy. An issue of $50,000,000 United StatesTreasury discount bills, due in 273 days, was sold onMonday at an average discount of 0.057%, computedon an annual bank discount basis. A week earlier asimilar issue was awarded at an average of 0.052%.Call loans on the New York Stock Exchange heldat 1/4%, and time loans up to six months' maturityalso were at that figure. Bankers' bill and com-mercial paper rates likewise were carried over andwere unchanged all week.

New York Money Rates

DEALING in detail with call loan rates on theStock Exchange from day to day, 3..4 of 1%remained the ruling quotation all through the weekfor both new loans and renewals. The market fortime money has shown no change this week, althoughthere was a report of a transaction in a six months'maturity at %%. Rates are 1/4% on all maturities.The market for prime commercial paper has beenfairly brisk this week. Paper has been in goodsupply and has been quickly taken up. Rates areYi% for extra choice names running from four tosix months and 1% for names less known.

Bankers' Acceptances

TRANSACTIONS in prime bankers' acceptanceshas been extremely dull this week. Few billshave been available and there has been little demand.Quotations of the American Acceptance Councilfor bills up to and including 90 days at 3-16% bidand %% asked; for four months, Yi% bid and 3-16%asked; for five and six months, %% bid and 5-16%asked. The bill buying rate of the New York Re-serve Bank is 32% for bills running from 1 to 90 days,34% for 91- to 120-day bills, and 1% for 121- to 180-day bills. The Federal Reserve banks' holdings ofacceptances decreased from $4,679,000 to $4,676,000.Open market rates for acceptances are nominal in sofar as the dealers are concerned, .as they continue tofix their own rates. The nominal rates for openmarket acceptances are as follows:


Volume 141 FinancialSPOT DELIVERY--180 Days 150 Days 120 DaysBid Asked Bid Asked Bid Asked

Prime eligible bills H Its % Ns 31 Lis

.

90 Days 60 Days 30 DaysBid Asked Bid Asked Bid Asked

Prime eligible bills 'is 34 '16 % its %

FOR DELIVERY WITHIN THIRTY DAYSEligible member banks 34% bidEligible non-member banks Ii% bid

Discount Rates of the Federal Reserve Banks

THERE have been no changes this week in therediscount rates of the Federal Reserve banks.The following is the schedule of rates now in effectfor the various classes of paper at the differentReserve banks:

DISCOUNT RATES OF FEDERAL RESERVE BANKS

Federal Reserve BankRate inErna onJuly 28

DateEstablished

PreviousRate

Boston 2 Feb. 8 1934 234New York 115 Feb. 2 1934 2Philadelphia 2 Jan. 17 1935 234Cleveland 135 May 11 1935 2Richmond 2 May 9 1935 234Atlanta 2 Jan. 14 1935 234Chicago 2 Jan. 19 1935 234St. Louis 2 Jan. 3 1935 234Minneapolis 2 May 14 1935 234Kansas City 2 May 10 1935 234Dallas 2 May 8 1935 234San Francisco 2 Feb. 16 1934 234 _

Course of Sterling Exchange

STERLING exchange is steady. The outstandingfeature of the exchange market is the unusualdrop in the Holland guilder and the decree of theItalian Government suspending the legal minimum of40% gold reserve to notes in circulation. Theseevents have, if anything, greatly enhanced the con-fidence of the banking world at large in the intrinsicstrength of the London market. The range forsterling has been between $4.9514 and .965% forbankers' sight bills, compared with a range of between$4.95% and $4.963A last week. The range for cable'transfers has been between $4.95% and $4.969,compared with a range of between $4.953/ and$4.96 last week.The following tables give_ the mean London check

rate on Paris from day to day, the London openmarket gold price and the price paid for gold by theUnited States:

MEAN LONDON CHECK RATE ON PARISSaturday, July 20 74.75 I Wednesday, July 24 74.97Monday, July 22 74.82 I Thursday, July 25 75.00Tuesday, July 23 74.931 I Friday, July 26 75.06

LONDON OPEN MARKET GOLD PRICESaturday, July 20_ __

-141s. lid. I Wednesday, July 24...140s. 6d.Monday, July 22..___140s. 81,6d. I Thursday, July 25_ _140s. 9d.Tuesday, July 23......-140s. 5d. I Friday, July 26_ _140s. 634d.PRICE PAID FOR GOLD BY THE UNITED STATES (FEDERAL

RESERVE BANK)Saturday, July 20 $35.00 I Wednesday, July 24 $35.00Monday, July 22

35.00 I Thursday, July 25

35.00Tuesday, July 23 35.00 I Friday, July 26 35.00

Essentially the sterling situation is not differentfrom what it has been for many weeks. As a seasonalmatter sterling is in demand and these favoring in-fluences should continue until the end of August andperhaps into early September, when import bills forraw materials begin to outweigh other factors whichmight ordinarily be expected to give firmness to thepound. At present, as for a long time past, theheavy movement of so-called nervous capital toLondon for safety is an important factor in giving thepound a firm tone. Other influences strengtheningsterling are the steady purchases of gold in the openmarket and the American purchases of silver. TheAmerican silver purchases are not at present con-ducted in spectacular volume, but day-to-day dis-patches from London show that the silver market isconstantly prevented from falling through the sup-port of purchases for account of the United States

Chronicle 491Treasury Department. Where at any time the sterlingquotation is inclined to sag, thip trend may be attrib-uted entirely to operations of the British exchangecontrol in its endeavor to 'steady exchange in termsof any important unit which at any given time maybe under undue pressure and hence disturbing to theLondon market.Market observers in London are watching the

political crisis in Holland with some anxiety, butinformed circles there do not believe that devaluationof the guilder is imminent. However, there is animportant body of opinion which feels that Hollandmay abandon the gold bloc and ally itself with thesterling group. It is thought such a course might themore speedily result in the stabilization of the leadingcurrencies. However, no move in this direction wouldbe possible on the part of Great Britain at present asapproaching general elections stand as a barrier evenwere the London authorities convinced of the de-sirability of the resumption of the gpld standard.The general elections must take place some timewithin the next year. It seems doubtful that theywill be held this autumn. A general election aroundChristmas season would be bad tactics. Nor can theelections be postponed too long after the turn of theyear because the British fiscal year ends on March 31,and succeeding weeks would have to be devoted tothe introduction of the budget, debates upon whichmight easily continue into the summar. It is in-conceivable that the Government would wish toencounter the budget and elections at the same time,so that it seems probable that the elections may beexpected to take place in January or early Februaryand that no practical steps toward stabilization couldbe entertained earlier than April or May 1936.Money continues in abundance in Lombard Street.

Two-months' bills are 9-16% to N%, three-months'bills 54%, four-months' bills N% to 11-16% andsix-months' bills 13-16% to 7A%.

All the gold available in London open market thisweek was taken for unknown destinations, chiefly forprivate hoarders. On Saturday last there was avail-able and so taken 158,000, on Monday 340,000,on Tuesday 530,000, on Wednesday 273,000, onThursday 178,000, and on Friday, 350,000. OnFriday the Bank of England bought 57,000 in goldbars.The gold movement at the Port of New York for

the week ended July 24, as reported by the FederalReserve Bank of New York, was as follows:GOLD MOVEMENT AT NEW YORK, JULY 18-JULY 24, INCLUSIVE

Imports I Exportsi2,793,000 from Canada32,000 from Dutch West Indies13,000 from Panama I None6,000 from Guatemala

t2,844,000 totalNet Change in Gold Earmarked for Foreign Account

Decrease: $448,000The above figures are for the week ended on

Wednesday. On Thursday there were no imports orexports of the metal or change in gold held earmarkedfor foreign account. On Friday $1,419,700 of goldwas received of which $1,414,100 came from Canadaand $5,600 from Guatemala. There were no exportsof the metal, but gold held earmarked for foreignaccount increased $5,600.Canadian funds during the week were quoted in

terms of the dollar at a discount ranging between5-32% and 1-16%.

Referring to day-to-day rates sterling exchange onSaturday last was firm in a dull half-day session..



Bankers' sight was $4.963@$4.963/2; cable transfers$4.96%@$4.965/. On Monday the pound wassteady. The range was $4.961/8@$4.963% for bank-ers' sight and $4.963@$4.963/ for cable transfers.On Tuesday exchange was steady. Bankers' sightwas $4.95%@$4.963/8; cable transfers were $4.96@$4.963. On Wednesday sterling was easier. Therange was $4.951/@$4.95% for bankers' sight and$4.95%@$4.96 for cable transfers. On Thursdaythe pound continued in demand abroad. The rangewas $4.953/2@$4.969' for bankers' sight and 84.95%@$4.963/ for cable transfers. On Friday sterling wassteady, the range was $4.963/8@$4.96M for bankers'sight and $4.963@$4.963% for cable transfers. Clos-ing quotations on Friday were $4.965/ for demandand $4.96% for cable transfers. Commercial sightbills finished at $4.963/2, 60-day bills at .953, 90-day bills at .94%, documents for payment (60 days)at $4.95, and seven-day grain bills at $4.95%. Cottonand grain for payment closed at $4.95.

Continental and Other Foreign Exchange

EXCHANGE on the Continental countries isprofoundly affected by the Italian decree re-lieving the Bank of Italy from its obligation to backits note circulation by 40% gold, by the renewedweakness in Holland guilders, and by the officiallyinspired revelation that the public debt of Germanyis admitted to be three times the reported amount.

Dispatches from Rome on July 22 announced thatthe Italian Government had decided temporarily tosuspend the 40% gold coverage of the note issue whichwas fixed on Dec. 21 1927 under the decree stabilizingthe lira at 92.76 to the pound sterling. The decreedoes not necessarily point to ultimate devaluationof the Italian unit. Nevertheless the foreign exchangemarket is inclined to believe that the lira may beforelong be devalued.In view of the heavy imports of many kinds which

Italy will be obliged to contract for because ofoperations in Ethiopia, it is highly essential that thelira should not be low-priced. The present decreemeans that Italy is paying for much of her importsof raw materials essential for military campaigningon a large scale, with actual gold taken from theBank of Italy. The outflow of gold from Italy,which had previously been arrested by variousmeasures compelling Italian holders of foreignexchange to hand over their holdings to the Bank ofItaly, again became manifest in the bank's returnof June 20. At this date the gold holdings of theBank of Italy were 5,677,000,000 lire, against5,829,000,000 lire on June 10. This loss of gold wastechnically made good by a corresponding increase ofexchange holdings, which rose from 54,000,000 lire to207,000,000 lire. The same kind of substitution ofgold by foreign exchange was in a smaller degreevisible in two subsequent bank returns. The state-ments indicated that the Bank of Italy was meetingdemands to cover Italian import requirements byselling gold and replacing the gold by buying up thecredits abroad of Italian exporters. Obviously therewas a limit to this operation.The decision of the Italian Government is contrary

to the official policy of maintaining a high nominalvalue of the lira which has been pursued during thelast few years, ever since Premier Mussolini made aspeech notable for an oratorical avowal that Italy"would defend the lira and maintain its value, if

necessary, with blood." As a matter of strict fact,Italy has been only nominally on the gold basis forsome time, as exports of Italian currency have beenrigidly controlled somewhat on the German plan.As long ago as last December a series of far-reachingmeasures was adopted by the Council of Ministers,which in effect placed all foreign currencies owned byItalians under the direct control of the Government.This establishment of a virtual state monopoly ofexchange was the first important indication thatItaly's financial position was such as to render herhold on the gold standard precarious. In the past fouryears the Italian budget has amounted to approxi-mately $1,200,000,000. The deficit for the year1935-1936 is estimated at about $170,000,000.Last week the lira showed a range in the New

York market of between 8.22 and 8.263/2. Italiancable transfers closed on Friday of last week at 8.26..Following the publication of the new decree the liradropped in the New York market to 8.01 in Tuesday'strading. Currently the rates for Italian lire arelargely nominal. In view of the complete controlexercised by the Italian Government over exchange,it is reasonable to believe that the lira can be heldfairly.steady, surely for as long a time as there is goldto be exchanged for war supplies. The Bank ofItaly's statement as of July 10 showed gold holdingsof 5,524,000,000 lire, a decrease of 153,000,000 liresince June 20, while note circulation increased to13,210,000,000 lire from 12,684,000,000 lire, in-dicating a gold cover of 41.81%, against 44.76%.The ratio of gold to combined note circulation andsight liabilities on July 10 was 40.96%, against42.54% on June 20.German marks as represented by the quotable

rates for so-called "gold" or "free" marks developedconspicuous weakness in keeping with the trend ofthe major Continental currencies. The par of thegold mark is 40.33. In June the free mark in NewYork had a range of between 40.42 and 40.52. InWednesday's trading the gold mark went as low as40.16. Whatever the quotations of the mark in termsof other currencies, they represent a scarcity valueimposed by the strict regulations of the Reichsbank,and the exceedingly limited supply of free marksperforms only the slightest fraction of Germanbusiness, the great bulk of such transactions areconducted through the instrumentality of the variousclasses of blocked marks, the values of which re-present excessive discounts on the mark. There ismuch uneasiness over the mark situation. It wouldseem likely that an economic breakdown in Germanyimpends. The Germans doubt the stability of themark and its internal depreciation is reflected inrising living costs. An official analysis minimizesthe high living cost, admitting that it gained 23/points in the year. The wholesale price index isacknowledged to be up 43/ points. Vegetables are20% dearer, meat is up 7% to 10%, and clothing is11% higher than a year ago, but private observationshows still greater advances. As has been pointedout on several occasions, the Reich's debt is officiallyacknowledged to be around 13,000,000,000 reichs-marks, but the prevailing opinion for some time hasbeen that certain items of expenditure have beenconcealed and that the true indebtedness of theReich was nearer 30,000,000,000 reichsmarks. It wasrecently admitted semi-officially, that the Reichdebt was three times the disclosed official estimate.


Volume 141 Financial Chronicle 493The French franc was visibly affected by the

changed situation in Italy and Holland, although therange for the French franc in dollar terms shows littlechange from last week. The franc went as high as6.63% on Saturday last, but following the dis-closures from Rome and Amsterdam the franc solddown as low as 6.603 in Wednesday's trading.Paris and Amsterdam dispatches during the weekshowed that Paris received gold from Holland andother neighboring countries and that the Bank ofFrance was active in supporting both guilders andlire. This support was doubtless one reason for thelower franc quotations in the middle of the week.In the main the French situation is much improvedand since the French Parliament does not meet untilOctober and may even not be convened beforeJanuary, it is felt that the Laval ministry will besuccessful in making its economy decrees effective.It is felt by competent foreign observers in Paristhat France is headed for an economic revival. TheGovernment is now concentrating its efforts onreducing the cost of money. It should be recalledthat the Bank of France reduced its rediscount rateon July 18 from 4% to 332%. It was confidentlybelieved that another reduction would soon be madein the rate, as it had been at 21A% from May 311934 until the threat against the bank's gold holdings

in May compelled successive increases until a 6%rate was made effective on May 28. It is nowthought, however, that in view of the current de-velopments in Holland and Italy, a further reductionin the rate from the present 332% level may bedeferred.The following table shows the relation of the

leading European currencies still on gold to theUnited States dollar:

Old DollarParity

3.9213.905.2619.30

France (franc) Belgium (belga)Italy (lira) Switzerland (franc) Holland (guilder)

New Dollar RangeParity This Week6.63 6.60;4 to 6.63%16.95 16.89 to 16.988.91 8.01 to 8.263432.67 32.57 to 32.82

40.20 68.06 67.04 to 68.12The London check rate on Paris closed on Friday

at 75.08 against 74.65 on Friday of last week. InNew York sight bills on the French center finished onFriday at 6.61, against 6.63A on Friday of last week;cable transfers at 6.611A, against 6.63%; and commer-cial sight bills at 6.585/8, against 6.605/8. Antwerpbelgas closed at 16.97 for bankers' sight bills and at16.98 for cable transfers, against 16.903/ and 16.913.Final quotations for Berlin marks were 40.31 forbankers' sight bills and 40.32 for cable transfers, incomparison with 40.41 and 40.42. Italian lire closedat 8.17 for bankers' sight bills and at 8.18 for cabletransfers, against 8.25 and 8.26. Austrian schillingsclosed at 18.96, against 19.01; exchange on Czechoslo-vakia at 4.15 against 4.173,'; on Bucharest at1.00, against 1.01; on Poland at 18.92, against 18.99;and on Finland at 2.20 against 2.193. Greek ex-change closed at 0.923' for bankers' sight bills and at0.92% for cable transfers, against 0.943 and 0.949.

EXCHANGE on the countries neutral during thewar holds the center of interest owing to thesharp drop in the guilder which followed the budgetcrisis which developed in the early part of the week.The Government-proposed economy program wasintended to effect a 77,000,000 guilder saving in thebudget. The Government declared itself as stronglyanti-devaluationist. Only a few weeks ago theMinister of Economics, Steenberghe, the only member

of the Cabinet favoring depreciation of the currency,was forced to hand in his resignation. In Parliament,it would seem, the Catholic party and the Laborparty, the two strongest bodies of the Right, refusedto concede any further aid in the direction of de-flationary measures. As a consequence of the re-sultant uncertainties the foreign exchange marketbecame strongly convinced that Holland will becompelled either to devalue the guilder or to abandonthe gold bloc entirely and ally itself with London as amember of the sterling group. Because of the dropof the guilder in all markets, gold moved away fromAmsterdam, particularly to London and Pads, andthere was a wide movement of Dutch funds toLondon. It was thought that both the BritishExchange Equalization Fund and the Bank of Francewere active in steadying the exchanges throughoutthe greater part of the week. The outward flow ofgold from Amsterdam might have been even greater,but for the fact that many bankers, especially on thisside, hesitated to be lured by the prospect of profitin such transactions, as the Netherlands Bankrequires 48 hours notice for gold withdrawals. Hencethe greater part of the gold shipped from the Dutchbank this week went to Paris, where the time elementwas not so important.The outstanding result of the guilder situation

was the increase in the rediscount rate of the Bank ofThe Netherlands from 3% to 5%, effective July 24,and on July 26, again increased its rate, raisingit to 6%. The suddenness of the Dutch develop-ments is best shown by the fact that only on July 17,the Netherlands Bank reduced its rate from 332% to3%, owing to what was felt to be great improvementin the economic outlook. The backing and fillingand great uncertainty with respect to the guilder isperhaps best reflected in the rapid changes in theDutch bank rate since the end of March. After thedevaluation of the belga the Bank of The Nether-lands felt compelled to increase its rediscount ratefrom 23% to 31A% on April 4, and again a few dayslater, on April 9, moved the rate up to 43/2%.Sentiment improved so much in the early part ofMay that the Bank reduced its rate on May 15 to4%. A sudden resurgence of pressure against theFrench franc, howev

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