FINANCE-PUBLIC & PRIVATE.
MY OUR CITY EDITOR.]
THE RALLY IN THE FRANC.
[To the Editor of the SPECTATOR.] SIR,-I find it difficult to recall an occasion when there has been a more dramatic recovery in an exchange than that which has taken place in the French franc during the past week.. When writing a week ago the franc stood at the lowest point in its history—at 121 to the £. Yesterday it had recovered to about 87 to the £, and at the moment of writing the quotation is round about 85.
Ostensibly the whole explanation of the volte-face is to be found in the important credits arranged for France both in New York and London. As regards the former centre, Messrs. Morgans are understood to have arranged credits of at least 50 and possibly 100 million dollars for about a year on the security of gold specially hyyppoothecated by the Bank of France, while in London Messrs. Lazard Bros. and_ Company, together with four of the leading joint stock banks, have arranged six months' credits for £4,000,000 on the same security, and it is believed that some further credits are in course of arrangement. This financial aid was excellently timed, both finsuricisdly and politically The French Premier was struggling to get through the French Senate certain measures for. increasing taxation and for strengthening the budgetary and fiscal policy of the French Government. His efforts in that direction were undoubtedly helped by the spectacular recovery in the franc while the discussion was in progress, and finally M. Poincare was enabled to carry his pro- posals through successfully. The aid was also well timed from the financial standpoint, in the sense that a huge " bear " position had been created in the franc, and the knowledge of the arrangement of these large credits had the effect of occasioning a veritable stampede amongst the speculators for the fall in French currency, the result being the dramatic recovery in the franc I have just referred to.
On the Stock Markets here the effect of this great recovery in the franc has been somewhat peculiar. At the moment of its most extreme depression, public securities here were inclined to droop on the idea of financial trouble which might follow any further collapse in the franc. Therefore, when the news came of the credits and the franc improved, the first effect was to occasion general cheerfulness in all departments of the Stock Exchange. Later, however, the very extent of the rise occasioned some apprehensions lest losses amongst the speculators for the fall in the franc should be sufficiently serious to occasion financial trouble from other quarters, calculated to react upon the Stock Markets. Added to this consideration, the uncertainty with regard to early developments in connexion with the reparation crisis, to say nothing of anxieties at home about the situation in the coal mining industry, imparted what can best be described as a rather hesitating tone to the Stock Markets, though in most departments there has been an undercurrent of firmness.
Moreover, it is impossible to close this very brief resume of an exciting week in the history of French currency without epitomizing certain considerations uppermost in the minds of bankers and business men at the moment with regard to the present situation. In the first place, it is, of course, recognized that external credits will not in themselves solve the problem of the depreciation in the franc. That must depend upon the use made by the French authorities of the period covered by the credits for dealing with the real causes responsible for the prolonged fall in the franc. If these causes are not dealt with both thoroughly and promptly, then, of course, the position will really have been worsened, because France may have to - export large amounts of gold to repay the credits. Much must also, it would seem, depend upon whether, in the very near future, the reparation tangle is so far straightened out as to produce political conditions in Europe calculated to restore confidence and aid financial and currency recuperation both in France and in Germany..--I
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