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AN ILL WIND...

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Rediscount rates are economic facts of little significance to the layman. Nonetheless, they are of vital importance. The controversy over the rate manipulations of the Federal Reserve Board in the summer and early fall of 1929 and its relation to the stock-market crash still rages. Thus news that the Bank of France has raised its rate of interest from 2 1-2 to 4 per cent, while apparently merely one more fact for statisticians and graph-makers, may conceivably have drastic repercussions.

Increasing the discount rate is a means of arresting the flight of gold from France. The excitement that prevails among the cabinet in Paris indicates that its success is doubtful. Should the attempt fail, the result would probably be abandonment of the gold standard. Since France and Italy--whose currency has recently been decidely unstable--are the only great powers remaining on gold, this might in turn result in the prevalence of managed currency throughout the world.

To seekers after monetary stability, this sequence of events may at first seem calamitous. It is true, nevertheless, that general inflation would be a more satisfactory basis for international negotiation than the present hybrid status. Thus although devaluation of the franc may cause temporary panic in France, it need not be disastrous in its ultimate consequences. On the contrary, if it should make possible an adjustment of the existing economic warfare, it would be of tremendous value to the world in general and therefore to France itself.

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