Puzzling Pound

In terms of dollars, the British pound has two prices. One price is quoted by the Rt. Hon. Montagu Collet Norman, who last week was re-elected for his 21st year as Governor of the Bank of England.

Through his bank all dollars held by Britons must ultimately pass, and for them he pays an official price, unchanged since mid-September: -L-1 for $4.02 1/3. The other price for pounds is freely made by U. S., other international money-changers in what, under a tighter system of ex change control than Britain's, would be known as a "Black Bourse." Until early last month, this free price had held within 2% to 7% of Mr. Norman's price. Then it began to slide.

Reason for the slide was the news that Britain would tighten her controls over foreign exchange. Late last month her new rules went into effect. No Briton can now export rubber, tin, Scotch whiskey, jute or furs to the U. S. unless he is paid either 1) in dollars, or 2) in sterling bought at the official Norman rate. Since these products are an important share of British ex ports to the U. S., practically dominate the U. S. supply for them, many a U. S. importer had no further use for free sterling, deserted the Black Bourse. In one day the free pound dropped 15-c-, next day went below $3.50, rallied only to $3.58! by last week's end.

To U. S. jute, tin, rubber, fur and whiskey buyers, the new rules made little difference. But for other goods, the de clining free pound was the same sort of mixed blessing as would be a reduction in U. S. tariffs. British custom tailors with clients in New York began calling attention to the availability of fine English woolens. U. S. fabricators, fearing increased imports from Britain, took alarm. The U. S. cotton market jittered as Bombay prices cheapened in relation to domestic ones. Alarmed too were some U. S. exporters who compete with Britons in foreign markets, especially when the British & Latin American Chamber of Commerce, meeting in London last week, announced a new drive for exports (a drive in which a cheap free pound could be a convenient weapon).

U. S. exporters were somewhat calmed by their knowledge of Britain's rising costs at home, high wartime delivery costs by sea. Nor was it certain that Britons themselves wanted a cheap pound. When the decline began, the London Economist suggested extending exchange control over more British products, "strangling" the free pound market "to its smallest possible proportions." Last week the gap between the pound's two prices had had little real effect on U. S. trade except to intrigue traders. More than intrigued were U. S. customs officials. Required by law to consider both prices (since both are now quoted by the Federal Reserve), they could not decide which to use in figuring ad valorem duties.

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