Devaluation No. 2

A respected Brussels broker with a solid clientele is meticulous M. Verviers. Last week his office was crowded with anxious Belgians including several War widows in trailing weeds.

''My husband gave his life for Belgium and King Albert," cried one widow. "I know the Association of Belgian War Veterans has petitioned King Leopold to keep the belga on the gold standard and that people say he will. But can we trust the young King to protect our savings? If only King Albert were alive!"

As well as he could M. Verviers answered, his shrewd guess being that the belga would be taken off gold and devalued 25%. Few hours later police rushed in and arrested M. Verviers. "You are charged with endangering the national credit," he was told. "Witnesses are ready to testify that you said, 'The Government has devalued the belga 25%.' For such a malicious falsehood you can be punished with three months in jail."

Newspapers throughout Belgium were forbidden to so much as mention the danger everyone feared. Wiseacres with cash rushed to buy stocks, real estate and then, as trading markets soared, began to jam Belgian stores.

Privately Catholics discussed with their priests the latest move of wavy-haired young King Leopold III in calling to the Premiership an economist untried in statecraft, Professor Paul van Zeeland, Vice Governor of the National Bank of Belgium. In her wisdom Mother Church could offer no fiscal consolation. Her attitude, cautiously reflected by the Catholic Press of Belgium, was that no good could be expected of van Zeeland, "an admirer of Roosevelt."

Within 72 hours after Broker Verviers' arrest for guessing at 25% devaluation, Premier van Zeeland, having first closed all exchanges, was telling the Belgian Chamber and Senate that he planned to devalue the belga by a maximum of 30% if other nations will join Belgium in an international monetary stabilization pact. If they will not, then the bright blue sky is Premier van Zeeland's devaluation limit.

Shouted an irate Senator: "Nothing can conceal, Monsieur, that your program is for confiscation of the savings of the Belgian people!"

Copper King and King. In a position to profit handsomely from devaluation, and known to have conferred with the young King last week, was Belgium's No. i financier, "Copper King" Emile Francqui.

The previous "Francqui devaluation" was in 1926. In that year the late King Albert was persuaded by Finance Minister Francqui that Belgium's currency, then sunk to about one-ninth of its pre-War value, should be officially "revalued" (i. e. devalued) and anchored for 25 years on gold. At the same time a new unit of currency, the belga, worth five Belgian francs, was adopted for dealings in foreign exchange, but in Belgium francs are still the currency.

In a spirit of "national sacrifice" this step was taken (TIME, Nov. 8, 1926). Last week, up to the very moment of Premier van Zeeland's announcement, the 25-year pledge in which King Albert participated was cited reassuringly as a reason why Belgians need not fear devaluation under King Leopold. When the belga finally slid off gold, Flemish peasants, thriftiest in the world, demonstrated fiercely in their villages against "Our French King!"

At that they were lucky. Years ago most of them put their savings into gold coins, plumped them into socks. These last week Professor-Premier van Zeeland had not the rapacity to touch.

107-to-54. In other respects, too, the new Premier's policy was un-Rooseveltian, but his enemies seemed to think the deadliest argument they could raise against him among thinking Belgians was to harp on the Professor's alleged "admiration" for the U. S. President.

Snapped onetime Premier Henri Jaspar: "What has Roosevelt accomplished? What? The worst thing about van Zeeland is that he is acting in good faith and is thoroughly imbued with American ideas!"

A paradox of the crisis last week was that Belgium's three major parties, the Catholics, the Socialists and the Liberals, all contributed Ministers to the Cabinet of "National Union" formed by Professor van Zeeland at the invitation of His Majesty. The politicians' theory seemed to be that, since all three parties had pledged themselves to the voters to maintain the belga at its 1926 value in relation to gold, they all might as well cooperate in devaluing it further. Never was the clear mandate of an entire electorate more flatly disregarded. Soon the Chamber gave the van Zeeland Cabinet a vote of confidence 107-to-54, although 92% of the Deputies were pledged to oppose devaluation. When the Senate balked and seemed about to vote "no confidence," young King Leopold hastily threw the Belgian Crown's great influence behind devaluation, summoning leaders to the Royal Palace. The Senate voted "confidence." Thereupon, as a starter, the Cabinet fixed devaluation of the belga definitely at 28%.

"What Next?" In the remaining full gold standard countries, France, Switzerland and The Netherlands, nervous public opinion echoed the Manchester Guardian which editorially exclaimed "After Belgium, what next?"

Obvious answer: Luxembourg. The tiny Grand Duchy has a customs union with Belgium and subjects of Grand Duchess Charlotte mostly think of the Luxembourg franc as interchangeable with Belgium's. They scratched their heads dubiously when the Grand Ducal Govern-ment decided that the Royal Belgian Government's example of 28% devaluation was a bit extreme, proceeded this week to devalue the Luxembourg franc 10%.

In Belgium, meanwhile, wholesale and retail prices were rising far too fast to suit Premier van Zeeland. Apparently he had thought Belgian shopkeepers knew as little about international exchange as did the majority of U. S. shopkeepers who disappointed President Roosevelt by not kiting prices as high as he thought they would. Belgian shopkeepers, keen exchange watchers, raised prices this week almost as fast as the belga fell. This made Premier van Zeeland so angry that he lashed out: "The Belgian franc ought to buy just as much merchandise as it did a year ago. Stop thinking of the monetary question, my countrymen! We are here to defend the franc and your savings. Keep calm !"

Sheer Confidence. Thus, on price policy, van Zeeland took a position opposite to President Roosevelt's. He announced nothing resembling the NRA, and headlines about NEW DEAL FOR BELGIUM could be charged off as oversimplified tosh. Chief effect of the European currency misgivings produced by Belgium's devaluation was to give a fillip to the notion that "Sterling is the best money," and Sterling soared against other currencies, gold and paper. Smug British bankers plumed themselves once again on the Empire's supremacy in creating sheer confidence out of whatever sheer confidence is made of. Keen in their quiet way, His Majesty's Government, several days before Belgium went off the gold standard, quietly upped tariffs on iron and steel which Britain imports chiefly from Belgium, thus blunting the cut-price advantage Belgian exporters would otherwise have gained.

On international exchange fiscal experts pulled long faces "because Belgium is the first country which has already devalued since the War to devalue a second time." If the world is to be plunged into an endless spiral of devaluation, each nation in turn undercutting the others, they could view the fiscal future with no optimism whatsoever.

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