The Washington herald. [volume] (Washington, D.C.) 1906-1939, 1914-01-10
WHEN CANADA
WANTS GOLD

Copyright. 1914. by G II. Keys. New York;
In a two weeks period the banking
houses in New York shipped to Montreal
about Ss.eoo.ooo of gold. The movement
was so much bigger than usual that it
attracted a great deal of public attention
and thousands of people all over the
country wanted to know why New York,
which is a much more powerful financial
center than Montreal, allowed the Cana
dian banks to take gold away from this
market at time when our own finances
need more bolstering than at any other
time of the year on account of our big
crop movement As a matter of fact the
withdrawal Of gold for Canada was one
of the direct causes for an increase in the
borrowing rate in New York on call from
about 4 per cent to about 10 per cent In
other words. Canada took gold which was
really needed in New York.
OF course. the fact is that the New
York market owed money to Canada,
otherwise the Canadian banks would not
have been able TO ge: gold SO easily.
Always the big Canadian banks have
call loans in the United States Of some
thing over s10o.000,oI. These loans are
biggest at the time of the year when the
Canadian market does not need much
credit, and they contract during the fall
and winter when the Canadian wheat
crop is moving into foreign markets, for
that Is probably the fundamental factor
In the case.
This year Canada had a big wheat crop
which was sold at high prices. What is
more, the crop came out early on &C.
count of good weather and the price
about cents I bushel higher than last
year, due partly no doubt to the fact
that part of Europe. which normally pro-
duces considerable wheat was at war
when the crop should have been planted
and attended to this year. As a conse-
quen1e OF quick exports Of wheat, Canada
has created temporary credit in foreign
countries of something like 5000. 90. COO 1t
is part OF this credit that the Canadian
banks are converting into gold coin in
order to strengthen their resources and
permit them to expand their credit facili-
ties for the carrying on Of the winter
business in Canada
The position is the reverse of the usuaI
position. Canada imports about ss1o. OOo, 90
OF goods every year and exports only about
SsJp,OOo.oco A very substantial part of her
imports are from the United States and
practically few OF her exports are to the
United States Therefore Canadian busi-
ness is usually a debtor to American BUSH
ness. II one can put il that way, and as a
rule Canadian money Is moving south
across the border rather than the reverse.
II is only the fact that the biggest export
movement is crowded into a few weeks of
the year that gives her a strong and ire
sistible call on the money supplies of the
United States at this period.
These international movements of
money are naturally perplexing to the
layman: but after all they are pretty
much the ordinary machinery of barter
and trade, and are not to be confused
with the movement of funds that are GO
ing into investment. II Canada, through
out the whole year. buys abroad more
goods than she exports naturally she
will have to draw upon the homemade
wealth for the balance every year; but
II In two or three months she exports
more than she imports she will, in that
brief period every year. be in a position
to be also an importer of money which
will take the form of gold when the
banks OF Canada demand 1t. One of the
minor reasons why the banks are de-
handing 1t at this particular moment Is
that they have new bank act in effect
which requires the putting away of larger
gold reserves than formerly. II they did
not particularly need gold, they would
naturally take some Of their New York
balance away in some other form, be-
cause gold Is not, by any means, the
easiest form of money or credit to trans
fer from one place to another.
OF course the movement of money and
credit to and fro is a very involved and
perplexing subject. 1t requires men of
great technical training and skill to be
able to forecast with any denniteness
whatever, what lines Of credit or what
amount OF gold, as the case may be,
will be required in all the foreign mar
kets Of the world at any particular time.
For instance, at the same time that we
are shipping gold to Montreal we were
also shipping to San Francisco, and the