Evening star. [volume] (Washington, D.C.) 1854-1972, 1914-11-01
MONEY markets
STEADILY IMPROVE
Reduction of Foreign Exchange
Most Gratifying Feature Of
Financial Situation.
COTTON NORTHUMBERLAND
CONTRIBUTING FACTOR
Difference in Method of Politician
and Man of Finance Shown in
National Crisis.

NEW YORK, October 31-American
bankers this week had the satisfaction
of seeing exchange rates between
America and London reduced to q. point
below 400 both for demand bills and
for cable transfers, thus establishing
the low record since the outbreak of
the European war. This was extreme
ly gratifying to them and is indeed an
objective point toward which they
have been bending all their energies
for period of three months or more.
In certain quarters there has been
disposition to credit the return of nor
NAL conditions in the foreign exchange
| market to the announcement that
Great Britain would not in future re-
gard cotton and cotton products as
contraband of war, but would permit
the shipment of such commodities into
the hostile countries if desired. This
is but one contributing element to the
situation, however; and to the sklllful
and devoted efforts of the bankers oil
the money centerS of the United
States must be ascribed all the credit
for having so carefully and SO thor
oughly reconstructed the shattered fab
ric of the mechanism of foreign ex-
change operations that exchange rates
came tumbling from their high noint OF
100 to within Is points of normal in
a comparatively short time.
The first step in this process was In
the providing of $S0,OO0.00O IN gold 10
take care of New York city's short
term notes which were due in London
month after the outbreak of the war
Hardly was this arrangement erected
when it became necessary to organize
the financial lenders of America to pro-
NJ fl1p1 of a
further bulwark for the exchange mar
ket. This is the whole story as told
by the newspapers. and by general
news agencies. But even these great
undertakings were not Of themselves
sufficient to restore complete confidence
in the international markets, and out
side of the organized movement many
of the bankers gave of their time and
their funds in private transactions
which made up tremendous total. 1t
should be remembered that whatever
we owed in foreign countries was due
to private people and not to govern
ments as such, and thus we were af-
forded many opportunities to balance
credit for credit and commodity for
commodity, thereby reducing to a large
extent the Indebtedness the liquidation
ef which necessitated such an extern
'sive propaganda.
Dependent on Foreign Exchanges.
1t is recognized in financial circles
that the adjustment of the general
financial situation at home was de-
pendent upon the restoration of normal
conditions in the foreign exchanges to
just such an extent as has apparently
been accomplished. The new aspect
of the cotton export situation is i'm
pOrtant in that as long as we can eX
port cotton to European markets it
will be unnecessary to send gold to
make up our adverse balance of trade
and pay over maturing obligations.
Hence the long strides that have been
taken during the last few weeks in
adjusting the cotton problem as a
whole are particularly significant
These various steps that have taken
place or at any rate in progress include,
in addition to the action just announced
by England, definite steps for closing
out the old commitments of New York
cotton exchange members and permit
ting that organization to resume bust
ness in an unrestricted way. Still
further, the banks of the country will
undoubtedly fall in with the plan which
has already received the Endorsement of
the federal reserve board and which pro-
vides for the formation of a sl35 100000
banking pool to enable the surplus cot
ton crop to be carried until needed by
spinners. 1t is attacking the problem at
British governments action. the physi-
cal resistance to cotton exports has been
removed, while at the same time ample
banking facilities for carrying the sur
plus stock at home are provided. AS
soon as spinners and buyers of cotton
goods are assured that prices of the raw
material are on a reasonably stable
ba sis there will be slight encouragement
to continue to refrain from buying.
Home Money Markets.
Leading bankers in every section of
the country are of the opinion that the
money situation will continue its tone
of improvement, and will therefore be
a distinct aid to the establishment of a
more satisfactory condition for loans to
business interests on a favorable basis.
The New York city banks have convert
ed their forty-four- llion-dollar reserve
deficit into a comfortable surplus. The
new federal reserve banks will. if pres
ent expectations are realized, be in
operation in two weeks. simultaneously
with which there will be an important
liberation of cash reserves, which will
add to available loanable funds. The fed
eral treasury also announces that 1T
will deposit with the reserve banks
locked up in the government vaults.
According to an estimate by the con-
troller of the currency, no less than
S500.OOO.00O will be released from the
national banks throughout the country
as soon as the district banks open. A
still further source of relief will be the
immediate ability of the banks to take
out the new federal reserve notes and
thus retire what emergency note circu-
lation has not already been retired on
the date the new banks open. Mean
while there has already been a sub
stantial reduction in the volume of
clearing house certificates outstanding
in New York, and the clearing house
banks and trust companies for the first
time since the war strain began were
Saturday able to report full restora-
ton of reserves even on the old 25 per
cent basis. The demand by banks and
trust companies for mercantile paper
is improving in a satisfactory manner.
1t is obvious that the money situation
is one of distinct promise. The credit
situation, too, Is improving, and there
is no reason for foreign bankers and
others who are said to be demanding
gold to doubt the so1vency of condi-
| lions on this side. Hence, the problem
becomes a routine banking question,
for 1t Is conceded that the international
trade balance Will change in our favor
within the next two months or So Our
bankers have not been able to secure
assurances from the Bank of England,
although such assurances have been
officially sought through our State De-
partment. that gold will be paid back
f<