Norwich bulletin., 1915-08-17

HndQClal WOTlQ TODAY
Pounds sterling, francs, Hres, virtually
all foreign exchange, went down to-
new depths in a torrent of bills tfsat
Poured into the exchange markets from
American manufacturers seeking pay
for the big war contracts of munitions
and other supplies purchased here by
the warning nations of Europe.
Foreign Buyers the Losers.
Coincident with the startling decline
in exchange rates, came the assertion
from an Unimpeachable source that
every contract made by the American
manufacturers for supplies sent abroad
called for payment in American dol
lars and not English pounds sterling,
where have heretofore been the stand
ard of finance the world over. The
immense lSsses. therefore, due to the
decline in foreign exchange rates will
be borne, to the last penny, by the for
eign buyers and will not be sustained
by the American manufacturers, a sit
uation exactly opposite to what had
heretofore been the popular belief.
decline in Exchange Rates.
The maximum depreciation today in
pounds sterling was "a per cent.
below normal: in francs 10 per cent.
below normal: in Italian lires % per
cent. In the money markets today the
pound sold for but 1854; 6.02 francs
equalled dollar; and a dollar pur-
chased GAS lires. These were the quo
tations while rates were at the lowest
ebb during the early afternoon. In
the last hour Of the business day the
presence in Wall Street Of J. p Nor
man for the first time since the at
tack on his life six weeks ago and
an informal conference Of bankers to
consider the situation sent rates Up
ward on a rebound
Sterling closed at 4.s7 1-2. one-haIf
point higher than it opened and
point and half under Saturdays
close. which established a new low
points over the low record, selling at
5.99 at the close and lires rebounded
a point, closing at CAT.
To Remedy the Situation. =
What to do to remedy the situation
international connections at their in
formal conference late today. 1t was
decided to do nothing, chiefly because
the remedy lay across the ocean with
the foreign buyers. They and not the
American sells, ii was clearly estab-
Hshed, were the sufferers and theirs,
it was the consensus of opinion,
should be the task Of setting the money
markets to rights.
How this would be done, however,
was the object of keen consideration
and some speculation. It was gen
trally believed that the present alb
normal situation would not be per-
mitted to continue long. The obvious
remedy seemed TO be to sell American
securities held abroad and when this
contingency was studied the situation
seemed to be pregnant with unique
possibilities.
Foreign Holders of Securities Would
Profit.
great many millions of American
SaPnritiac raaK-abIa nf in NJ
lars, when due, are held abroad, chief
ly high class railroad bonds and pre-
ferred stock of certain railroads and
the bonds and preferred stock Of a
selected list of American industrials.
Should these securities be sold at the
present exchange rates in foreign mar
kets, they would fetch far more than
the purchasers paid for them, due en-
tirely to the depression of exchange.
Thus a $4,000 American bond sold
in Paris at par would. on account Of
the prevailing exchange rate, bring
approximately 5000 francs. When
purchased at a par a year ago, it
cost the purchaser approximately $3.50
francs The net profit would be about
$50 francs, or about 10 percent, the
percentage of depression in francs in
American exchange markets. In Lon
don the profit would be approximately
4 S-4 percent and in Rome the profit
would approximate % percent.
Collateral for Temporary Loans.
With these prospective profits as an
inducement. it was believed that hold
ers abroad would be willing to sell and
that foreign buyers of American goods
would have little difficulty in prOduc-
ing Il large amount Of American Sc
curitieS abroad as collateral for a
temporary loan in this country which
would tend to correct exchange rates.
The establishment here of big for
eign credit, estimated conservatively
at $500,000,0O0. was thought to be
necessary if exchange rates were to
be restored to anything like normal
figures.
A Distinct Surprise.
The assertion that dollars and not
pounds sterling having been the fin
ancial standard on which all contracts
for war supplies had been accepted in
this country came as a distinct sur
prise. Aside from marking the tenn
porary passing of London's control of
the worlds treasure chests, it relieved
anxiety on behalf of investors in So
called war specialties in the stock mar
ket who were confronted with the
prospect of large shrinkage in pros
pective due to prevailing low rates of
exchange
s4oo, 100000 War Contracts.
Measured in dollars and cents. lit
was learned that the amount of these
war contracts on which fully or near
ly full payments would be due on or
before October 1st next approximates
S4OO 100000 to $500, 900. This is in
addition to the huge total of more
than $1,000 600 owed by Europe to
the United States at he close of the
fiscal year June 80.
Profits Greatly Exaggerated.
1t was also learned from an authori-
tative source that the prospective
profits on some of these contracts had
been greatly exaggerated; that only
normal profits would accrue in a big
majority of cases and that in some
instances thera might be no profit at
all.
This, is was said. was due to the
rigid surveillance exercised by inspec-
tors of Great Britain and her allies
over all deliveries. Goods contracted