Evening star. [volume] (Washington, D.C.) 1854-1972, 1915-08-22
FOREIGN EXCHANGE
| CLOUD ON HORIZON
British Pound Sterling Shows
/ Four and One-HaIf Per :
~ Cent Loss.
AMERICAN SECURITIES
:. NETTING BIG PROFITS
Cousins Business Review of the
Week Shows August Trade
: to Be Excellent.

NEW YORK, August 21-The most
serious cloud on the horizon today is
the international monetary situation,
more Familiarity known as the foreign
exchange market. In normal times the
British pound sterling is equivalent in
value to $4.S6h of American money.
Monday of this week sterling ex-
change was a drug on the market at
AGA, and only the special efforts of
skilled international bankers prevented
still further decline. This represents
discount of 22 points from normal
value, or about Az per cent decrease.
Normally the French franc is eQuiva-
lent to 20 cents of American money; in
other words, one dollar will buy five
francs. With the present depression in
French exchange it is possible at times
to purchase six francs for one dollar,
representing 16 per cent decrease.
Italian lire and German marks have
shared similar fate, though with the
almost complete paralysis of trading
with these countries there is no special
necessity for the maintenance of the
exchange parity.
One PRACTICAL effect of these condi-
tions in the foreign exchange markets
is the obvious advantage it gives to
the seller of American securities in
the foreign money centers. With the
British pound sterling al 41s per cent
discount and American bonds payable
in dollars, the investor who sold his
securities in London at the same nomi-
nal price at which he purchased them
one year ago would in reality receive
Az per cent more than he paid for
them. An American bond for $1,000
sold in Paris at prevailing exchange
rates would net the seller 5000 francs,
while normally rated at the same price
at which it cost 5000 francs one year
ago. This represents profit of 20 per
cent. and it is stated that the same
process in Rome would net the in
weston 25 per cent. This is. of course.
only incidental to the real problem, and
it may be assumed as most unlikely
that sufficient of such transactions will
be recorded to show any appreclatlve
effect upon the exchange markets.
May Issue Bonds. -
Cable reports from London this week
tell of the very urgent desire of the
financial leaders in Great Britain to eff
feet satisfactory adjustment of this
exchange problem. The latest suggestion
Is that of a government issue of short
term high-rate bonds to be placed on the
American market The amount involved
would be anywhere from 5000, 100000 to
$500, 100000 in the form of two-year D
per cent bills free from the income tax
and all special membranes. If SUBJ
scriptions could be secured in this coun
try sufficient to cover such an issue the
foreign exchange problem would be
quickly solved; but the question is. could
and should such loan be acceptable to
American investors. Backed by syndi-
cate of Americas leading international
bankers. which would be strong enough
to underwrite whatever of the issue
could not be absorbed in the regular In
vestment markets. there would be no
doubt as to the ability of our financial
mechanism to bridge the chasm that now
threatens disaster to our foreign trade.
New York bankers have been in confer
ence on the subject this week, and i'm
portant developments may be expected
in the near future.
1t is now recognized that any pro-
longed decline in foreign exchange
rates must adversely affect American
trade; and that whatever remedy is to
be applied must be the result of joint
action between this and the British
market. Neither nation can say that
the problem is none OF its concern.
for neither nation can solve the diff
Guilty acting alone. The unsettiement
of the exchange market has hardly
been af factor in the stock market.
but settlement of the matter would
nonetheless be a very helpful develop
ment from a business point of view, for
it would give greater assurance Of the
continuance of conditions favoring a
record volume of exports.
Railroad Earnings Decrease.
Gross earnings of the leading rail-
roads in the United States for the six
months ended June 80, 1915. amounted
to Sass, Az. 0o3, decrease of SAL, 423,-
035, or 30 per cent from the CORE
spending period in 1914, according to
reliable tabulation. A remarkable cir
cumstance in connection with these fig
ures is that, though business conditions
in the United States, stimulated by the
large war orders from abroad, considera-
bly, improved during the six months and
tone and sentiment changed very de-
cidedly for the better, no reflection of
the fact is found in the revenue re-
turns of the country's railroad trans
portation systems. In the west and
southwest some instances of consider
able gains are recorded, but these arise
out of the fact that last seasons album
dant harvests contrasted with the very
poor harvests of the previous season,
giving the railroads in those favored
parts of the country a greater aSri-
cultural tonnage in 1915 than they had
had in 1914. But the great railroad
systems of the east, which are de-
pendent mainly for the course of their
traffic and revenues upon general man.
ufacturing and industrial activity, give
no evidence Of revival in trade sutfi-
cient to affect very materially the
course of traffic or revenues. The New
York Central. it is true, made some
recovery toutside of the lines where
the mineral traffic largely predominates.
such as the Pittsburgh and Lake Erie),
but on the other hand. the Pennsyl-
vania railroad, which is usually con-
sidered typical railroad system and
representative Of the country's varied
activities. suffered further consider
able shrinkage on top of the shrinkage
of the previous year.
The following table shows gross
earnings reported by the railroads for
the first half-yearly period back to
1902