The Washington herald., 1915-01-18
Frightening Skies.

natural desire on our part not to Inconvenience
Europe there will probably be no gold brought
across the Atlantic at this time, nor even any gold
imported from Canada where the Bank OF England
has accumulated large cash balance, mostly as
the result of recent free exports OF gold from this
country 1t only yesterday that our banks
and the agents of foreign banks in New York City
were tumbling each other in our principal
sterling exchange market to buy remttances on
Europe at price of 81 to the pound, an enormous
and unprecedented figure. 1t a price that on
the face of things indicated alarming state OF
affairs as regards our national credit But how
rapidly the scene has changed! The rush to send
money to Europe has ceased, and it is the
bankers of Europe who are strainng every effort
to keep their gold at home and to pay their debts
to the people of the United States in some form
other than in actual money.
What has been the cause OF such a surprising
turnabout in the financial world? The beginning
of the war in Europe found this country indebted
to Europe on the current balance OF trade and
financial obligations in a sum varying from $780,
900 900 to 5000 ooooo according to various esti-
mates AS nearly everybody understands,
these obligations were only of routine financial
character and did not include in any way the vast
permanent investments of Europeans in the United
States They represented in part the temporary
borrowings OF money Dy our merchants IlOHl
foreign countries. The city of New York, for
instance, was indebted to the bankers of London
and Paris for $50, 100000 upon short term notes
made by the city in anticipation of the receipt of
money from taxes. For months previous to the
war there had been a heavy liquidation of our
securities by Europe and while part of the pro-
ceeds had already been rcmitted in gold to those
entitled to it. a good share of the balance re-
mained in New York City to the credit of Euro
pean financial concerns. Many of our bankers
were owing money to Europe in the shape OF bills
of exchange sold by them in anticipation OF the
usual eastward flow of seasonable merchandise,
mostly cotton in the fall OF the year; and as the
flow was interrupted by the war, the bankers had
to cover their obligations best they could by
purchases of exchange by an actual transfer
OF cash.
On ordinary occasions our European creditors
would have most cheerfuy and readily extended
the maturity of our obligations, knowing that
there was no question of solvency. But the
occasion was not an ordinary Europe wanted
money in the shortest possible time and whenever
it could get it. 1t asked to pay all that we
owed, and to pay in gold. 1t was a peremptory
demand OF uncxampled kind.
When all this storm cloud burst upon us as sud
denly as an actual hurricane, the stock exchanges
and banking and commercial industry in the United
States were for a moment almost paralyzed.
What can be done to meet the emergency was
the question that trembled on every tongue. The
answer was Immediately forthcoming from the
penius the common sense and the ready courage
of the great bankers OF our country. No matter
how unreasonable these demands seem, let US meet
them No matter what sacrifice they mean, let
us make the sacrifice. Let us send Europe all the
gold she asks for without an instant's hesitation
The people of the country acted upon this advice,
and for weeks and months there not large
steamer crossing the Atlantic that did not carry
gold from the United States to Europe. The Bank
OF England established a temporary storchousc IN
Canada so as to get gold easily and $5oooo,ooo Of
GOLD was sent there. In seeming amazement at
the gigantic financial strength thus displayed by
.us the demands OF Europe slackencd, and slowly,
but steadily the price of exchange declined.
One great drawback in export trade was
the practical cxtinguishmcnt for the time being OF
our foreign shipments of cotton. Cotton manu-
featuring in England and France at a stand
STILL and the Izooo,ooo-bale cotton crop here
brought additional pressure to bear against the
price OF the staple But countcrbalanclng force
entered the field in the shape of extraordinarily
heavy purchases in this country OF foodstuhs and
munitions of war by Europe. The buying OF wheat
here for foreign account has been on the largest
scale ever witnessed; and general buying OF COM
moditics by foreigners in markets for reasons
incident to tho war caused trade balance to
accumulate in our favor, according to the govern
mcnt estimate OF SIIoooo,ooo in the month OF
December. Now our Treasury Department and
Our private sasticians agree in the statement that
as the result of debt paying and increase in trade
the financial balance against US of over S2oo,ooo,-
90 on July l. last year, has been entirely quidated
and considerable balance substituted in our
favor.
1t may be argued that these conditions will
again be changed for the worse, so far as we arc
conccrned when the war ends. 1t is true that when
the war ends VIC shall not send foodstufs to ku-
rope in such large amounts and at such high prices
rs we are now doing. But when the war ends our
shipments Of cotton will not only he resumed, but
will, in all probability be resumed in an abnor-
malIv large way because OF their previous inter
ruption; and these shipments will make exchange
even more rapidly than wheat. Even as it is, cot
ton exports are beginning to pick up decidedly.
| On Thursday last week they were 84,457 bales as
compared with o,7II bales the same day last
I year. Money cheap, too, for indefinite time!
Perhaps we are too optimistic, but, with Congress
fte;rr