The sun. [volume] (New York [N.Y.]) 1833-1916, 1915-09-03
The Foreign Exchange Crisis and
Our EXPORT Trade.

There was something like demon
alization I'm the international money
market, otherwise called the foreign
exchange, In the first half Of the
present week. As this Is the mar
ket where international commerce 10
financed, the whole country is vitality
concerned in the violent derange-
ment now witnessed.
The foreign trade movement can
not fail to become more difficult II
the money market. which ordinarily
takes care OF 1t, Is In acute and grow
ing disorder. As It Is the foreign
trade expansion In which we have
been able to engage on account OF
the war that has raised the country's
business, industry and values from
severe depression to more than a
promise Of prosperity, all the people
are vastly concerned, whether they
know It or not. In the problem which
the disturbance OF the foreign ex-
change offers. Moreover, the prob
lem presses urgently for solution be-
cause we have entered upon the six
months period when customarily the
regular increase Of our staple export
trade would add largely to the ex-
port balances which have been dis
tributing profits widely owe the land.
giving labor employment at rising
wages and finding remunerative oc-
cupation for capital.
Optimistic aspects Of the fallen quo
tations for sterling, francs. lire,
relchsmarks and so on are obvious.
They testify to the enviable economic
position Of the United States, which
all the world, and especially Europe,
must draw on heavily for necessary
supplies. whether for war or for
peace. The other side Of the picture
Is seen in the significance of the for
eign exchanges as the measure OF fear
full economic strain which the war Is
! causing abroad. Meanwhile the sit
uation thus denoted calls for ego
lutte. intelligent financial effort of the
most comprehensive sort IL the for
eign trade brought to us by the war
Is to be kept up.
A new international financial crisis
has succeeded to the crisis Of a year
ago and much skilful work must be
done to overcome 1t. As the prob
lem has been mistakenly described
I'm some directions. 1t is the problem
Of engaging American resources In
doing their share toward financing
the war. What the problem really
Is from our side Is that Of finding
and agreeing ON ways and means TO
finance the external trade which will
keep the country's business and in
dustry a-going actively and in con-
tlnuous prosperity.
Exchange on Italy sold this week
at a discount Of 81 per cent. from
what Is called the normal par.
Francs were at a discount of II per
cent. relchsmarks IA per cent, and at
one stage the discount on the pound
sterling was more than Z per cent.
The depreciation Of all other forms of
remittance can be ignored in compar-
son with the decline In the quoted
value Of sterling exchange at New
York, for the time being the princi-
pal money market OF the world.
Just a year ago this week the pound
sterling sold here around $5.0I, while
the Morgan firm was completing the
syndicate arrangement to pay off the
New York city notes maturing abroad.
London was then insisting on gold
payments from American debtors,
but there were men Of discerning
vision among our W bankers who
insisted that the London banking
community was dwelling in n FOOLS
paradise regarding the inevitable eff
fects of the war on British finance.
A year ago It cost a premium Of 20
cents in American money to buy ster-
ling exchange here. At the low
level Of about $3.50 this week the
pound sterling was at a discount of
approximately 81 cents. This Is the
o impressive token Of the terrific
wrench which the wal has given to
the worlds financial organization, for
the pound sterling in the form of a
bill on London. that Is, a claim on
gold in London, has been the cur
rency of international for
generations.
The fact, then, Is that we have come
to the point where British finance
must make an exhibit OF the means
Of payment for our exports which are
within the power OF British finance
to provide and where we must agree
upon the means Of payment which
will be accepted in settlement of our
export trade balances.
Gold payments, cash settlements,
are absurdly out Of the question.
Modern volumes Of business depend
on credit arrangements, credit instru-
ments and credit machinery, and 1t
has been shown not only that the
amounts Of gold which can be trans
ferred to this country to pay foreign
trade debts are preposterously small
I'm comm ri son with the current md