New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1915-09-03
Stabilizing Foreign Exchange.

Stabilizing Foreign Exchange.
Yesterdays sharp rise in demand ster-
ling seems to forecast a return to sanity
and relative stability in the foreign eX-
change market. The depression Of the
rate on Wednesday TO 4.50 in our market
TO 4.4S in London's-was apparently the
last phase Of a arrangement, largely hys-
terical in character, which had run I'M
checked too long. Il is as much against
this country's interest as it is against
Great Britain's TO allow an unreasonable
disparity in exchange to hamper com
merce between the two nations. Great
Britain would naturally cut down to the
minimum her purchases from US If an
artificial blockade in exchange facilities
compelled her TO pay an exchange pre-
MUM of Sc on every 500. The premium
exacted would not benefit the American
with goods to sell. He would get no share
OF it. 1t would only constitute veXatious
tax on our European customers.
In ordinary times the sales we make
abroad are not paid for in cash-that IS
in gold. London's debts to US are bal
anced in 95 out Of 100 cases by our debts
TO London For a trifing sum the Lon
don customer can purchase American eX-
change. and if the exchange brokers run
the price Of this accommodation too high
the London customer can draw gold and
ship it here, paying freight and insurance
Before the war the pound sterling was
worth s4.S7%. Now. because we are buy
ING little from London and London is buy
ing so much from us, the exchange value
of the pound has steadily slumped, going
as low as SAB. With both countries on
q cold basis and our gold dollar worth no
more in London now than it was before the
war there is no sufficient reason for the
excessive charge levied on British buyers
for the use of the machinery of exchange.
The exchange value of the pound ster-
ing has deprecated simply because no
r6eouate measures have been taken to pre-
serve a reasonable parity. There are
three ways by which London could re
store a normal ratio. 1t could send gold
here 10 nav British debts. But shipping
coin in bars is hazardous and under
present conditions very expensive. More
ever the United States would not welcome
excessive gold shipments. A big increase
IN our gold supply would lead to artificial
imitation here. We do not want to eX-
baust gold funds of European nations and
,hus impair their financial stability and
weaken their capacity to purchase further
from, us. Ii would also be impractlcable
for Great Britain and France to pay by
cold shipments for the vast quantities OF
eunplies which they have contracted for
in this country for delivery in the next
twelve months.
The second expedient is to resell IN
the New York market American securl-
ties now held abroad. These have come
back in considerable quantities. But the
Allied governments find it difficult to in
duce individuals to part with stocks and
bonds which have a good earning power
and interest and dividends on which are
artifcialy increased in value by the appre-
citation Of American exchange.
The third expedient is to float govern
mental loans here for the purpose OF pay
ing for supplies purchased This remedy
applied on large scale, would quickly
re-establish a proper parity Of exchange.
The United States would much rather
take its pay for the products it sells to
the Allies in their obligations than see its
market abroad limited by an excessive pre-
r;um exacted from foreign purchasers by
the exchange dealers.
The rise in demand sterling yesterday
originated in London. 1t was high time
that London did something TO restore the
balance. Any remedial move made by
Great Britain will have the strongest sup
port from financial interests here, which
see in a dsorganization of the exchange
rate a real obstacle TO our commercial
expansion.