The Grangeville globe. [volume] (Grangeville, Idaho) 1907-1922, 1915-04-08
UNITED STATES BECOMING
CREDITOR NATION,

The war has turned foreign com
merce and international finance topsy-
turvy. says the Oregonian. 1t has
converted the United States from a
debtor to a creditor nation as to
liquid capital, represented by imports
and exports, freight and insurance, in
terest and dividends on Investments
II Is gradually changing us into a
creditor nation as to fixed capital,
represented by Investments. as Europe
sells its American securities to the
United States and borrows money in
this country.
That Europe owes the United States
more than the United States owes
Europe In liquid capital Is indicated
by the rate of exchange The par
exchange on London IL $4.86H for the
English pound. At that point ii is
not profitable to ship gold In either
direction. When the rate falls to
s4S4 II Is cheaper to ship gold from
England than to pay debts In bills OF
exchange. When the rate rises to
$4S9, the United States can better
ship gold than pay In bills. Last
August our debts to London were so
great and Londons demand for gold
was so imperative that the rate rose
to SO and $3.50. We shipped gold to
London to pay the debts of New York
City and We shipped more gold to
Ottawa for the credit of the Bank of
England In settlement OF our general
adverse balance. Those operations
reduced rates OF exchange to some
where near par
In recent months our vast favora-
BILE balance of trade has put Europe
so deeply In our debt that exchange
fell on March 20 to SAT-, and gold
has been flowing inward, imports Of
gold from January IL to March rs
having totaled sss. 100. 900. Normally.
gold would now flow to Europe, for
interest rates are now higher In that
continent than in this, and the ten
dency of money Is to flow where in
t6rest Is highest. But war finance has
suspended this rule. The fixed capital
of belligerent countries has been con-
verted into liquid capital-that Is.
money-by the floating OF war loans
and the issue of notes. To cover these
notes they hold onto every ounce Of
gold possible. Europe has a flood Of
paper money in circulation, while the
United States has a surplus of gold,
which no other nation has the power
to draw from us, because no other
nation can sell us an excess of goods
over what 1t buys and then enforce
settlement In gold. Europe buys more
goods from us than 1t SELLS but is
unwilling to pay in gold. 1t there
fore establishes credits in this country
by borrowing Of our banks.
The artificial conditions created by
the war have thus checked the nor
NAL flow OF gold which would follow
the strong turn Of the commerce tide
in our favor An adjustment may be
reached when a balance Is struck be-
tween the price of European national
securities and that of American secur-
tiles held In Europe; also between our
valuation OF our securities and the
prices Of our commodities. When that
balance Is struck. Europe will pay for
our goods with Its holdings of our
securities and the United States will
be In the happy position of farmer
who pays off a mortgage by the sale
OF his crops. That process and the
borrowing In the United States OF
money with which to pay for American
exports will complete the change of
the United States from a debtor to a
creditor nation as to fixed as well as
liquid capital