The Caldwell tribune. [volume] (Caldwell, Idaho Territory [Idaho]) 1883-1928, 1915-06-25

New low RECORDS In the price of eX-
change on London this week empha-
sizes the magnitude of the problems
now confronting international bank
ers on both sides OF the ocean. With
sterling exchange at 476A for de-
mand bills, the lowest point in gen.
Grafton, and with a continuous influx
from Ottowa of gold that is not need
ed, reports have been current of an
effort to steady this important market
by the establishment of formal Gre
dit for Great Britain and France in
this country. Foreign exchange. the
same as any other commodity, must
obey the memorable law of supply and
demand, and should American exports
continue on the present basis with no
corresponding imports, it would seem
a natural inference that rates for ster-
ling exchange will seek a still lower
level.
Briefly, the situation may be sum-
married as follows: due to the chang
ed conditions ushered in by the war
in Europe, the nations at war are I'M
able to ship to us the many commodi-
ties heretofore consumed for Ameri-
can goods, especially food, cotton and
war materials has enormously in
creased. When American and Eu-
rope are each sending their special
products to the other they build UP
system of credits which provides for
mutual payment without the actual
transfer of money, except as may be
necessary to settle an existing bal
ance. But when the nations on one
side suddenly cease their part of the
business, and increasingly demand the
commodities of the other, they must
either pay for the goods they receive
in cash (gold) or establish credit for
the purpose. The fact that American
merchants arc unable to import for
eign goods means that they are not
indebted to foreign merchants and
hence are not in need of foreign ex-
change with which to settle foreign
obligations. Absence of this demand
is reflected in the low quotations for
sterling, which conditions we now
have to deal with.
Early in the war the Bank of Eng
land established an agency in Ottawa,
where gold was received both from
the United States and Canada in set
Element of obligations that existed
prior to the outbreak of hostilties.
With the general change in the trade
situation most of this gold has been
returned, and since the first Of the
year New York has received $75,665,-
10000 of this metal, in addition to
$4,000, 10000 from other sources.
Were the supply of loanable funds
in the United States at present at
low figure, this influx of gold would
be welcome. But the situation is ex-
actly reversed, and with an excess
supply of money in all the principal
financial centers the gold imports may
now be considered as a drug on the
market. The New York City Clear
ing House banks alone, according to
last weeks official statement, are car
rying reserve of $l95, $50, 10000 in
excess of the legal requirements, an
amount out of all proportion to form
er records, and comparing with $47,-
l87 $50 in the same week last year
1t is expected that in order to solve
this problem of foreign. exchange,
special terms will be offered to Ameri-
can investors who may desire to sub
scribe to the new $1,000,000,000 Bri-
fish loan, the proceeds of which will
be largely devoted to the purchase of
supplies in this country. Such being
the case, new credit will be auto
maticallY created, against which the
American commodities may be sup
piled to the English markets. When
Mr.. J. P. Morgan went to London in