The Birmingham age-herald., 1915-02-25

tivity. When the new situation has been mastered and when there is com plete restoration of confidence. 1t is inevitable that domestic business be found rapidly gaining the pre-eminent | position which has been predicted by some of the ablest men of affairs in the United States
 IT many bankers confess their inabil- lty to understand any but the most general features of the science of for eign exchange there is no wonder that the great body Of business men of the United States do not understand that science. It is a department of finance Which requires more than any other the services of very competent and long trained experts But there Is one thing which business men do under stand and that is that when the quo tations for foreign exchange fluctuate Violently and are very low that means serious embarrassment, if this condition IS continued, to American business men. Our merchants. manufacturers and farmers have been selling ommodities in enormous quantities to beligerent and neutral nations. They have drawn drafts against these sales. If they find that they can with difficulty sell the drafts, or if they are compelled to ac- cept very low rate for them, then they realize that they are to con siderable extent losers. Their reason able profits are cut into
 This is an experience which business men have been compelled to face for nearly two weeks. It is strangely in con trast With the experience of August and September of last year when foreign ex- change was quoted at a prohibitive fig ure There was very little of it. Our merchants and manufacturers were com pelied to take advantage of the volun- tary underwriting syndicate of bankers which had subscribed sloo.Oo00oo in gold With intent to utilize it to enable Amer counts in London and on the continent of Europe
 The Alternatives
 There seem to be two reasons for the unpi ecedented fickeness of the movement Of foreign exchange well as for the very low price at which it is quoted. One or these reasons any business man should understand, for it is now a matter of common knowledge that we are selling to other parts of the world commodities vastly in excess of the commodities which we are importing. President Farrell of tho United States Steel corporation said the other day that this excess. If contin- ued through the calendar year, would create visible trade balance in favor of the United States in excess of S1, ,0o0, ,0o0, ,0o0 The Secretary of Commerce. MT Redfeld, predicts a trade balance of $1,50O 900 GOO. In other words the normal ideal con dition of trade does not now exist. Or dlnar1ly, one nation expects to pay for the commodities which it buys of another nation by the sale of it's own commodities to that nation. In fact it is a great in ternational barter the balances being paid in golc as they are in the clearing house. or, if it be preferred, in credit.
 But it is now apparent that no one of the nations to which we are now selling commodities is in position to make pay ments with its own commodities. There- fore, gold in enormous ainounts must be sent or American securities must be sold or else the nations must establish great credit facilities in the United States.
 The latter process is undoubtedly the one which will be chosen and the ndica- tions today very strong that American banking institutions are preparing to fla cilitate the creations of credits of that kind and in enormous amounts. This may be done through the sale of other nations in the United States of notes which have d shorr time to run, and it means, for the time being at least, dollar exchange.
 Another reason for the extraordinary and complicated situation is undoubtedly the apprehension that the attempt of Ger many to establish a complete blockade around the British empire may be so far successful as greatly to interfere with the delivery of our commodities to Great Britain to France.
 In the financial district while there Is concern about the situation. it is ob- served that the experience of last sum- mer and early fall. which taught the