Bonners Ferry herald. [volume] (Bonners Ferry, Idaho) 1904-current, 1915-08-20
ENGLISH POUND DISPLACED AS
ACKNOWLEDGEMENTS TO
PROVIDE LOAN.
DEBT TO U. S. IS GROWING
100000 Credit Here to Restore the
Money Rates-Foreigners May
Sell American Securities.

terday with an iron grip. Pounds ster
ling, francs, lires, virtually all foreign
exchange, went down to new depths
in torrent of bills that poured into
the exchange markets from American
manufacturers seeking pay for the big
war contracts of munitions and other
supplies purchased here by the war
ring nations of Europe.
Coincident with the startling decline
in exchange rates came the assertion |
from an unimpeachable source that
every contract made by the American |
manufacturers for supplies sent abroad |
called for payment in American dol |
lars and not English pounds sterling, |
which have heretofore been the stand |
ard of finance the world over. The |
immense losses, therefore, due to the |
decline in foreign exchange rates, will |
be borne to the last penny by the for
eign buyers and will not be sustained |
by the American Manufacturers sit |
uation exactly the opposite of what
had heretofore been the popular belief.
The maximum depreciation yester-
cent below normal; in francs, 10 per
cent below normal; in Italian Tires, 25
per cent. In the money markets the
pound sold for only s4.64; 6.02 francs
equaled a dollar, and a dollar pur-
chased GAS lires. These were the
quotations while rates were at the
lowest ebb during the early afternoon.
In the last hour of the business day
! the presence in Wall street of ]. p.
Morgan for the first time since the
attack on his life six weeks ago and
an informal conference of bankers to
, consider the exchange situation, sent
} rates upward.
Sterling closed at 4.67h, one-half
point higher than it opened and one
point and a half under Saturdays
close, which established a new low
record at the time. Francs gained
I three points over the low record, sell
4 ing at 500 at the close and Tires re-
{ bounded a point, closing at CAT.
! What to do to remedy the situation
5 engaged the attention of bankers with
D international connections at their in
e formal conference late yesterday. 1t
e was decided to do nothing, chiefly be-
cause the remedy lay across the ocean
with the foreign buyers.
i 1t was generally believed that the
o abnormal situation would not be per-
e mitted to continue long. The obvious
!, remedy seemed to be to sell American
= securities held abroad, and when this
. contingency was studied the situation
e seemed to be pregnant with unique
: possibilities.
A great many millions of American
n securities, payable, of course, in dol
a lars when due, are held abroad, chief
J. ly high-class railroad bonds and pre-
IS ferred stocks of a selected list of
l. American industrials Should these Sc.
y curties be sold at the present ex-
II change rates in foreign markets they
n would fetch far more than the purchas
ers paid for them, due entirely to the
p depreciation of exchange.
e Thus a $1,000 American bond sold in
Is Paris at par would, on account of the
:. prevailing exchange rate, bring ap
y proximately 5000 francs. When pur
n purchaser approximately $3.50 francs
IS The net profit would be about 95(
lie francs, or about 10 per cent, the per
u centage of depression in francs il
lie American exchange markets. In Lon
e, don the profit would be approximately
r Az per cent and in Rome the prof
sr would be approximately 25 per cent.
a. With these prospective profits as al
inducement, it was believed that hold
ers abroad would be willing to sci
and that foreign buyers of American
goods would have little difficulty il
ss procuring a large amount of American
~ securities abroad as collateral for
~ temporary loan in this country, whicl
~ would tend to correct exchange rates
D. The establishment here of a big for
ds eign credit, estimated conservative.
n at s500,O0e,000, was thought to b.
IA absolutely necessary if exchange rate
we're to be restored to anything lik
ed normal figures.
nu Measured in dollars and cents, j
= was learned that the amount of thes
- war contracts, on which full or nearl
70 all payments would be due on or be
M fore October / next, approximate $500
100000 to s5OO,OO0.OO0. This is in az
- cordance with the huge total Of NOR
he than 100000 owed by Europe to tn
so United States at the close of the fisca
lst year June 4. 1t was also learned froT
&C. an authoritative source that the pre-
spective profits on some of these col
tracts had been greatly exaggerated
that only normal profits would accru
ISIS in big majority Of cases and that
err some instances there might be no pro
IN. it at all.