Clearwater Republican. [volume] (Orofino, Idaho) 1912-1922, 1915-08-20
AMERICAN DOLLAR
IS FINANCIAL BASIS
ENGLISH POUND DISPLACED AS
ACKNOWLEDGEMENTS TO
PROVIDE LOAN.
DEBT TO U. S. IS GROWING
Warning Europe Must Establish $500,
100000 Credit Here to Restore the
Money Rates-Foreigners May
Sell American Securities.

New York, Aug. 1.-THE American
terday with an iron grip. Pounds ster
ling, francs, lires, virtually all foreign
exchange, went down to new depths
in a 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-
day in pounds sterling was AZ per
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 $4.64; 602 francs
equaled a dollar, and a dollar pur-
chased 6.4S Tires. These were the
quotations while rates were at the
lowest ebb during the early afternoon.
! In the last hour of the business day
t Morgan for the first time since the
I attack ON his life six weeks ago and
an informal conference of bankers to
: consider the exchange situation, sent
5 rates upward.
Sterling closed at 4.67R, one-half
: point higher than it opened and one
point and half under Saturday S
. close, which established a new low
record at the time. Francs gained
three points over the low record, sell
y ing at 5.99 at the close and Tires re-
! bounded a point, closing at CAT.
9 What to do to remedy the situation
l. engaged the attention of bankers with
a international connections at their in
i formal conference late yesterday. II
/ was decided to do nothing, chiefly be
cause the remedy lay across the ocear
y with the foreign buyers.
q 1t was generally believed that the
< abnormal situation would not be per
e mitted to continue long. The obvious
t. remedy seemed to be to sell American
e securities held abroad, and when this
II contingency was studied the situs tio1
= seemed to be pregnant with unique
D, possibilities.
great many millions of American
)" securities, payable, of course, in dol
e lars when due, are held abroad, chief
ly high-class railroad bonds and pre-
10 ferred stocks of a selected list o
III American industrials. Should these sc
curities be sold at the present ex
change rates in foreign markets the
would fetch far more than the purchas
ers paid for them, due entirely to tn
n depreciation of exchange.
Thus $1,000 American bond sold il
=. Paris at par would, on account of tn
prevailing exchange rate, bring al
-. !, proximately 5000 francs. When pull
n chased at par year ago it cost tn
=. purchaser approximately $3.50 francs
10 The net profit would be about 95
ke francs, or about 10 per cent, the PEI
ed centage of depression in francs /
as American exchange markets. In LoI
nv 10, H., he, nv, OF II
Az per cent and In Rome the prof
~ would be approximately rs per cent.
With these prospective profits as a
inducement, it was believed that hol'
80 ers abroad would be willing to Sc
~ and that foreign buyers of America
"a goods would have little difficulty
~ procuring a large amount of America
20 securities abroad as collateral for
temporary loan in this country, whic
"a would tend to correct exchange rate
ca The establishment here of big TO
In eign credit, estimated conservative
mt at S500,000,000, was thought to
co. absolutely necessary If exchange rate
ur were to be restored to anything liz
ca normal figures.
he Measured in dollars and cents,
or was learned that the amount of the:
ne war contracts, on which full or mean
of all payments would be due on or b
srs fore October 1 next, approximate $40,
ird 100000 to $5O0,OO00O0. This is in a
cordance with the huge total of mo-
G. than 100000 owed by Europe to Il
70, United States at the close of the fisc
w. year June 4. 1t was also learned fro
an authoritative source that the pr
spective profits on some of these co
tracts had been greatly exaggerate
de- that only normal profits would accrr
be in big majority of cases and that
the some instances there might be no prt
his it at all.
nes
35- The worlds chamDiOns are only