New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1916-09-13
EVOLUTION OF
DOLLAR CREDIT
New York May Discount
Bills Drawn by England
on London Banks.
Bv SRININAS L. WAGEL.

The various changes that have oc-
Cured since the outbreak of the war IN
connection with finance and credit have
all been sudden and violent, so much
so that one is now prepared for any
thing. But the recent arrangement
made in England with regard TO Ar
gentine bills involves fundamentals,
and hence deserves careful study.
Owing to the war. the British govern
mont has been purchasing large guam
titles OF food products. principally
wheat. meat and sugar direct from the
different countries. instead OF buying
from the regular importers who found
the regular means Of financing unayail-
able and hence had TO fall back on the
government. The Argentine Republic
always sold wheat, maize and -four to
Great Britain. The normal annual TAX
inps Of wheat and maize were to the
value Of el6,OOO.OO0 During the first
six months of this year, however, Ar
gentine sold 100000 worth.
How to Pay.
Financing these purchases grew TO be
a serious problem, as highlands exports
to that country love much smaller
ratio than normal. In spite of the fact
that Argentina owed more than E1O,-
O0O .OOO Of her total public debt of slO9,-
eco 900 20 Great Britain, her traders
were unwilling, or more probably un-
able. to grant credit. Direct Treasury
bills. with whi,h England paid Holland
for sugar purchases and Japan for am
munition sunlied to Russia were not
wanted i'm Argentina as the country
had no means Of raising internal loans
or cashinc them in any other manner.
As England had to have the commodl-
ties the British government has ar
RANGED thu. purchases abroad should
be financed b. bills Of not more than
six months currency drawn on London
banks and banking houses. According
to recent Treasury minute, the total
drawn for meat for any one month IS
not TO exceed e2,5OO0OO, and the total
outstanding at any time is not to eX-
coed cl0,0OO,00O for meat and i5,OOO,OOO
for sugar. No limit has, however, been
fixed for other food products. The
minute states further that no bills
drawn under this arrangement are TO
mature later than October 81. 1917.
\ toyci Plan.
This plan is thoroughly novel and
upsets all established precedents. Hith-
erto il was customary for an importer
TO draw bills on London banks and
banking houses. One Of the results Of
the war has been the breaking down
Of this practice. The importers ball
in the past was set off by the export
ers paper. The acceptors of bills had
only to pick oGt the papers that can
celled each other. Owing to the con-
ditions created by the war, the clear
ing house arrangement that had eX-
listed for decades was put out OF order.
It is needless 30 90 into detail into the
difficulties that arose out OF the vast
mass Of acceptance papers that were
suddenly thrown on the London mar
ket the moment war was declared
some of which represented sums due
from Germany and Austria. and other
sums due from Neutral countries, which
had to meet the situation by pro-
claiming a moratorium; also we know
how the Britioh Treasury helped 10
reduce the volume of unredeemed pa
per with the banks. With the I'M
balanced trade Of the last two years
and the credit mechanism out of gear,
the government had to assume the role
of the trader.