Daily Kennebec journal. [microfilm reel] (Augusta, Me.) 1870-1975, 1919-12-23
Three Factors in
Decentralization
of Foreign Trade

VI i VI \AS1A IL oNAV-
New York. Dec e2-Three factors
in the Generalization of foreign ex-
change. ineligible to the average
man, rise above the complexities of
the present situation. according to
old timers in Wall street
These are: I)-Allied and other
nations of the world owe the United
States approximately $4,000. 900 900.
{2)-American manufacturers hesi-
tate. owing to peace treaty uncer-
tainty, to accept big advance foreign
orders
(3)-England's virtual suspension
of gold exports outside the British
colonies is repulsing American trade.
Just why the British pound ster-
ling. normally worth s4.s665 in
American gold. should have declined
so much since the war ended, and
what it all means is an obscure
question" said New York financial
expert. THE present situation. Sir
George Paish's apprehensions not
withstanding. is by no means hope
less. Prophecies of a breakdown of
credit are not well founded.
America. the storehouse of the
world and now the worlds banker, is
in the same position England was in
after the Napoleonic and American
Civil wars. She bought the cheap
securities of impoverished nations in
a most prodigious manner and there
by laid the foundation for her future
wealth. We must do likewise and do
it within the next two or three years
by which time these abnormal condi-
tons will have passed.
With pound sterling 25 per cent or
more below par England can sell to
the United States at a great ad-
vantage. We can sell American
goods abroad only at great disad-
vantage because We must add the alb
normal rate of exchange to the goods
to get into foreign markets.
Premier Lloyd George recently de-
clared, when sterling was selling at
a discount of Is percent, that the dis
count really represented a protective
tariff Of Is percent on goods manu-
featured in England. Certainly it is
helping to keep American goods out
of that country.
The only remedy for this condi-
ton is for the United States to buy
foreign securities and extend long
time credit for merchandise. We are
in strong economic position. The
nations of Europe must have our cot :
ton and wheat and, since they are so
heavily indebted to us and we must
pYtan6 Thorn -
put them on their feet what is the
difference whether we buy their bonds
or send them our merchandise?
Everyone in Wall street knows
that if the Peace Treaty had been
signed in Washington an Interria-
tional Exchange Committee would
have been organized long before now
to stabilize exchange and bring about
other necessary readjustments Never
during the darkest days of the war,
when the Germans were almost at
Paris. did British and French ex-
change go to where it is now. The
British, during the war. by a system
of credits with the United States, had
sterling 'pegged to S4.52.
Tile tension over and gold exports
curtailed there was nothing to keep it
that close to parity. Indeed, unless
the United States loosens it's purse
string there are London financial ex-
perts who say the pound sterling will
drop as low as $3.50. That would
be Il calamity. 1t would be a two
edged sword injuring both England
and the United States.
Europe is like man on the verge
of death due to starvation. When
you find such an unfortunate you
feed him gradually until the stomach
becomes accustomed to digesting
food. Now our aim has been all along
to stuff Europe with all kinds of
American products. We have piled
up a trade balance, according to for
mer Secretary Of Commerce Redfield,
$4,000, 000,0 a year. Eu-
ropes financial system, like the
human stomach, has been I'M
able to assimilate it. Consequently,
We thus contribute to the demora
lization of foreign exchange and, in
by imitation help to lower
the purchasing power of our own
dollar.
when you consider. as Mr.. Red
field points out, that s4,000,0O0, 900
represents American dollars at par
and must be paid by those who owe it
in deprecated currencies, making it
the equivalent Of $4,000 900, the
result cannot be healthful to future
American trade and commerce. For
eign buyers are going into more fav-
orable markets."