The sun. [volume] (New York [N.Y.]) 1916-1920, 1919-09-08

GER
tihcates These increased by un amount
rof y1,066,127,000. or from ST. 6.7s5, 900
10 ts,l11,s12.000, an increase OF 1913 per
cent. 1t thus appears that the increase
OF deposits noted above Is to a consider
able extent to be regarded AZ a pure
credit expansion not called for by in
creased Industrial activity, but occa-
stoned by the use OF the banks credit
Tor Government financing. II shows once
more how much care and discrimination
must be used In interpreting increases
in bank deposits and bank resources
In times like the presen. and the recent
past, when conditions In the financial
field have been so abnormal.
Bank Credits in Deposits.
The native idea that a bank deposit
normally originates by the banks Gus
toner making a deposit of cash in the
bank does not reveal the substance In
countries like the United States, with
highly developed systems of bank credit
ane its utilization through the form of
the deposit account
The adverse trade balance COM
claimed of in England is most manifest
IN her relations with the United States.
On our side 1t has given rise to a situa-
ton which Is conventionally described as
favorable balance of trade because OF
the large excess Of goods exported above
those imported, leaving a resulting bal
ance of Indebtedness to be met. Looking
at the matter from the point of view of
the ordinary American consumer, how
ever, the effect OF such a favorable bal
ance of trade is far from favorable for
him. Whatever economic and financial
justification there may be for the vast
quantities of merchandise the United
States has been. selling to Europe, pay
ment for which, looking at the transac-
ton from the point of view of the nation
as a whole, Is to be made some time In
the future when the economic and IMAM
cial circumstances of the importing ma
tions of Europe are more satisfactory,
the immediate present effect of 1t in
many lines of industry is to curtail the
supplies available for the American con-
sumner and thereby to become factor
OF considerable Importance in our price
level.
ITO the extent that the American con-
sumner or a sufficient percentage OF
American consumers do not voluntarily
reduce consumption by amounts SUM-
cient to release for the use of the Eu-
ropean consumer the great quantities OF
goods which are being sent overseas,
there results in the American market
competition between the European de-
inevitable effect of which Is to drive up
prices and to induce the speculation
which rising prices usually occasion.
"'Buying in competition with export
demand undoubtedly has been major
cause of rising prices in the postwar
period in the United States. For the
fiscal year ending June 80, 1919, the
exports from the United states amount
ed to s7,225, 100000 and imports
amounted to $3,0s5, 100000, leaving
therefore an excess of exports amounting
to S4,12s, 200. 900. as against s2,s74,00O,-
600 for the rscal year 1918 and 1880
100000 for the fiscal wear 1917. 1t is
noteworthy not only that the figures Of
our exports and our net exports for the
year 1919 are the highest ever attained
but also that the volume of our exports
showed with little interruption an In
crease through the fiscal year, attaining
its highest point In June, the last month
of the fiscal year. when the total ex-
ports amounted to $91S.3o0.000.
Production Must BE Increased.
.sWhether our export trade will keep
I'm anything like the 1919 volume during
the current fiscal year Gully, the first
month of the year, shows falling OIL
of exports by s34s.169.000) seems
doubtful, but 1t seems highly probable
that Il will maintain a volume so far
IN excess of the normal ratio of our
exports to total production in pre-war
days that it will be factor of moment
in the domestic price situation and in
living costs.
AS long as circumstances make II
necessary OF advisable for the United
States to sell large volume of mer-
chandise to Europe on credit. there must
be shortages Of supply in the domestic
market unless industry is kept in a
state of high activity and all hands are
at work to increase output Unless this
is done resulting shortages will mean
reduced consumption to be met by vol
untary saving on the part of the con-
sumers, or compulsory saving through
the process OF high or even perhaps
rising prices"
The work and save" remedy then
was outlined.
OF the delicate and dangerous foreign
exchange situation the statement of the
board remarks:
at is too frequently assumed by those
complaining of the fall of foreign ex-
changes that trade on the scale of our
recent exports is a thing desirable in
itself and to be kept up by keeping UP
the value of foreign currencies in the
American market. But when the export
trade is considered In connection with
the domestic trade IL becomes clear as
already pointed out, that the source of
much of the difficulty presented by the
situation is in the competition of the ex-
port demand and the home demand.
att should be understood that the de-
cline in exchange operates as a correc-
tive to the situation which has brought
about the decline by checking exports
and stimulating imports. Viewed. there
fore, purely from our own domestic
standpoint, the falling exchange rates
are beginning already to relieve the pres
ent abnormal and difficult situation. The
large volume of exports during the past
few months has been rendered possible
by advances from the United States
Treasury to the Governments associated
with us In the war. These advances
have amounted. from the date of the
armistice to August 81. to $2,177, 096,- |
212.
There is some danger also that the
present abnormal situation may undergo
more violent change In the future, F!
when the European countries shall have
stocked up on commodities and our do
nestle consumers have gratlfied the
mood OF reaction from war economy, and
we may then experience an abrupt fall
ing of in exports SO great as to embar-
rass some of our industries which antici- |
pated their natural growth under the in
tenslfied stimulus of war conditions |
Such a condition can be averted through
timely action by the countries involved,
lob. CHI 40