New-York tribune., 1919-03-21
Wealth h-Markets-Inv estments

not De anected py the drop IN sterling
exchange and that such transactions
will be arranged between this country
and Great Britain at fixed rate of
exchange. What that rate will be was
not stated. The banker who made this
statement was of the opinion that the
step taken by the British government
is an effort to .curtail the importation
of unnecessary commodities in Eng
land from this country, the idea being
that low rate for the pourfH sterling
as quoted in American currency would
operate in the manner of a/tariff and
check Importation of goods by private
English interests. at is step toward
restoring the old fashioned methods in
the foreign exchange market" said this
banker.
1t was pointed out in Wall Street
that a fall in sterling exchange rates,
II allowed to &C, far, suggested many
interesting and highly important pos
sibiities. For one thing, it might
mean resumption of selling of Brit
ish owned securities in this market, as
the lower sterling rates fall the
more advantageous it would be to Brit
ish investors, as the dollars obtained
from such liquidation would buy more
English pounds than would be the case
were sterling to move in the other di-
rection. Bankers said also that res
toration of normal sterling exchange
market with government control elm
mated might result in the restoration
of free movement of gold. 1t was
not believed, however that much gold
would be shipped here in that event, as
England has little of the metal to
spare.
May Stimulate Dollar Exchange
A member of an important interna-
tionai banking house was of the opinion
that freeing of the sterling market of
all government restrictions, thereby dis
turbing the equilibrium of sterling
bills for some time to come, probably
would tend to stimulate the use of
dollar exchange in international trans
actions as the American dollar is now
the most stable of all of the national
currencies.
In specializing as to the reason for
the unexpected action Of the British
government in withdrawing it's support
from the sterling market, bankers were
of the opinion that this move is closely
bound up with the fact that credit
advances to the Allied governments by
the United States Treasury. have prac-
tically ceased. 1t is probable, accord
ing to bankers, that private credit ar
rangements will be made in the future
thus taking such financing of purchases
in this market out of the hands of the
governments and putting it into the
hands of the banks.
1t has been reported in New York
for some time past that steps might be
taken at any time to remove all re-
strictions from the sterling exchange
market, but few persons expected it
would be done until after the peace
treaties had been signed in Paris and
the Allied governments were in a po-
sition to proceed actively with the
banker yesterday described the step
taken by the British government as
"amateurish" and unnecessary at this
time.
Effect Striking
The immediate effect of the with
drawal of artificial support from ster-
ling on the financial markets yester-
day was quite striking. The stock
market, left groping in the dark as to
what the step would mean for bust
ness here, broke sharply, prices of
representative stocks falling 1 to s
points on fairly active trading. Busi-
ness in the foreign exchange market
dried up and the market became only
a nominal affair. Quotations fol-
French exchange declined sharply for
a time, while Italian exchange also
moved downward as a result of the in
innate connection between these cx-
changes and sterling.
1t is believed here that the degree to
which sterling will be allowed to de-
cline will be limited and that if the
market shows signs of demo moralization
the British government is prepared to
step in again with artificial means for
stabilizing rates