Atlanta semi-weekly journal. (Atlanta, Ga.) 1898-1920, 1919-12-16
WORLD TRADE, SAYS
BANKER, should CD
BACK To GOLD BASIS
Restoration of Approximate
Equilibrium of Imports and
Exports Between u. S, and
Europe Also Held Essential

'LuIODC HIOO lClQ EOOCIItIOI
NEW YORK, Dec. 13.-Restoration
of an approximate equilibrium OF
imports and exports between the
United States and Europe and return
Of European currencies to a gold
basis ares needed before foreign ex-
change will return to a normal basis,
according to James S. Alexander,
president Of the National Bank of
Commerce, and an authority on for
eign trade.
Mr.. Alexander, officer and director
of many important banking institu-
tions who served as chairman Of the
| committee on credit and finance at
the International Trade Conference
at Atlantic City, and who is chair
! man of the executive committee OF
the national committee on European
finance, was asked today by the AS
ISOLATED Press to reduce to plain
terms the highly complicated inter-
| national business problem presented
by the present condition of foreign
exchange. He prepared a statement
in which he explained that foreign
exchange is a commodity, and the
present demoralized depreciation In
rates for sterling and other Eu-
ropean exchanges is a normal express
sion Of the law of supply and de-
mand. The statement follows:
If w
changes is primarily only reflec-
ton of deeper problems in relation
of exports and imports between
America and Europe. The problem
may be simply stated as follows:
when exporters sell to foreign
buyers, they draw checks, drafts, ETC.,
on those foreign consignees or their
banks for the amounts due. These
bills are drawn in foreign money,
preponderantly pounds sterling-that
! is, On houses in London, long the
worlds International clearing house
Americans drawing these bills sell
| them in the foreign exchange market
for what they will bring, which, I'M.
! der normal conditions, fluctuates
within marrow limits of face value
| The total volume of such checks anG
! drafts coming into the foreign eX.
change market constitutes the sup.
ply of foreign exchange in exist.
ence at that time. The foreign ex
| change market consists Of foreign
| exchange houses whose function is
to buy exchange, say in New Yorl
On Londwon and send it there fol
collection, or the establishment OF
! balances.
Normally About Equal
Ordinarily. at the same time
Americans are selling goods to for.
I eigners, foreigners are selling goods
to Americans who therefore have re.
mittances to make abroad. They
therefore buy from the foreign ex.
change dealers drafts or checks
against the balances those dealers
have established abroad through the
| purchase of foreign exchange. Thus
while American exporters sell for.
| eign exchange, American importers
buy foreign exchange. The one
creates the supply; the other creates
| the demand.
NORMALLY this supply and demand
were about equal because the total
| volume of goods and services sold
| to Europe about equalled the total
volume of goods, and services bought
| from Europe. In pre-war times the
| difference in the two volumes fluct.
uated between narrow limits and the
excess one way or the other was
! settled by shipments of gold.
'"The foregoing states in general
terms what normally took place in
! the foreign exchange market, ignor.
ing many technical details. which
! however, do not alter the main
| thought.
Gold Kept Up Values
During Europe's war purchases
| from us before Americas entry in
| to the war, foreign exchange on 'Eu-
rope was kept from deprecia tfon to
| present levels by the great volume of
! sold she sent us in cash liquidation
! Of her adverse balance, until she
| sent about all the gold she could
! spare. At this point America en-
| tered the war and government cred
! it's were extended to our allies serv-
| ing to keep a large volume Of for
eign exchange for Europe's pur-
chases out of the market. Drafts and
! checks which would otherwise have
come into the market during this
period were, in effect. funded In a
! consolidated long time credit. This
postponed the deprecia ton. The ex-
tension of government credit how
ever, has ceased, and there is moth
ing new to prevent foreign exchange
| from coming into the market in
greater supply than there is demand
for, due to the cont;n"irg excess
of Eu' ope's purchases from us over
| her sales to us.
THE question as to what will
ho
swered on general principles with
out any attempt to prophesy. For
eign exchange cannot come back 70
parity until the restoration of the
gold standard in Europe corrects
the depreciation of European cur
rencies, and until the restoration OF
approximate equilibrium, between
our exports and our imports in re-
spect to Europe again makes the
demand for foreign exchange ap-
| OrOxin11ta the SI1On1u