The Washington herald., 1920-02-10
Why Foreign Exchange
Rates Have Shown
Huge Declines in Value
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ginians were less ready to accept
dollars. until for 100 Alexandrines
or their equivalent in goods. the
buyers were forced to give $1,000.
And all the time. in their own mar
kets. the dollar was almost as hard
to get in wages or in business as
before. What was the result?
The District people were unable
to buy imported goods because of
their high price in their own cur
rency and importations rapidly
ceased. The Virginia producer
found his export trade falling of;
he was left with a surplus of agri-
cultural produce on his hands. to
dispose of which he reduced prices
to the home consumer. and, he suf-
fered from a lack of imported man
ufactured articles, to supply which
he. turned his attention to manufac-
turing within his own borders.
For a time these conditions caused
not merely unrest but actual distress.
The people Of the District like those
of England and France, could not
cAisI Will lIupoTt tIdttc tnuS
shut Off. For theirs was a manufac-
raise enough food within their bounds
to feed their people. But IL they
could, by intensive farming, meet
even narrowly this need. their peo-
pie would have no money whcrewith
to pay for 1t. For their wages came
from their factories. and their fac
tories without raw materials could
Lot be operated.
The people of Virginia were In less
adverse straits. although not wholly
without loss for no world calamity
is limited in its hurtful effects to one
nation alone. They had food in
plenty. They were creditor people
and had no interest to pay abroad
But on the other hand those who had
to rely largely upon foreign markets
for the sale of their cotton, wheat
and food products found that market
abruptly closed to them. But others
found advantage in the lessening Of
food prices, owing to the cessation of
foreign buying. Thrift was en-
couraged by the disappearance of
foreign luxuries from the markets.
Manufactures were stimulated by the
reduction Of prices Of raw materials
of domestic production. And as the
volume of manufacturing increased
the prices of these materials rose to
correspond to the, demand.
In the end. therefore. the effect
upon these two communities of
what the newspapers called the
"break down of exchange" was to
enforce upon the debtor nation i'm
mediate and vigorous production of
commodities needed by foreign ma
tions. and upon the creditor nation
thrift. concentration upon the man
ufacture of necessities rather than
luxuries. and the intensive cultiva-
tion of their home market. Time
brought international trade back to
normal. with both peoples once
again fitted to engage in it for mu-
tual profit.
This suppositious instance makes
clear the essentials of the problems
raised by the tremendous fall of the
pound sterling and the French
franc in tie American money mar
ket today. OF course in the actual
situation are a number of collateral
problems with which we have not
encumbered our attempt to reduce
the main proposition to its simplest
terms The United States is not
wholly an agricultural nation, and
it's exports of manufactured goods
will for a time pc seriously affected
by the fall in exchange. Our market
Cor, raw material will be seriously
curtaiied-England has already
stopped the purchase of cotton
and that interest is too great to be
adversely affected without a serious
injury to the prosperity of the
nation.
In the end. however, nothing
but good = national and interna-
tional-can come out of the present
situation. 1t was as inevitable as
penury after riotous extravagance,
as. physical and moral revulsion af-
ter a debauch. 1t cannot be cured
by the drunkard's device of "a hair
of the dog The evil is due to the
prolonged interruption of produc-
tion and the overstraining Of credit.
It can be cured only by a return
to production and economy. Only
industry and thrift will pull the
world out Of the pit IL digged for
itself, and the increasing difficulty
of exchanges Is today the phenome-
non most likely to impress that fact
on the British. French and American