New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1920-01-04
BY Theodore M. Knappen

WASHINGTON. Jan. Show do they
do it7 is question that financial stu
dents are asking in view Of the fact
that the world bought about $S,7o0, 0OO,-
ooO worth more from tho United States
in 1919 than it sold to It. It didn't
pay Tor any part OF it in gold, for the
gold exports exceeded tho gold imports
by near $so0,o00,000. Part Of it repre-
sented realization on loans made to the
Allies by the United States, part of it
was represented in Red Cross expendi-
lures, part in various forms Of relief
work, which were either clear gifts or
else on longtime credits, but very
large part Of It, probably so per cent,
represents foreign purchases Of Ameri-
can products on some sort of private
credit extension.
Sir George Paish has come from Eng
land to ask for Europe staggering"
credit-and yet, according to the sta
tistics of exports and imports, it ap-
pears specifically that it is actually
getting it already, in large if not stag
gering volume.
AS the Optimists SEQ II
The situation is viewed pessimisti-
cally in some quarters and optimisti-
cally in others. The fact that, in spite
Of the adverse exchange rate, the
United States continues to increase it's
exports, is taken by the optimists to
nean that private agencies arc solving
the problem Of financing Europe; that
while the financial pundits have been
seeking some way to extend credits to
Europe, individual. bankers and bust
ness men have been actually doing IL
In the ordinary course Of business.
Certainly American traders are not
giving away billions Of dollars worth
of goods. Equally certain. they are not
getting goods in return for gold so
they must be getting debts from their
buyers. 1t seems to be equally certain
that the debts must be long time debts.
If so, foreign buyers are overcoming
the handicap of adverse exchange, for
it Is only the cash or short-time pur-
chaser who has to get together cheap
high-priced dollars. If this be the case
the magnitude of foreign purchases is
easily explained, and just because they
have been so extensive Of late is taken
to be an excellent indication for the
future.
The foreigners have been rushing, &C.
cording to this theory, to get from us
on long time credit the machinery and
materials they need for production.
With these they will get to work again
and resume production and expectation
goods from US this year, they will need
less next year. We will buy more from
them and they will buy less from us,
and the Favorable balance of trade"
will become much less. Thus, it would
appear, individual traders are settling
the problem of continued international
trade with the exchange market so alb
normal.
The Pessimistic View
The pessimistic view is that the ire
mendous. foreign purchases from us
last year are like tho purchases of
man who involves himself hopelessly
in debt and mortgages everything he
has to keep his household and personal
time that nothing but miracle can
save him, but being content to shut his
eyes to the ruinous future if he can
/ only keep going from day to day.
The same view holds that the Ameri-
can sellers have let the foreigners have
their goods with full knowledge and
understanding that the latter were
! plunging with the recklessness Of des-
peration,. and have charged two. or
taking a chance on benefting from
( exchange If the transaction covered a
short period Of liquidation, which it is
/ assumed had been the general rule. 1t
is further held that the American
vendors have taken all the chances that
they care to, and that presently Europe
will be able to get no more goods here
and yet is wocfully short of the raw
materials and instruments of produc-
ton without which it cannot put its
people to work.
The pessimists predict that when set
Element day comes there will be just
two ways out-either the European
| buyers will have practically to repudi-
ate their American obligations in part
or in whole, or some collective effort
must be made in the United States to
finance the debts that have been in
Cured and make possible further COM
Of settlement Is rapidly, approaching
and that when 1t comes the world will
be confronted with the collapse Of in
ternational trade, which, Of course,
means ruin for Europe and unparallel
| distress for the United States. 1t is
pointed out that Europe as whole
makes an essential part Of it's annual
production Of wealth by expanding
labor on imported materials which 1t
exports in finished form. It cannot
support it's present population on its
domestic production of materials. It's
wealth is In ita capacity for lahor-in
its labor supply-rather than In its
materials. Unless it imports on great
! scale 1t cannot produce, and SO canpot
export and turn Its surplus labor into
wealth.
Europc's Position
Europe might be regarded as fac
tory. 1t cannot send out finished goods
unless it tskes in raw goods as well as
some finished goods. There IL nothing
! in the factory Of itself to produce
wealth for its workers. Europe has no
| goods on hand--or not anywhere near
enough--to exchange for the raw ma
| teriais it must have to start its produc-
tive machinery going and keep 1t going
until it does begin to produce suf-
| ficient volume to exchange for. what 1t
must have. It has been buying des-
pcrately In the hope Of getting a start
| but has not bought enough--and what
| it has bought has been at :ruinous
| pricss--And 10 now at the end OF lts
While IL Is we'll known that certain
bankers believe that tho best way out
Of tho situation 70 for France, say
IL L