Oxford Democrat. [volume] (Paris, Me.) 1833-1933, 1920-02-17
AMONG THE FARMERS.
"sPEEp THE PLow."
Foreign Exchange and Butter.

of butter to this country from Denmark
= and Holland along with offerings from
Argentine, according to the prevailing
opinion in market circles. As the for
eign butter has had q bearish effect OF
/. American prices, the fact that depres
sion in foreign exchange is responsible,
I. makes the position of foreign exchsng,
rates OF unusual interest 10 dairymen
Even II the depressed foreign exchange
situation were not the cause of the offer
iugs OF foreign butter, IL would still
deserve the serions attention of the dairy
interests OF the United States as we'll Al
of all other live stock and agriculture
workers of this country. Depression In
foreign exchange, IL is already apparent
promises to affect the business of every
citizen Of the country.
Unfortunately, the subject of foreigr
exchange has been too long regarded as
so complicated as not to warrant the
attention Of the average business man.
However, the general position OF foreign
exchange markets Is not so complicated
as supposed, although innumersble fac
tors enter into the fluctuations In the
exchanges OF the different countries OF
the world.
Before one can understand why foreign
exchange depression is considered the
principal factor In the movement OF
foreign butter TO this country and why
IL may affect business 10 general, it Is
we'll to bear in mind that foreign e1-
change rates have involved the quota
tious or market values on the bills or
other instruments which are really orders
for the payment of given amounts OF
foreign money. Thus, German exchange
Involves the payment OF marks, the
standard of money in Germany. French
Exchange involves the payment of French
francs in France. Italian exchange in
wolves the payment Of Italian lire in
Italy. English exchange involves the
payment OF the English pound sterling
The foreign exchange market is there
fore really a market which determines
the value of foreign money in this coun
try.
Conservative financial observers have
recently been describing the foreign ex-
change market as demoralized. Their
description is not surprising. The Ger
man mark is more dem0rslized than any
foreign money in the United States.
Prior 10 the European war the German
mark had a normal value in the United
States of % s cents. At this writing the
German mark is quoted at only L 1-2
cents. This, of course, is a sensational
decline. The mark is still weak at its
present figure, the lowest in history.
The English pound sterling is quoted al
So 81, compared with the normal par of
81 81. The Italian lire is quoted at
about Is 70 to the dollar. The French
franc is quoted at II 65 to the dollar.
This means that the Italian lire is worth
only about fraction over Z cents in
American money whereas the normal
par is 1913 cents in American money.
In the case of the French franc, the pres
ent quotation means that 1t Ia worth only
little over s cents compared with the
normal parity of 1913 cents. The
Austrian crown has been quoted at less
than one half cent, compared with the
normal pre-wsr intrinsic value of 20.3
cents. The Danish kroner, normally
worth 20 cents In A mericsn money, has
been quoted around 20 cents. These are
new low record quotations in the history
of international finance. They repre-
sent deprecistions for European coun-
tries of fraction of one per cent to
1 more tnan 30 per cent.
Dairymen can best appreciate the
meaning of the sharp depreciation in
the value of the European money in this
country by making comparisons OF the
effect on the purchasing power of the
consumers of the countries affected.
Germany shows the most serious effect.
Suppose, for example, pound Of Danish
butter is worth 90 cents in American
money. That butter is offered to the
first bidder, as usual on normal markets.
The American buyer can obtain it for
80 cents. On the other hand, the Ger
man buyer who wants 1t must pay about
40 German marks on the basis of the
current exchange value of German cur
rency. Prior to the war, about two and
one-h half German marks were equal to
90 cents in American money. There is
vast difference between two and one
half marks and 40 marks. The French
importer could obtain a pound of butter
quoted in New York at 80 cents by pay
ing slightly more than three francs prior
to the European war. To-day, with the
French franc worth only about s cents,
the French buyer must pay seven and
one-half francs instead of little more
than three The Italian buyer is handi-
capped even more seriously than the
French importer. All other European
exchange conditions as affecting butter
might be cited with the same results,
the seriousness in the case of each ooun-
try depending on the extent of the depre-
citation in its currency here.
The relationship between the Danish
producer and the American market is
also interesting, as well as that between
the Holland and the Argentine and the
American producers. When Danish
dsiryman sells pound of butter in the
United States to-day for 60 cents, he
obtains practically three kroner. Prior
to the war, he obtained for the go cents
in American money only about two and
one-fourth kroner. This is because the
kroner is quoted at about 20 cents in
American money to-day, compared with
the normal par of 26.S cents before the
European war. The discount on Hol-
land exchange is only about per cent,
but this Is an incentive to sell here, for
it means per cent more in Holland
money for every dollar of credit In the
United States. Argentine finds 1t more
advantageous to sell here than in Europe
beause the American dollar Is worth rel.
atively more than the European cur
rencies.
The influence of depressed foreign
exchange rates is one of the reasons for
enlarged exports of cattle to the United
States from Canada in 1919. Canadian
exchange has been at discount of
about 10 per cent in the United States
recently. This means that every unit of
American money is worth IL units in
Canadian money. This instance brings
nearer home one of the results of dspres-
sion In foreign exchange.
European exchange rates are depress-
cd because OF the huge initiation in the
currency of the majority of the coun-
ties OF the old world, especially those
which participated In the war. Their
currencies have been inflated without
the maintenance OF gold reserves In the
central banks on the same ratio as prior
to the war. France increased the
amount of paper money in circulation
since the beginning OF the great war,
according to one report, which Is regard
ed as authoritative, by IA times the
volume before the fateful summer of
1914. Germany multiplied her currency.
according to the same authority, Is
times. The multiplication in Austria 10
said to be 20 times the pre-war total.