The Washington herald., 1920-02-10
Sharp Falling OFF IN For
eign Money Values.
Explained. .
OUTPUT Is DIMINISHED
Direct Cause Of the Present
Situation Governed by
Productive Power.
ny WILLIS j. ABBOT.


instances intricate and puzzling to
the mind unframed In finance. But
those involved in the present state Of
exchange between the United States
and Great Britain and France. for
example. are simple enough.
While the swift fall in the rate Of
exchange has demoralized internation-
al trade. unsettled prices on the stock
exchange and caused scare heads. and
sometimes alarmist editorials in the
newspapers. it is but a perfectly natu-
raj consequence of conditions obtain
ing abroad. 1t could not have been
Iverted. and cannot now be cor
-ected by artificial or radical me-
thods.
Moreover. its ultimate results will
be beneficial not only to the United
States. but to the European countries
that. for the moment. appear to be
sufferers.
Perhaps the operation of interna-
tional exchange may best be made
clear by a simple. although imasin-
airy, illustration.
Let US suppose that Virginia and the
District of Columbia had from time
ammemoriaI maintained distinct cur
rency systems. but that at all normal
lines the Southern coin. which we
may call an Alexandrine. had been
worth just five times the District dol
lar Moreover. for the purpose of IL
lustration, we shall conceive of Nr-
einia as an exclusively agricultural
community and the District of CO.
Iumbia as a manufacturing center.
For clothing. shoes. agricultural
machinery and all manufacturer
FOODS the people of Virginia had
seeh in the habit of going TO the
District markets. The people of
Washington in turn bought food and
-aw materials from their Southern
1eighbors.
Upon the District fell a great
.aIamity-a pestilence. earthquake
md IRE or a savage Sgar. For hEe
ears Its people could manufacture
rot even enough for their own
reeds. All the time they had to
at and use manufactured commodi-
les, and to have the raw materials
O maintain what factories they
sept in operation. These supplies
hey bought of their neighbor. For
4 few months. or until the stock
Il manufactured goods they had
accumulated was exhausted, they
,aid in goods which the people of
.'irginia wanted. All trade between
,ations is at bottom a matter of
al n
,Iy ran out. Then for a time the
District folks paid in Gold-the only
International currency-of which
hey. like all prudent peoples. had
1 reserve stock laid away. Finally
hey resorted to borrowing. for in
sonle way or other they had to have
he goods which Virginia had for
ssie.
The Virginia people were ready
.uough to lend They had enor-
nous surplus of their products on
,aud. They believed in the ulti-
nate soIvency of their old-time
customers, so. with the aid of their
government. they opened huge cred
is with the District and for four
" FIVE years supplied the people
With all they needed. being paid
n bonds.
raphe which had overwhelmed the
District passed. 1t became time for
Il people to turn again to indus
nv and TO recoup their fortunes.
The interest on their debts was
pressing and they had no gold with
which to pay it. Only by the re-
1ewed production of commodities
which Virginia needed could they
discharge their obligations. And the
Virginia people. no longer feeling it
heir duty to sustain fellow beings
n the midst of great calamity, de-
lined to lend further. but sug-
rested rather that their debtors be-
gin the process of liquidation.
Unfortunately the disaster had
.rippIed the resources of the Dis
.rict. and more than thar its people
rad lost the habit of industry. Many
rad been employed in public service
It high wages. and were loath to
.eturn TO more difficult private en-
Iloyment Others had subsisted on
,ublic benefactions and now refused
o work at all. All wages and profits
Turing the continuance of the
pestilence. or war. had been eS-
.eedingly high for those who shared
n them, and the effort to bring
hem back to normal caused unrest
n the labor market. and unsettled
business conditions. The psychology
cal temper of the people was all
Igainst a speedy recurrence of the
Industrial conditions of four years
.arlier. rf
But they had to have food. they
rad 60 have new raw materials for
guch factories as were ready for
work, and they had to have the
means to pay their heavy interest
:harges to Virginia. What were they
o pay in?
Virginia did not want the actual
Iollars coined in the District. They
would not circulate on that sue o,
he Potomac. and could not be used
" the Virginians in buying things
rom the Carolinas and other neigh
,oring foreign States. When con-
litions were normal a Virginisn
vas perfectly willing to take a.
lraft on a District bank for $500
n exchange for produce which n.
lad sold for 100 Aiexandrines. he
ause he knew that with thar draf.
Ie could buy $500 worth of District
roduce needed in his own com
nunity But Industrial conditions
we're such that the District no
onger produced enough ,commodi-
les to exchange on an even par for
hose IL absolutely had to import.
70 in theiS eagerness to get Vir-
inia goods and Virginia credits the
district importeis kent biddinr
dgher and higher. while the Yir-
CONTINUED ON PAGE THREE.