The Maui news. [volume] (Wailuku, Maui, H.I.) 1900-current, 1920-01-02
Why Foreign Exchange
Is Low And Why 1t
Is Undesirable To Us

-1f ~ wv AoA EoCOCldlth
Press)-Three factors in the demora.
l~ization of foreign exchange, intelli.
gible to the average man, rise above
the complexities of the present situa-
ton, according to old-timers in Wall
street.
These are: (1) Allied and other ma
tions of the world owe the United
States approximately SIS, 900, 900, 900.
(2) American manufacturers hesit-
ate, owing to peace treaty uncertain
ty, to accept big advance foreign or
ders.
(3) England's virtual suspension of
gold exports outside the British colo
MES is repulsing American trade.
Just why the British pound sterl-
ing, normally worth $A.S65 in Ameri-
can gold, should have declined so
much since the war ended, and what
it all means is an obscure question"
said a New York financial expert.
THE present situation, Sir George
Paish's apprehensions notwithstand-
ing, is by no means hopeless. Prop
hecies of a breakdown of credit are
not well founded.
America, the ~storehouse of the
world and now the worlds banker, is
in the same position England was in
after the Napoleonic and American
Civil wars. She bought the cheap
securities of impoverished nations in
a most prodigious name and thereby
laid the foundation for her future
wealth. We must do likewise and do
it within the next two or three years
by which time these abnormal condi-
tons will have passed.
With pound sterling 25 percent or
more below par England can sell to
the United States at a great advan-
tage. We can sell American goods
abroad only at a great disadvantage
because we must add the abnormal
rate of exchange to the goods to get
into foreign markets. Premier Lloyd
George recently declared, when sterl-
ing was selling at q discount of Is
percent, that the discount really
represented a protective tariff of Is
percent on goods manufactured in
England. Certainly it is helping to
keep American goods out of that coun-
try.
"The only remedy for this condition
ID flor the United States to buy foreign
securities and extend long time credit
for merchandise. We are in a strong
economic position. The nations of
Europe must have ii cotton and
wheat and, since they are so heavily
indebted to us and we must extend
them many more millions to put them
on their feet what is the difference
whether we buy their bonds or send
them our merchandise?
Everyone in Wall street-knows that
if the peace treaty had been signed
in Washington an International Elk
change Committee would have been or
ganized long before now to- stabilize
exchange and bring about other %neces-1
sary readjustments. Never during the
darkest days of the war, when the
Germans were almost at Paris, did
and French exchange go to
it is now. The British, during
the war, by a system of credits with
the United States, had sterling 'pegg-
ed to $4.52.
THE tension over and gold exports
curtailed there was nothing to keep
it hat close to parity. Indeed, unless
the United States loosens its purse
there are London financial eX-
perts who say the pound sterling will
drop as low as $3.50. That would be
a calamity. 1t would be a tw~o-edged
sword injuring both England and the
United States.
Europe is like man on the verge of
ieath due to starvation. When you
ind such an unfortunate you feed
lin gradually until the stomach be-
dCCuSIollSu W uiScolihS loou'
Now our aim has been all along to
stuff Europe with all kinds of Amer
can products. We have piled up a
rade balance, according to former
Secretary of Commerce Redfeld,
lg~gregating $4,000, 900, 900 a year,
1urope's financial system, like the
human stomach, has been I'M
bile to assimilate it. Consequently,
We thus contribute to the demoraliza-