The New York herald., 1920-12-06
Workable Foreign Exchange
Remedy.


Dutch banking Ingenuity has made
itself conspicuous since the war by
Lropoymding theoretical remedies for
the wide fluctuations and deprecia-
ton in the currencies of all countries,
two evils which have been serious OBJ
stacles to the restoration of normal
international commerce, but Belgian
bankers have outstripped the Dutch
by reducing speculative theory con
cerning this 10 actual practice. A
number Of Belgian foreign exchange
bankers have established Mt Antwerp
clearing house for dealing in foreign
money.
This new institution was founded
primarily for the purpose Of protect
ing Belgian purchasers of foreign
goods from excessive fluctuations In
exchange rates, but it exposes and
lendeayors to combat the very cause
which is making so much trouble in
all international transactions.
a large volume of bids and offers
~ futures in French, Dutch, Ger
ran. English and American exchange
is concentrated in the Belgian clear
ing house daily, giving the Belgian
merchant, through his banker. the
broadest possible market from which
10 obtain funds TO pay debts abroad.
This scheme differs Srom the ordinary
practice Of exchange trading. which
IL done chiefly by individual bids and
offers over the telephone. IT Is a
counterpart Of the original Dutch
suggestion for an international ex-
cnange clearing house along the lines
OF barter put on practical work
| ing hasls.
The Dutch plan was 20 r-iuce In
ternational commerce 10 a concen-
trated bookkeeping transaction by ex-
changing through one agency the
products of various Countries at prices
In terms OF commodities instead Of
money. But il was found that strikes,
fue shortages and other unforeseen
| Incidents of production. trade and
transportation might change the val.
ues of commodities in the period in
tervening between the making OF a
contract and the delivery Of the goods.
Thus, IL shipment of Dutch cheese
were exchanged FOR German rails, and
before delivery of the rails the cost
Of their manufacture advanced or the
German market for cheese declined.
the German party to the contract
might be thrown into bankruptcy by
his inability to make the proceeds
from the cheese cover the cost Of
producing the rails.
The Belgian exchange clearing house
lifts this burden Of price fuctna-
tlonx from the shoulders Of the mer-
chant and puts it on the foreign ex-
change market. whore II properly be-
Dngs The purchaser Of exchange
through the clearing house Is Obliged
70 put up margin TO assure full
ffDsent o. his part OF the contract at
msfnrifv. snd lrstead of being paid
f8r his pro1uef wiih some other com
r.pdiiy be receives money. This
-f9ieRe ~ e0urse limits the advantages
gg the ciesSing house to those who are
sf,ip 40 r,ut rr nargin. But the plan
esnlrsnes o3i ne elements necessar ry
IN y fraers'-3 iafe1national clearing
hour4 ~ efisrhate unnecessary due
tns ler.s in exfh0nre.
4 nsere Gespsasatle tone Is provided
f1. ~ prfes Skiing or "pegging' ex-
changes blt ~ concentration of bids
and 0yerx. ffius mskinz FOR broader
and taere<ore fD0re stfble market.
The margin required by the Belgian
clearing hovse ~ equivalent TO the re-
sOiytnz credit 1t'ch would be one Of
the requisites for an international
ciesrfng fonse.
fnssabfilfr snd not depreciation Of
,r~esrn cvfrencfe. r. th~ principa'