The Washington herald., 1920-03-08


material in 1920 as in 1919, AMI has
In the past year Europe bought
from the United States produce and
goods to the value of about ], 1,o50, ,o0o,-
900 sterling and sold in payment
goods to a value of no more than 150,-
100000 sterling. Europe thus had to
obtain credit in one way or another
from the United States to the ex-
tent of no less than 0,00o, ,0Go
sterling. OF this sum the American
government supplied about one-salf.
or about f450. .0o0, 900 sterling by is-
sue of liberty and victory loans and
the balance was secured. in part, by
the sale of European securities to
American investors; but mainly by
grant OF credit by American bank
ers for the purpose of financing
Americas exports.
In 1920, Europe's exports to the
United States should be larger than
during the past year and the sd-
verse trade balance smaller. That is,
it would be smaller IL European cur
rencies had not fallen so heavily in
value. The increasing depreciation
of the currency means that in 1890
the balance against Europe may be
even greater than in the past year
in spite of greater exports to Amer
lea and the expenditure of large
sums Of money in Europe by Amer
lean tourists.
Can't Rectify Exchanges.
II exchanges could be rectified
and the pound, franc, and other cur
rencies of Europe restored nearer
Ak
would be minimized, but this can
not be done without a comprehen-
sive arrangement which at present
seems to be impossible so far as
existing conditions permit an opin-
ion to be formed. The trade bal
ance against Europe and in favor
of the United States in 1920. tax
ing into account both visible and
invisible exports and imports, in
American currency, may be reduced
from about $4.5o0, 900, 600 to about
$500, 900, 900, but when converted
into pounds, francs. lire or into
currencies of any other of the great
nations of Europe, Europe's adverse
trade balance to the United States
would be much more than f900, 0,000,-
| 900 sterling in 192o-that is. IL Eu-
rope is able to obtain credit to en-
| able her to purchase the things she
absolutely needs for maintenance
and reconstruction. At $3.50 to the
British pound. a favorable balance
of $500, 900. 900 for America would
be equal to an adverse balance for
Europe of f1.00o.000.00o.
More Bond Issues Unlikely.
"The problem now to be solved
is, How can this great sum OF
money be supplied in order that
Europe may be able to purchase
goods and materials she must buy
from the United States. whatever
the cost? In considering this prob
! lem it is essential to realize that
the American government is un-
likely to ask Congress to issue fur
ther liberty or victory loans in or
der to finance the entente nations
Even IL it were willing to do so.
Congress probably would reject the
proposal, and that rejection would
be supported by the American pub
lie. Therefore that source OF credit,
which furnished about one-half the
sum required in 1919. is no longer
available.
| Moreover, bankers OF America are
now employing almost the whole
of their resources and have little
or no margin available for addi-
| tional credit for Europe. There is,
/ indeed, no little danger that Ameri-
can bankers will require to restrict
| their previous credits, having re-
gard to the fact that the reserves
of the Federal Reserve banks are
now reduced to under 43 per cent
of their deposits and of their notes
in circulation, while the law re-
quires them to hold reserves equal
to 40 per cent of their notes and
to s5 per cent OF their deposits.
| Outlook Gloomy.
/ Europe must face the fact that
as matters stand the American gov
ernment. the American Congress and
the American people are not will
ing to issue American government
I loans in order to supply exchanges
to Europe; that the American mar
ket for European investment Sc
curities is a very limited one, and
that American bankers are not able
even If they were willing to render
much help.
Luckily there Is stin q possible
loophole Of escape from this dan
gerous situation"
u fConxrishf ION by puhlic Iedrer aOal