The Washington herald., 1920-04-05
SITUATION TN
GREAT BRITAIN
Recovery In Pound Sterling
Reflects British Finan-
cial Soidity.
POSTWAR POLICIES
Reconstruction Methods an
Important Factor To-
ward Sterilization.
POSTWAR POLICIES

In view Of the pessimistic predic-
.tions current a short time ago fore
casting European bankruptcy and
the collapse Of Old World credit.
the recovery In sterling from its low
level around s3.1s to 81 comes as a
striking proof Of British financial
solidity. 1t also shows the wisdom
of permitting economic laws to COR
rect a troublesome situation with
out the interference of artificial ex-
pedients.
Those who a-e not familiar with
the mastery manner in which Brit
ssh finances have been conducted
since the end OF the war will be
inclined to ascribe the recovery
chiefly to the revival of British
Industry and commerce and the
prospect of gold shipments. Un-
doubtedly these factors have been
efficacious, but they constitute by
no means the dominating infld-
ences.
The changing character OF the fig
ures on the foreign trade Of the
United States, as well as Great
Britain, tell an important part of
the story, but no. all of 1t. Our
February exports amounted tc s54t,-
000.000 compared with S52E.0U0, 900
fo- the SAME month last year. . IT
imports were 67,900.JG0 against
s235, 100000 in February last year.
While we gained approximately s61,-
100000 in exrort5, our imports ia-
creased $232,000,000. For the eight
months ending With February oCr
exports were $5 231, 100000 compar-
ed with S4,3S2. 900, 900 FOR the same
period last year. Our imports rose
from s1,9sS,000,000 to SS.235.0oo,0 GOO.
1t will thus be sem that imports
are gaining rapidly on our exports,
thus tending to restore the balance
of trade and act as an Influence to
a dislocated foreign exchange.
Gain I'm British Exports.
Great Britain during February
made imports amounting to f11O,-
sss,o00 against f107.o73.0oo in Feb
ruary last year. Her exports rose
from f52,034.000 in February last
year to f10s.5ss.o0O this year. In
other words. while her imports
showed a rise of about so per cent.
her exports gained more than 100
per cent Moreover, Great Britain's
Imports consisted largely of raw
materials of industry which in time
will be reflected in greatly Increased
exports.
: As stated above. the manner in
which Great Britain is regaining
control of commerce as well as gold
has contributed to the recovery in
the pound sterling. The prime fac
Ator, however, Is the sound policy
adopted for the reconstruction OF
British finances. The methods as
we'll as the results constitute a
model which our own government
might well consider. In fact. the
interim report, as well as the sfinal
report, of the committee on cur
rency and foreign exchange after
the war" as IL is called, afford an
Illuminating study on governmental
fiscal operations. The committee
was appointed in January, 1918, un-
der the chairmanship Of Lord Cum
life. 1t was formed Ito consider
the various problems which will
arise in connection with currency
and the foreign exchanges during
the period of reconstruction and
report upon the steps required to
bring about the restoration of nor
NAL conditions In due course"
Emphasis should be laid upon the
fact that this committee was ap-
pointed long before the termination
of the war. and in anticipation OF
the dificulties arising during the re-
construction period. In the first in
tertm report the committee reached
the conclusion that 1t was impera-
tive that after the war conditions
necessary to the maintenance of an
effective gold standard" should be
restored without delay.
The Gold Standard.
The committee also stated the
conditions precedent for the resto-
ration Of an effective gold standard,
and at the same time made certain
observations on the subject of con-
trolling note issues. In the final
report, which has been recently pub
lished, the committee stated that
the first essentials to a recovery in
the exchanges would be increased
production, cessation of government
borrowings and decreased expendit-
, pres, both by the government and
by each individual member OF the
nation. These essentials, the report
stated. must be associated with the
restoration Of the pre-war methods
of controlling the currency and
credit system of the country for
the purpose Of re-establishing at an
early date a free market for gold
in London"
Here Is another example OF the
manner in which the committee
faced facts: "The weakness Of the
exchanges II. in q measure, due to
trade conditions, but an important
cause OF depreciation in sterling in
New York and other financial CEN
ters ID. In our opinion, to be found
In the expanded state Of credit in
this country" The committee laid
stress upon the necessity of an in
crease In the gold reserves and q
limitation upon the issue of cur
rency notes. The government pro-
ceeded to carry out these recon-
mendations. and has been steadily
adding to its gold holdings. and has
restricted the issue of new curren-
cy notes. Not only were no new
were somewhat reduced.
As has been pointed out by a
leading financial authority In this
country, this policy has been in
rather sharp contrast to our own
fiscal methods which are apparent
ly based on the theory that reserve
note issues may be continued Indefi-
nitely without losing control of the
gold reserves. The Federal Re-
serve Bank Of New York the third
week in March added more than 81
100000 to its Federal reserve notes
in circulation, which then reached