New-York tribune., 1921-03-26
Swiss Bank Corporation Of
London Holds Present Sit
uation Sounder Than at
Any Time Since Signing
of Armistice
Creation of Capital Urged
Bottom Reached in Many
Commodities, Is Belief;
Warnings Against Too
Much Optimism

to-day is intrinsically soundcr than at
any time since the armisticc, according
to the Swiss Bank Corporation Of
London, in its financial and commercial
review for 1920. Other conclusions
reached are:
"The foundation is being laid for
new era of prosperity.
"For many commodities the fall in
prices has reached bottom.
There is no overproduction.
THE only effective remedy for the
present state of international COM
merce is to be found in the creation
of new capital.
General conditions and prospects do
not Justify too sauguinc a view, nor.
on the other hand, do they permit of
exaggerated pessimsm. The economic
situation at the end of 1920 was in
trinsically sounder than it was at any
llmc SINCE the armistice, and if, on the
surface, the future appears somewhat
ovcrclouded, for it is evident that the
world IS only just entering into a
period of adjustment, it can already
pc seen that underneath the founda
ton is being laid for new prosperity.
"Ihe depreciation of the exchanges
mas been put forward as the principal
reason for the difficulties which inter
national trade is experiencing at the
present mdment and system Of barter
was devised, that is, the direct ex-
change Of goods for goods on large
scale. Practical experience, however,
has shown that the results of this
method have been negative, for the
simple reason that countries with de-
preclated exchange have no goods to
dispose of, the volume of such goods
decreasing in direct proportion to the
depreciation in the exchange. If there
was sufficicncy Of goods, these coun-
tries would, by exporting them, always
obtain the means of liquidating their
purchases abroad.
Foreign Trade Financing
"Cnder such conditions the only
means Of engaging in business with a
considerable number of countries is to
let them have goods and at the same
time to advance them the money re-
qulred for their payment. 1t was soon
recognized that it would not be posi-
bic to make such loans, except with the
assistance of one or several organiza-
tions, created for that express purpose,
and q number of schemes have been
discussed, or even put into partial exc
cution, but without any marked sue
cess. These schemes have, one and all,
the same great defect, which is that
they are too complicated for business
purposes. Any one knowing the diff
cultes which always existed and exist
more especially at the present time, in
the conduct of commercial transac-
tions, the laborious negotiations, the
sudden change in conditions which re-
quire equally quick decisions, must be
aware Of the Inconvenience of any in
tervention between sellers and buyers
of a new clement, more generally of
bureaucratic nature, having its own
ideas and its own interests to protect.
If, too, this organization conducts its
business on strictly commercial
basis, it's efforts will be generally
futile. AS an instance of this can be
taken the result of the export credit
scheme of the Overseas Trade Depart
ment in England. The services this de-
partment is called upon to render
could just as we'll have been under
taken by existing organizations, such
as the banks.
"a number Of schemes only take
into consideration the immediate inter
ests of exporters, without being con-
cerned with the way in which debtor
will ultimately pay his debts. 1t is
thus a question of credits for con-
sumption which constitute in them
best the funds will soon become immo-
bilized, with a result of liquidating GER
tain stocks of goods which would evil
IDENTIFY considerably ease the industrial
situation. This would not, however,
create constant current of business,
which alone is of permanent value to
trade and industry.
Ter Meulen Project
"The Ter Meulen project, which is
recommended by the Brussels confer
encc without much conviction, has one
great advantage over the others. 1t is
inspired with the real wants of the
debtor and endeavors to place him in
the position of being able to pay his
debt some day. On the other hand, it
is much more complicated and bureau
cratic than any of the other proposals.
The author of this scheme states that
its object is to facilitate the obtaining
of credits by newly constituted states,
which, proud of their recently obtained
independence, would object to the
terms proposed by their leaders, who
would probably require pledges and
guarantees of a reliable nature for their
loans. But is this pride sufficient
reason to justify the setting up Of an
organization such as is contemplated
by Ter Meulen?
"ln the last place comes the question
on which, after all, these schemes de-
pend, as to whether the capital neces-
sary to grant large export credits
exists. and this must be answered in
the negative. An analysis of the sta
tistcs of new issues gives a conclusive
proof. All countries prohibit, or at
all events discourage, the issue of for
eign loans, with the exception Of the
United States, which has some funds
available for this purpose. The ten
dency underlying the various export
credit schemes is inhationist and to
realize it the assistance of the state
is necessary"
The outlook as regards the future
development of money rates, the bank
points out, is rather uncertain. If the
present worldwide stringency is to be
considered as consequence of the
greas destruction of capital which
took place during the war. high rates
would be likely to prevail until this
deficiency has been made good, or at
all events until the worlds economic
state becomes adjusted to the amount
OF available capital Since the crea-
tion of new capital is at present very
slow process, owing to the economic
dlsorganization caused by the war and
the extravaganza of governments,
when spend the greater rart of the
national revenue, it would seem that
money should not become cheap for
some time to come.