Evening star., 1921-08-28
ONE WAY EUROPE COULD PAY u. S.
Owns Billions of Dollars of South American Securities Which,
Transferred Here in Settlement Would Present No
Menace to American Industries.

$3.50, giving an annual interest rate on the in
vestment of tn per cent and a maturity re-
turn Of fraction over 10 per cent But until
there a betterment> in the London exchange
rate. the interest payments. when converted
back into dollars. would be subject to dis
count Of about 25 per cent.
But the idea being discussed here is that
instead of collecting his interest in eventual
dollars the American investor would reinvest
his earnings in Argentina. If he did that. the
present exchange situation would give the
American investor still further advantage.
The Argentine peso Is at a discount about Is
per cent greater than the pound sterling. So
1t would operate that instead Of 800 worth
of interest being converted through sterling
exchange into $75 worth of American dollars.
1t would be received in the form Of Sis worth
Of new investments in Argentina.
X \ X
There is no thought on the part Of respon-
sibe officials of the government that the United
States Treasury would accept South American
securities of any kind in direct exchange for
the obligations Of European governments which
owe money. 1t would be up to the European
governments to obtain from their people the
South American securities in exchange for
their own bonds and then to send the South
American securities here for sale. and with the
dollars thus obtained to settle with the United
States Treasury. This was the process fol-
lowed during the war, when American securities
owned In Europe were resold here and the dol
lars obtained for them used to finance the pur-
chase Of war supplies.
Whether thing which was practical during
the stress Of war would be practical now that
the war is over would depend upon how great
ly general investors in Europe felt the need Of
maintaining credit here and rectifying exchange.
The European governments no doubt would
have to make their bond offerings highly at
tractive. but from this distance It would seem
better that they should borrow money from
their owp people. even under severe terms than
that they should be in default to foreign
creditor or that they should further depreciate
their currencies and increase the adversely Of
the exchange rate by attempting shipments Of
gold. -
X X
Europe had difficulty reselling her Ameri-
can securities here during the war. because the
market for them already existed, and the
American people. In the flush of war prosperity
had plenty Of money for investment. But be-
fore South American securities could be sold
In large volume the market would have to be
created and a very-eHtensive campaign Of edu-
cation would have "a. be conducted to familiar
fse the people with aecaff1fss p4yAAf65 III cur
rencies other than dollars. Then thsfs would
have to be established foreign securities ex-
change or the South American securities would
have to be listed on the New York and other
stock exchanges. and daily quotations pub
lished.
If the task Of educating the American in
vesting public to tho di.ect buying of South
American securities with their different cur
rencies and complicated exchange rates. ap-
peared too great, tho dihlculty might be over
come by the organization of strong holding
companies which would take over the South
American securities and issue against them for
sale to the American people their own collateral
bonds. payable in dollars at New York or Chi
cago or elsewhere.
X X
That the difiiculties in the way Of such a
program are very real must be admitted. but
80 are the difficulties involved in the whole
problem Of collecting the money which is owed
to US by Europe. Difficulties Of very serious
sorts must be overcome somewhere II we are
ever to get our money back and there is sound
financial opinion which holds that the diff1cul-
ties in the way Of receiving very substantial
payments in South American securities are less
serious than those presented by any other mode
of payment yet proposed.
Copyright, 1921, by The Washington star)