Indiana daily times. [volume] (Indianapolis [Ind.]) 1914-1922, 1921-03-02
OF
CREDITS HELD
NEED OF TRADE
Financing Head Says I'm
balanced State Can Not Go
on Indefinitely.
EDGE ACT TO AID EFFORT

NEW YORK, March department of
Commerce figures Of foreign trade for
January, which have just been made
public, forcibly emphasize the dilemma
the United States is facing. The shrink
age Of exports Of over SCI, 100000 as conf
pared with January, 1920, the fall Of i'm
ports amounting to $265, 900 900, as COM
pared with January, 1920, and. the in
crease of gold imports Of nearly $4,000
000 illustrate what bankers familiar
with foreign trade regard as automatic
AS expressed by John McHugh, chairman
Of the committee on organization Of the
Foreign Trade Financing Corporation, the
explanation is this;
Unbalanced trade on the part of any
country cannot go on indefinitely unless
crpdit extensions are provided. Some
such simple statement as this must be
kept in mind: Sooner or later, this flow
Of unbalanced trade must come to an
end, because customers who steadily buy
more than they sell Will not have the
means of payment.
NOT KEEPING PACE
WITH CREDIT DEMANDS.
obviously, we are facing a practical
demonstration of this fundamental eco
homie truth. No close analysis Of com
paratiye foreign trade statistics is re-
Quired to show that we are not keeping
pace with the demands for credit with
which to finance sales abroad.
NO relatively permanent one-sided
balance Of trade can be financed by our
commercial banks. BY force of circum-
stances they have been obliged to extend
so-called short term credits of S4000,0O0,
600 They have come practically to the
limit Of their ability in this direction, for
in large part their short-term loans,
through the necessity for repeated re-
newals, have been converted into long
term credits. This has logically led to
the familiar credit stringency in the
United States, which, in turn, has been
one large factor contributing to the
violent declines in commodity prices
NEW MACHINERY
CREDIT NEED.
1t may seem elementary to emphasize
here what has seemed more or less OBJ
vious to our business men for q long
time, yet the lesson Of the January trade
figures cannot be too often repeated In
view Of the necessity we face for meet
ing foreign trade credit necessities in
an adequate manner. We must provide
new credit machinery, designed TO care
for our permanent needs.
Bankers and business men have felt,
from the time the Edge bill was pro-
posed, as an amendment to the Federal
Reserve act. that here was legislation
that would make possible this machinery.
They were called in as consultants, their
opinions were canvassed thoroughly and
Congress acted upon their general recon-
meudation.
when the Edge act became law, the
,srf-- f1sa
resolution into concrete machinery Of re
lief, and the Chicago meeting last De-
cember marked the first practical step
toward the creation Of a credit extending
corporation adequate to the need.
EDGE ACT MAKES
EXTENSION POSSIBLE.
The Edge act, in its potential effect
on American business, is probably the
most important legislation that has been
secured since the Federal reserve act it
self II can accomplish the unihcation OF
our foreign trade financing. as the Fed
eral reserve act unified orr banking sys-
ten. Just as the Federal reserve system
made great extension Of banking credit
possible. the Edge act makes possible
great extension Of investment credit.
1T is essential to keep in view through
out all discussions of shrinking trade and
credit machinery the one outstanding fact
which is affecting American prosperity.
However keen the desire of the people OF
Europe. Of South America, OF Asia. of
Australia. to trade with Us, the present
premium on the American dollar is so
great that buyers abroad cannot pru-
IDENTIFY borrow and agree 10 pay on short
time.
Under the circumstances, our export
trade is bound to languish."