The New York herald., 1921-08-20
A Currency Conference.

OmclalS Oh the united states treas
ury have under consideration a plan
4 tocall an international conference to
formulate method of maintaining
the equilibrium of foreign exchange,
according to the news from Washing
ton. Secretary of Commerce HOOVER
asserts that the uncertainties Of for
eign exchange constitute one of the
major difficulties facing the recovery
of the country's commerce. This is
an opinion which THE New YORK
HERALD has maintained more than
( once in recent months. as curtail-
ment Of foreign commerce has re-
suited only in augmenting our top
heavy trade balance in goods. Gold
( shipments have been proceeding on a
large scale from all parts of the
world to this country, but the effect,
as far as the stabilization of ex-
change rates or the elevation OF for
eign money prices is concerned, has
been negligible.
In ordinary times the variations in
exchange rates are result and not
3 r cause. of trade depression. Before
the war one of the chief functions of
: the Bank of England was the regula-
tion OF exchange rates, and when it
could not prevent the English pound
from rising or falling by the sale or
purchase of bills of exchange 1t either
k. imported or exported gold. Through
out the commercial world the knowl-
edge that the Bank of England stood
ready to regulate English exchange
made the English pound a popular
(. and reliable currency for future buy
ing and selling among international
markets, whether the transaction
concerned British and a foreign
merchant or was an exchange OF
goods between foreign traders. Draw
ing on London had become deep
rooted habit. Even this country de-
pended on London. Our copper. cot
ton, grain and other products were
exported to all parts OF the world
against London payment. Our i'm
porters bought in all markets, but
they paid almost exclusively through
2 London. When they did make ar
rangements to pay through an Amer
ican bank that bank usually cleared
the transaction through it's London
account.
The British pound is regarded as
favorably as ever where the business
integrity of England and her mer
+ chants is the paramount considera-
ton. But integrity has nothing to
do with variations in exchange rates
which compel importers and export
ers to add an arbitrary margin to
their buying or selling prices TO
cover possible movements in the
price OF currencies over which no
body has any control. When wide
fluctuations in foreign curreneies
cause merchants to curtail their pur-
chases in fear OF overwhelming
losses the variations in exchange
rates cease to be an effect and be-
come a cause OF trade depression.
Before the war governments COM
monty exercised little influence in
the regulation of exchange rates.
Slack business IN any part Of the
world was Immediately reflected In
the exchange rate; the conditions
could be rectifed according to the
!. usual custom. The credit to stabilize
money values was always available
( to honorable, solvent merchants.
\ Now the inability Of some nations
7 either to obtain credit except
through their governments or TO
ship goods to give immediate sup
/. pert when their money falls in price
throws the old system OF regulation
out OF joint. The reparations pay
mepts by Germany further compli-
4 cate the situation.
These circumstances add force to
the argument in favor of an interna-
tional conference on the exchange
The need is not 50 much for an In.
crease In the quantity of world cred
its as for a change in the methods OF
using them. First Of all must come a
cessation Of paper money emissions
which are an easy but damaging sub
torfuge for con6scatins private credit