The Washington herald., 1922-01-09
CANADA EXCHANGE
SITUATION SHOWS
STEADILY BETTER
Dollars Advance Over
Eight Cents During
Past Year.
TRADE IMPROVES
Unfavorable Balance of $685.
100000 in 1920 Cut to $751;
100000 First IL Months.

TORONTO. Jan. S.-UndoubtedIy
the rise in the value of the Can
xdian dollar from Ssis cents on De-
cember 81, 1920. to ga cents OF
your money on December 81. 1921,
represents an improved trade sit
uation in this country. Yet so COM
pick are the influences affecting
exchange between Canada and the
United, States that the exact causes
Of the recent improveme>. are still
somewhat perpIexing TO even the
most expert authorities, for the
huctuation does not always consti-
tute an absolutely reliable bdrome-
ter of international trade condi-
lions.
1t may illumine the present sit
uation IL We remember that the dis
count on our dollar Is not wholly
due to our unfsyorahle balance Of
trade for the excess OF our imports
over our exports is by no means a
new thing in our commercial his
tory. Only twelve times between
your Civil War and the Great
World War were We able to show a
favorable balance. yet our currency
was far from being at a discount
In your market during that period.
Chiefly because We were enabled to
ray our Indebtedness TO you with
the money that we borrowed IN
England. when. however, in 1914
the supply of British capital was
cut of we were obliged to float
our loans in New York and thus
to increase our Indebtedness on
merchandise by an additional debt
of $25.O0O.OOO that We have to pay
to you in interest charges each
year.
Foreign Trade Satisfactory.
Our foreign trade, however, must
be regarded as very satisfactory.
for in the first eleven months of
1921 we reduced our unfavorable
balance from the SI2s.OeO.oO0 of
1920 to s23.00O.o0e. Indeed, during
October and November. owing to
our heavy outward shipments of
grain. our trade figures actually
showed a favorable balance of s4,.-
0oO.o Due partly to diminished
buying power and partly TO the
irritations caused by the high rate
of exchange we had greatly reduced
our buying in the States Of the
luHurles that had swelled our i'm
port totals a year before. There
fore. il is highly probable that the
present rate OF exchange may have
been affected by these signs Of
greater economy on our part.
Less easy to calculate is the in
fluence that our foreign borrowings
may have exerted. Already. besides
our Indebtedness to you. we owe TO
ether nations an annual debt of APP
proximately Sl75.OOo.OOO for inter
est payments and services rendered.
Yet during September We increased
this debt by floating $4,000. 900 of
Toronto Street Railway bonds in
your country. by issuing another
$4,000. 900 of Province OF Ontario
bonds payable in the. United States
and by making two other good On
tario municipal issues, aggreSstinS
$4,000. 900 payable either in Canada
or the States.
Americans Buy Securities.
At the same time the high prem
ium on your funds earlier in tie
year caused a good deal of Ameri-
can buying Of our securities, the
exact figures for which II is hard
to ascertain. when these various
bonds and other securities are sold
abroad they are counted As exports
from US for which we receive cash.
and as such they help to diminish
our unfavorable trade balance.
Paradoxically. however. they are
later added TO the debit side of our
foreign trade account because they
become a commitment on which We
have to pay interest
without doubt the exchange rate
has been greatly affected by the
Improvement in the value OF the
pound sterling on this side Of the
Atlantic because whenever the
pound depreciates English holders
find il profitable to dispose OF their
Canadian securities. but when It
rises English investments in Can
ada are usually left undisturbed.
It is quite possible that the most
potent cause of fluctuations in ex-
change may yet be traced to specu-
lation in Canadian dollars. II Is
suspected here that the accelcration
of the movement in our favor dur
ing Christmas week was due to
short covering, but only the early
weeks of the new year will reveal
TO what extent the appreciation G
our dollar was due to such opera
tionS