The Washington herald., 1922-01-23
WORLD'SEXCHANCE
STATUS COMBATS
TRADE RECOVERY
Situation, However, Is
Not Cause of Economic
Difficulties.
EXPORTTRADE HURT
U. s. Suffers Most From De.
rangement, Currency Rates
Being at Premium.

The present disordered exchange
situation in the world is initiating
severely against the recovery OF the
worlds commerce, according to
statement by United States section
OF the Inter-American High Com
mission. The exchange situation is
not however. the cause OF the
worlds economic difficulties, but it
Is the effect thereof. For the most
part the exchange situation merely
reflects the economic situation. Ex-
change has been likened to a bar
ometer: the barometer indicates the
weather, but it does not make the
weather. The ,dislocations which
still exist in the whole internation-
al economic structure, and the de-
ranSements of the international
price structure, are mainly respons-
ible for the disordered exchange
situation. The exchange situation
VIII improve as the worlds eco
nomic recovery goes on. especially
in Europe, and particularly as the
existing distortions of the price
structure disappear.
Two Factors in Confusion.
Confusion in the existing ex-
change situation shows itself prin-
cipally in two ways: First, In the
relative premiums and discounts on
the currencies of different countries,
and, second, in the disastrous daily
fluctuations of the currencies OF
some countries.
The export trade of countries
whose cnrrancies N .ro,,g,,,.,
is at a serious disadvantage. The
trade of the United States is sur-
fering more from this arrangement
than any other country. because its
currency is at premium with re-
spect to practically every other
country. The other American re-
publics are, however. suffering. IL
not in the same degree. neverthc-
less in much the same way as the
United States wherever a similar
relationship exists with regard to
their respective currencies and to
the currencies of the different
states of Europe.
The Future Outlook.
1t is to be expected that. in the
course Of time, price levels and
wage levels will rise in countries
WIN ana Will
decline In countries with premium
currencies until an economic equi-
librium is once more attained.
Meanwhile. however, while changes
in the relative premium and dis
count on currencies are going on,
the process Is causing incalculable
inconvenience and serious injury
economically, financially and social
lV-hnfh IN thu l.
count countries.
The second phase of the derange-
ment. that is. the daily .fiuctuation
of exchange, is destructive OF sound
and progressive business. because
1t drives every international trans
action into the realm of specula-
ton. The daily fuctuation in ex-
change. in many instances, absorbs
more than the normal margins of
profit. and thus either enlarges the
margins or drives business to a
cash basis instead of the accus-
toned credit relationships. In
either case, the result is a decrease
in the entire commerce of the
world.
These fluctuations are less ex-
tensive between the American re-
publfcs than they are between the
American republics as a group and
Europe, but 1t is impossible to dis
associate American exchange
relations from the European rela-
ton. The European American bus
mess fabric is constructed on a tri-
angle with one point resting in Eu-
rope, and two points in South and
North America. Any consideration
OF the effect of the exchange prob
lem on the trade of the American
republics must therefore involve the
question of exchange stability be-
tween Europe and the Western
Hemisphere. So long as the Eu-
ropean vertex of the economic tri-
angle remains unstable, the estab-
lishment of stability in inter-
American exchange will be attend
cd with difficulty.