The Washington herald., 1922-03-26

Al the end of last year, says
Commercial Attache Tower, at Lon
don. in a dispatch to the Department
of Commerce. expert opinion. on the
assumption that the strength OF
sterling was based on sentimental
factors, assessed the true value Of
the pound sterling as between SS.eo
and 81. When quotations in Feo-
ruary rose above $40. however. eX-
pert opinion shifted and cited sew
eral reasons to show why that hg-
ure may be regarded as a true ell
max of conditions. On the whole
these reasons represent an analysis
of underlying influences that will
At the conclusion. rather than an
inevitable conclusions drawn from
the facts.
Level Too Lew.
First-It Is claimed that the level
of sterling-doIlar exchange in the
summer of 1921 was too low, owing
TO over-discounting OF the expected
requirements for dollars to pay the
customary heavy volume OF imports
of raw materials and foodstuns dur
ing the autumn months. 1t Is eN-
actly at this time, however. that
the business outlook was generally
felt to be nearly hopeless for many
months to come, and buying was
confessedly on a hand TO mouth
basis.
Second-It is stated that the
pound sterling was out OF line as
regards its purchasing power par
ity. a situation brought about. II Is
claimed. by a rise of prices in the
United States, while prices con-
tinued to fall in the United King
dom. Such an influence probably
was a factor early in the year put
since August the course of price
index numbers in the two eoun-
tries has not been such as to JUST
fy placing very much weight on
this particular argument. When
the idea of purchasing power par
ity was advanced by Prof. Cassel'
as a determining factor in exchange
rates. the idea was not regarded
very seriously in some financial cir
Giles. where IL is now being ap-
pealed to as an influential item in
the recent course of sterling-dollar
exchange.
DECLINING Experts tnctof'
Third-The declining exports
from the United States are held to
he A considerable factor because
the shrinkage of exports to the
United Kingdom has not been ac-
COMMANDED by any corresponding
shrinkage in imports Of British
goods. This trade argument IL
clearly sound as a reason for some
of the recent strength of sterling.
Its relation to the future course OF
exchange. or even the maintenance
of the present level. Is quite an
other matter. The rise in sterling
has made British goods dearer L"
the prospective buyer and imports
correspondingly cheaper, thus tend
ing toy revive exports from inc
United States and to decrease I'M
ports into that country. Prospect
i've tariff legislation, also. may
make II more difficult to sell Brit
ish goods In the United States. TN
TIE other hand. progressive revival
Of Eritish industry and trade would
involve larger purchases of raw
materials from the United States.
Payment uf interest and anything
on account Of sinking fund In con-
ection with the British war debt
will further increase the demand
for dollars. 1t would therefore,
seem that on this line Of agreement
future prospects should tend to re-
press, more than maintain, the
strength of sterling in terms OF dof-
lars.
Fourth-Some argue that pay
ments on account of war debts have
already been largely provided for.
| Brt it is difficult to believe, that
with first interest date nearly a
wear off. a properly administered
treasury was buying ct n heavy
premium in the first half of the
year.
Fifth-The buying of securities
from British holders, the purchase
of British treasury bills for Ameri-