Perth Amboy evening news., 1923-07-20

TO America q CneCh pdydple III
pounds but wants to buy dollars, al
ready in America. The bank sells
him the dollars represented by the
American check charging a small
profit on the transaction.
Larger Profit Possible
If, in the meantime, the balance
of trade has changed materially, so
that there is a bigger demand for
dollars than when the check came
into possession of the bank, a larger
profit is made because the price of
dollars goes higher.
The business of the world is so big
that checks constantly are passing
through the banks of all countries
and when they call for foreign sums,
they are put in the foreign exchange
account and used to supply demands
for that kind of money. Also, there
is a constant interchange of demand
for currencies. Americans owe money
to Germans. They go to their banks
and buy German marks. A check is
made out to the bank for a certain
amount of dollars. In return the
bank gives a check for the equivalent
at current quotations, in marks. The
check calling for marks then is sent
to pay the German debt. The Ger
man who wants to pay money in this
country goes to his bank and buys
dollars. He must pay a great num-
Der of marks to get a few dollars
because o people want dollars
than want marks.
1t is again a question of supply and
demand. The price is fixed by the
banks in accordance with the sup
nIrv nTa1 ~, ~ a,,aA 80 IT, -. -1w1k
for fish is fixed. II a large catch
of fish ONE into a market, the
price goes down. The dealers find
they can not get what they would
like, SO they lower the price. The
banks sell exchange-that is German
marks or French francs or Austrian
kronen-for what people will pay.
Daily newspaper quotations are
watched by people dealing in these
currencies and so there is a general
concensus of opinion about what Is
the right price.
A fact not generally appreciated
Is that, normally, there would be a
difference in exchange even though
%currencies were expressed the same.
II Germany, France, England and all
other countries used 100 cent dollars
AloLtdu VI lIldIhSt lIdllCS anu pOuiluSi
there still would be a difference in
exchange. 1t would depend on the
debts owed by one country to an
other. A German dollar would not
be worth as much as an American
dollar if Germans owed money to
Americans and were competing tc
buy American dollars to pay off
those debts.
One fact which has complicated
the present demoralized exchange
condition is that most of the Eu'
ropean/ c~urrencies are no longer re-
deemable in gold. Everyone knows
that a paper mark is not good fol
a gold mark. Everybody knows thai
a paper dollar is good for a GOLD
dollar. This adds 10 the difference
in exchange. The owner of al
American dollar insists on having {
lot of marks in exchange for it be
cause the mark represents merely tn,
promise of a more or less bankrup
government and does not represen
gold. The marks value is profile
NAUTICAL. The dollars value is fixeC
and sure. This is an added intricac,
and normally does not enter into for
: eign exchange transactions between
: Europe and America, although it ha
become an important element sine
| the War.
Fundamentally, foreign exchang
: is simple in that it merely mean
I that a poor country must pay extr
= for a rich country's currency. TIL
basis of the whole system is risk.
If countries exchange goods direct
= ly, there would be no such thing a
S foreign exchange. When the poore
country ran out of goods, it merel
would stop exchanges until it az
S cumulated more. 1t is the system {
Y using money, which is artificial, I
fill in the gaps. which results In de
probation of exchange values.