Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-05-18


rencies sank to low levels in our mar
ket, and for a time gold was shipped
to this country despite the shortage OF
funds in Europe.
Foreign Exchange Advances.
This situation now appears to have
been corrected. Foreign exchange rates
have advanced. and interest rates
throughout the world have moved down
ward. Credit conditions in the United
States in the near future should be
more inviting to foreign borrowers than
they have been for some time. Just at
present the state of business is not such
as to encourage large security f1otations,
but this is a passing phase. Europe
will continue to need American capt.
tai and America will continue to look
to Europe as field for investment and
as market for It's products.
These financial conditions. which are
almost world wide in their application,
are accompanied by variety OF COM
plications in many countries that ordi-
narily provide important markets for
American goods. Several nations have
recently conducted experiments in price
control for their leading products, with
most unfortunate results. In England
financial stability has been maintained,
but apparently at the cost of industrial
Cling with the problems imposed by
currency sterilization. Germany, which
has depended more largely on Ameri-
can capital than any other European
country, has recently encountered seri-
Gus financial difficulties.
Brazil has been depressed by the de-
cline in the price of coffee and the
doubt that has arisen as to the future
success of the govermentally sponsored
defense program. Cuba has been SIM
1larly affected by the sugar situation.
Argentina, concerned by the trend of
her foreign trade and by large gold ex-
ports, closed the Gaia de Conversion,
the Argentine gold conversion ONCE.
Australia Is contending with a diff
cult exchange situation Political chaos
has interfered with trade In China.
Japan has passed through a critical
financial period, aggravated by the eff
fects of the earthquakes few years
ago. Mexico, Nicaragua and other
Latin American countries have been
affected by political disturbances. In
all nations having the silver standard
the recent drastic decline in the value
Of that metal to the lowest level on rec
ord has created difficulties. With this
variety of obstacles to encounter, the
immediate outlook for American foreign
trade is clouded with many doubts
Looking into the more distant future we
are justified In taking a much more OPP
timistic view. We shall continue to
have difficult problems to face; but
If these are intelligently met we may be
confident that the trend of our foreign
trade will continue to respond to the
influences making for expansion.
1t must be recognized that the proc
ess whereby we have maintained our
export trade balance in commodities in
recent years cannot be continued indefi-
nitely. We have been passing through
an abnormal period which appears to be
drawing to a close. We have just seen
that the interest on our loans abroad
has already increased to a point where
it represents large export item in our
balance of payments. Last year 1t was
not much smaller than our surplus of
commodity exports. Every new foreign
issue floated in this country temper
arily stimulates our export trade, but !
it must increase the pressure
upon us to receive foreign goods and
services In payment OF the interest due |
to us; and unless we can find q way to |
admit such goods and services without |
unduly restricting the market for our |
own products our export trade must |
suffer.
Loans Will Exert Pressure.
In other words. the loans that have |
enabled us to expand our export trade |
balance in recent years will, as time |
goes on, exert an increasing pressure |
in the other direction. The effects of |
ntergovernmental debt payments and |
Of payments Of interest and principal |
on American loans abroad will be to |
decrease purchasing power and to Gre
ate strong demand for dollar exchange |
In the debtor countries. These factors, |
In turn, will tend to depress prices in |
those countries and to raise prices in |
the United States, and at the same time |
to exert an upward pressure on the ex- |
change rate of dollars in terms of for |
eign currencies. The effect of this |
situation will be to make 1t increasingly |
difficult for American producers to |
maintain costs at competitive level /
and less difficult for European producers
to offer strong inducements In the mat
ter Of price.
Stated in broad economic terms this
means simply that the United States
will find 1t increasingly difficult to
maintain its position as an exporting |
nation and to prevent the encroach-
ments OF foreign producers in its do
nestle and foreign markets. A creditor
nation Is normally an importing nation.
So far the United States has not be-
come an importing nation because It |
has received invisible" imports and |
has increased its foreign investments
fast enough to offer the receipts from !
existing loans.
But the insistent demand for funds
for European rehabilitation will not |
continue forever. In the long run
Europe will probably not offer the most |
field for the investment |
OF American capital, as it has in the
last decade, and we must look elsewhere
FOR opportunities to invest our funds. !
AS long as foreign countries continue to |
provide such outlets our export trade |
balance in commodities can be main |
tanned. Little by little, European coun- |
tries will probably be supplanted by the |
nations of the Southern Hemisphere,
the New World and the Far East as the !
principal sources of demand for Amer
lean capital and American goods.
But these fields for investment and |
export cannot be developed with the |
small amount of effort that has been |
required TO respond to the desperate
need of Europe during the last 10 years. |
and ultimately our income from invest |
ments abroad will become so large that |
we shall not be able to find new foreign !
outlets fast enough to provide us with |
the means of maintaining our export |
trade balance.
Concerned With Readjustment.
This point, however, appears to be far
in the future-far enough, at any rate,
SO that we need not be seriously con-
cerned with it at present. What does
concern us is the complex set of read |
justment that we must face when Euro |
pean rehabilitation is completed when |
the New World and the Orient, rather |
than Europe, furnish our chief markets;
and when a revived European industrial
system becomes a serious competitor in
such markets. To appreciate the true
significance of this prospect we must rid
ourselves of the fallacious view that the
restoration of Euronean industry will. in