The Daily Alaska empire. [volume] (Juneau, Alaska) 1926-1964, 1938-11-16
Foreign Capital In Our Market

New York Tines
The persistent weakness in sterling exchange de-
spite its recovery from the pancky price $460 dur
ing the September war scare has generally been
assumed in banking circles to mean continuing re-
mttance of European capital to this country OF this
the import of gold-S520 100000 in September and
something like S150OOOO00 during the present month
is at least partial measure. Continuance of this
movement makes it much in point to inquire how this
transfer OF capital affects our own financial situation
During pre-war days and practically throughout our
financial history up to that time movement of Euro
pean capital, into away from our markets. often
had profound effect the American situation
whether by its direct investment in our securities and
industries or in building up American bank reserves
The Treasury has not yet compiled the ascer-
tanned quarterly movement since June 1888. In the
nine preceding months it estimated the net with
draWal Of foreign capital wholly account of short
term banking funds at 1891 100000 of which was
taken out in the last quarter of 1897 But the heavy
fall in sterling exchange from the high rates preva-
lent in the first half of the year sufficient testi-
mony to the change in direction of the capital re-
mittances.
In older days reversal of a trend from with
drawal Of foreign capital to its renvestment here
was apt to be occasoned by rise in American money
rates This has not the present occasion been
evidence There is left for consideration the effect
position of foreign capital sent for shelter
10 America, because the home situation disrusted
That is what happened in the autumn of 1914 when
English markets were confronted with moratorium on
debts and wartime depreciation of its currency but
when the bankers of the United States had pooled"
their resources to guarantee payment in gold OF
all maturing foreign obligations. The result in
Simultaneous. European capital RENTED to the
United States and funds accruing here for shipment
Of goods from Europe left deposit AS result
foreign exchange which had been running heavily
against moved strongly in our favor the bank
position immensely strengthened and American
recovery from the panic began All this it should
be remembered, before the war orders from
Europes begerent Governments converged the
United States.
In far this incoming foreign capital was
invested here (and the Treasurys quarterly estimates
found that when foreign short-term balances
were being Withdrawn net foreign purchases of AM
erican securities increased moderately it would af-
feet the stock market It's effect on industrial
covery not plain, because allowance must be made
for the changed banking situation When the move
ment of foreign capital to this country began in the
autumn of 1914. the New York banks still under the
old banking system, reported heavy deficit in
serves. This changed to a high surplus a month
or two later But when withdrawal of foreign
capital in progress earlier this present year
money rates extremely low and excess reserves
of member banks, although still under the influence
of increased reserve requirements, remained above
billion dollars and increased half billion in three
months. The problem with the incoming foreign
capital with home reserves to get the accumuat
ing funds to work.