Evening star., 1940-03-03
American Dollars
and the War
By ODen L. Scott.

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II Europe's war turns out to be q long
war that law is going to precipitate grave
decisions both for the allies and for the
United States.
When Congress decided to put down. in
black and white what were to be the
rights of American shippers in wartime
and what were to be the conditions under
which nations at war could trade with
this country, 1t all looked quite simple
American ships thereafter would keep out
of war zones and American dollars would
stay at home, where they could keep out
of trouble
Experience now shows that it has been
quite simple to reroute this country's
ships to keep them out of troubled zones.
Almost all Of the ocean vessels that had
carried the American flag to Great Brit
ain and France now have found work to
do along other ocean lanes. But the
repercussions that flow from tha new
rules governing the use of American dol
lars in wartime are just beginning to be
apparent. Those repercussions will be-
come increasingly important and, in the
end, can be vital.
The point is that, logically, the United
States must serve as base of supply for
the allies
But this great American reservoir can
be tapped only by warning nations with
cash. The neutrality law bars loans in
any form. 1t even bars short-term busi-
ness credits. If this is to be long and
costly war the allies may find themselves
running short of dollars. In the first
World War-half as expensive as the pres
ent slow war-Great Britain and France
used $11 000, 900 900, over and above the
dollars received from selling goods here,
to pay war bills. The United States sup
piled eight of those billions through loans
that were not paid.
This time, under the law, there can be
no loans. Consequently, the allies must
look to their supply of cash dollars and
to their supply Of possessions that can
be turned into dollars. They find them
selves with s2,50o,0OO000 in American
bank balances and American securities.
They own $4,000 900, 600 in gold that can
be turned into dollars. They have IS, ,O0O,-
100000 in Canadian and Latin American
properties.
Here is more than $4,000 900 900 that
conceivably could be mobilized and used
to pay for American goods. But even
that huge total would not be enough in a
long war, and only portion of that total
could be realized
Consequently, the British and French
owing to the neutrality law-are hav-
Ing to start out with the planned use Of
the resources that they do have. Most
officials think that Congress would fall
over itself to remove the present bar to
loans rather than to face the sort Of
depression that would follow any COL
lapse of business built on war orders.
But the allies right now are not figur-
ing on that basis
Instead, they are mobilizing their
American holdings preparatory to turn
ing them into dollars And they are US
ing them into dollars. Dollars are a vital,
basic reserve.
In spending their dollars, Britain and
France are cutting down purchases in
the United States of goods that they can
get elsewhere through exchange of their
own goods or through exchange of Brit
ish and French currency on better
basis.
But they are greatly increasing their
purchases of American airplanes and
American machinery and American ma
chine tools. They have plans for spend
ing 100000 900 for military airplanes
alone.
Yet, in that very lop-sided sort of trade
| forced by neutrality law considerations,
| there is danger for American industry.
Danger lies in the fact that the British
| and French are using their cash to create
vast war supply industry in the United
States that would face collapse once war
| ended. And. in the meantime. they are
| using their controls over their own in
dustry to maintain an export trade in
| peacetime goods of their own.
Many American manufacturers are
aware of the danger of this situation and
are insisting that war orders carry with
them margin of payment that will per-
NIT building of additional plant so that
peacetime trade in airplanes and other
goods for export can be carried on.
The real catch is going to come. how
ever, if and when the British and French
face shortage of dollars. That time
might not be so far off, as many think,
If this war continues and grows more de-
structive. When the time does come
that the British and French run out of
American money there is every prospect
that way will be found to provide them
with needed money rather than to see
collapse of war business upon which an
important part of business activity will
rest.
| Before the time comes to face that
issue, this country at least is insisting
upon one point upon which it did not in
sist in the last war.
The point is that the United States
wants to be sure that the British and
French really do sacrifice their holdings
in this hemisphere in exchange for the
goods that they get from the United
States. The allies have large security
holdings in American industries, in Ca
madam industries and in Latin American
industries They managed in the last
war to avoid liquidating those earning
assets to pay for war goods bought in
the United States In this war, the
present official attitude is that this in
vestment must really be nquidated, with
| ownership transferred to American