EXCHANGE PROBLEM

Evening Post, Volume XCVIII, Issue 144, 16 December 1919, Page 19

EXCHANGE PROBLEM

♦ THE DOLLAR AND POUND STEELING. Great Britain's export trade is still much below its pre-war volume, and supplies of many lines of merchandise required by the Dominion are not obtainable, and we have to look largely to America to meet requirements, said Mr. J. H. Upton, chairman of the Bank of New Zealand at the half-yearly meeting to-day. Buying in . America, however, owing to the rapidly-appreciating exchange value of the dollar, is becoming exceedingly costly, arid a continuance of the present adverse position must tend to. diminish the volume of orders that will find their way thither. In any case, buyers will doubtless readily resume purchasing 'in the Old Country as soon as Britain is in a position to supply, because, in addition to the exchange saving thereby effected, the preferential Customs duty in favour of Empire products represents a further material advantage. American manufacturers will have to cut prices very substantially if they are to counteract these influences favourable to Britain. These exchange difficulties are not confined to America. They exist, also, with India, China, Japan, and other countries in a greater or lesser degree. They are in evidence generally throughout the whole commercial world, and are the result of the heavy liabilities incurred by the belligerent nations to neutrals and others for supplies of food or war material during the years of war. Heavy international floating indebtedness has in this way been created, and, until this floating indebtedness has, been in some way adjusted between 'the creditor and debtor countries, exchange rates between them will remain strongly adverse to the debtor. Under normal conditions, any adverse international trade balance is adjusted by a movement of gold; but the existing debit balances awaiting settlement aro so 'enormous that the supplies of available gold are not adequate for the purpose, and some other mode of settlement will have to be devised. The problem has been engaging the attention of leading financiers in both America and Europe. The solution, it may bo, will lie in the creditor countries granting loans for fixed periods to the debtor countries, or making investments therein, or extending credit, thereto, for terms of years. This will afford the debtor countries the needed time to reorganise their industries, re-develop their export trade, and gradually re-establish'the financial position which the war has so seriously disturbed.