PAYING AMERICA

Evening Post, Volume CV, Issue 89, 14 April 1923, Page 12

PAYING AMERICA

HOW IT IS GOING TO BE DONE.

Every year for th;e next 60 years (cays the financial editor of .the "Daily.Mail") the British. Government. is going to pay the American. Government more than £30,000,000 in interest and instalments of principal on the War Debt. How will this big sum be remitted? .The necessary amount will come in. the first place from the British public in the form of taxes. But,it is payable to the American Government in. New York in dollars. It will therefore be necessary for the British Government to convert so much sterling in London into dollars in New York. This will be done either by drawing gold from the Government's account at the> Bank of England and shipping it to N«w York to be sold there for dollars ox by the commoner and more probable method of buying "exchange" on the foreign exchange market, just as the British citizen who owes a New York firm bo many dollars buys dollar exchange through his bank. The Government's bank for such transactions is, of course, the Bank of EnglandT This exchange means, in affect, that someone who has dollars in New York and wants sterling in London instead will give his dollars to the British Government in exchange for its sterl-

In normal, times these exchange operations were effected with comparatively little shipment of gold. The demand for sterling- in exchange for dollars approximated to the demand for dollars in exchange for sterling, because the surna we were remitting abroad for goods and services arid for new loans to foreigners were approximately equivalent to the sums owing to us for goods, services, and interest. The war violently upset the equilibrium, and there has been a big balance each year in favour of the United ' States. These balances have been m%de up by gold shipments. Last year we shipped £26,632,645 of gold to the United States; in 1921 we sent £55,456,----340, and in 1920 £52,833,423. Latterly, however,, the balance has been turning in our our favour, as the rise in the American value of the £1 sterling shows,' and whether the £30,000,000 a year goes iij gold or in goods and services will depend on the continuance of this favourable trade movement. If gold has to be sent, we shall have plenty to send. We received £32,463,461 of gold from the South African gold- mines last year, £36,----577,772 in 1921, and £38,662,923 in 1920. The United' States, because of her huge war trade profit-B, already has more gold than she knows what to do with, the Federal Beserve. Banks holding over £600,000,000 of it. If Americans should employ part of this gold in financing Europe, ■ that would increase the balance in our favour, and we might find our^ selves paying our American debt in the gold that ■ the United States at present possesses. • ■ :