EXCHANGE ISSUE

Evening Post, Volume CXV, Issue 40, 17 February 1933, Page 9

EXCHANGE ISSUE

'"■' A MUNICIPAL LOAN

REFUSAL TO PAY

CANADIAN CITY'S STAND

VANCOTJVEB, January, 18. The' City of Calgary, with a population of 60,000, the commercial centre of valuable ranching country in the foothills of the Eockies,' has set North America by the heels by refusing to pay 300,000 dollars exchange on a loan of 2,500,000 dollars which matured in New York on January 1. The municipal council has more tjian. once afiirmed its refusal, in spite of the withdrawal of credit by the Bank of Montreal. ; Tlus loan was negotiated in 1913. ■when the Canadian, dollar was.at par with the American. Neither borrowers nor lenders at that time realised that repayment would involve ; any more than regular interest charges, let alone an added 12J-per. cent..in exchange. , 'Xh.o council contends that it -will discharge its obligation to the bond.hold'efs if it pays in Canadian' funds. The' 'American bondholders retort that ' Canadian;, currency -is.-.,worth: only;; 87J cents, on the ;dolla.t! in United States funds.. 'fPatriotic". Canadian boiid.hblders, sensing the prospect of dxtra profit, have; sent their holdings, in the ' ,loan across the border, •to be realised /thore^.'."..:; i;" .-" ...','.: . '•'-■ I The ultimate decision may bo that bondholders will be paid in the currency of the nation in which they purchased their certificates. What will happen to- Canadian holders and Canadian financial houses who purchased blocks of the loan from. American agencies, is open to discussion. ,AVI the cities of Canada are eagerly watching the disputo, many of them with an, eye on.attenuated revenues, hoping that Calgary will win. A year ago, similar action was threatened by the City of Victoria, but the council backed down on. receiving a peremptory warning ■ f rom^ the Government -of British Columbia. .'. ... ; -• ; ; : .^-.CANADA'S LOANS. :- ; Cankda-'s ' outstanding 'lbans- total 4 ? (j0O,Oq0,ODOv dqllarß, 'of which ;48 per cent, were - negotiated in the ; United JStateSj^^ per cent. in.-Canadaj :~ahd: 10: pcr r: cent, in the United: Kingdom. At tho present rata- of" exchange r 'Cif ; Canadian' loans, to mature in-~. iTeTV 'Torky were wound* up,-the sum involved in.' exchange woul3 throw the issue into ~bolder.relief, ConVersiely,-iS the ibulk. of Canadian loans were' raised;in. Lonaon; aa>was the rule the war,: it would create a similar issue :if *the^ question arose of paying' English sub-; scribe'rs-. in Canadian fttnds, ■.with.-;the pound sterling at.a discount'bi;2B.;per ceut.j;compared^ with: :the" year.' before the Wdr.- : - ■;.'; :~:~.:- ';i'S^:: -.:-.-,. '.•.-:.-. .-.'■ ■„"■ .. Shortly: after Britain suspended, the gold' standard, a hint was drpppediff -.Washington; that Canada could, if she chose, unify her "with 'that of the United States.' The. offer :was not' accepted "'as 11, it would havo ■- b'ec'n'impossiblel; to trade vwitbp the Motherland- or:: the: rest of the' -Empire. "It: is. significant • that a: city in a- prairie-' province'sHould refuso to. pay. American exchange, "as farmers on the Prairie ■ say they can never reap tho benefits of the Empire- preference on wheat while the present -disparity between the pound and the Canadian dollar cpqtiiiues. ' ..'.,•..,' ~...; United States back down? Will-Canada back up the City of Calgary? Will the Government of Canada make gold available for. the redemption of municipa.l and Provincial-loans, as at does in: the case of Federal loans? Will the Canadian dollar and the pound sterling be linked? Will Canada go off the gold standard, to the full extent J ..Will the United States do likewise, .to recapture some of the 67 per cent, of overseas trade lost during, the past two and "a halfyears? The answers to-.somf of these, questions may be known .this, dispatch Reaches its-destination; . ]^.ean>:hile, the whole issue of-currericy. ■'exchange is Brought -nearer ,to-a head;by; tho action' W-tho City of Calgary: -'■-■..-- '•■= ■••-- •■ -;•' '■:■■■