The Wanganui Chronicle FRIDAY, JUNE 26, 1931. AMERICAN MONETARY CONDITIONS

Wanganui Chronicle, Volume 74, Issue 149, 26 June 1931, Page 6

The Wanganui Chronicle FRIDAY, JUNE 26, 1931. AMERICAN MONETARY CONDITIONS

PRESIDENT HOOVER’S proposal for a year’s var debt payment holiday is so novel in its relation to America’s previous attitude that it is permissible to indulge in the somewhat ungracious exercise of enquiring in how far it will help or harm America itself. A survey of America’s monetary condition carries with it the conviction that America will benefit considerably by the Hoover war debt proposal. This does not detract from the value of the proposal as such, nor of its desirability for the rest of the world. Despite the fact that America is a creditor country, and as such should be receiving more in imports than the goods she exports, she has consistently exported more goods than have been imported. This excess of exports in recent years has been as follows: Year. Excess of Exports. 1923 $375,427,000 .1924 981.021,000 1925 683,258,000 1926 377.772,000 1927 680,663.000 .1928 1.036,912.000 1929 841.634,000 1930 782.300,000 Besides this preponderance of exports, America also receives payments of interest and principal due upon foreign loans and other overseas investments. These are estimated to amount to approximately 1,200,000,000 dollars, of which 236,000,000 dollars represents payment of interest and principal on war debts. A third item of importance is the foreign purchase of securities by operations on Wall Street. The Department of Commerce has estimated that this buying amounted to 1,500,000,000 dollars, 'and 1,537.000,000 dollars in the years 1928 and 1929. The lower stock levels of last year will doubtless tend to decrease the total credit balance involved on this account. It was estimated by the Commerce Department that the payments to and by America in the year 1929 just about balanced each other. The outflow of money from America other than the payment for imports (which as is shown above is more than offset by exports) is occasioned by external loans, which in recent years have been as follows: 1928 $1,250,951,00(1 1929 671,231,000 1930 905,333,000 The spending of American tourists abroad—estimated at 700,000,000 dollars for the year 1929—is another cause of financial outgo, as are also the payments for shipping services and the remittances of immigrants to their families and relatives in their respective homelands. The depression has naturally contracted loans to foreign countries, the payments for foreign shipping services, the outgo of tourist expenses, and the remittances of immigrants, so the disequilibruim has been an increased one since the year 1929. For the first three months of this year trade has declined heavily, the balance of exports amounting to 141,840,000 dollars, as compared with 236,115,000 dollars for the corresponding quarter of last year. The balance of the world’s trade with America during 1930 may be gauged from the fact that America’s goldholdings increased by 278,000,000 dollars. During the first four months of the current year American gold imports totalled 131,000,000 dollars, plus 10,000,000 dollars en route from the Argentine, which is at the rate of 400,000,000 dollars for the year. The Federal Reserve Bank of New York has done almost all it can do by reducing its purchase rate for acceptances to per eent. With the London bill rate at 2 9-16ths per cent, the inducement is for loose gold io go to London, not to New York. Banking policy, therefore, cannot be blamed for the embarrassing flow of gold to America. For this gold flow is embarrassing. It means the piling up of a non-interest earning asset, while at the same time the credit structure of America’s customers must either become unsound or else contract. The inevitable result will be a progressive reduction in international trade in which America, too, will bear an increasing burden.

President Hoover’s proposal will stop the flow of some of the gold to America but unless some further change takes place America will continue to absorb gold to a degree that is as equally embarrassing for the consignors as it is without advantage to the United States of America.