The Waikato Times With which is incorporated The Waikato Argus. THURSDAY, OCTOBER 13, 1921. EXCHANGE

Waikato Times, Volume 94, Issue 14774, 13 October 1921, Page 4

The Waikato Times With which is incorporated The Waikato Argus. THURSDAY, OCTOBER 13, 1921. EXCHANGE

Among the various difficulties which confront us in restoring trade to a satisfactory footing exchange is one of the most troublesome, and to many of us the most difficult to understand. The German mark, which formerly exchanged at twenty for the pound sterling, has fallen, and 360 can be had for a pound. But when that pound is exchanged in America it will not fetch 4.80 dollars as iff"the brave days of old, but about 3.36 dollars, and it is a mystery to very many why this should be. There is a very common idea that it is owing to the machinations of speculators, and the idea is encouraged by the undoubted fact that some people are speculating on exchange. It is certain that they will do so on a matter that fluctuates wildly clay by day, but whether ihcy arc increasing the evil or not could only be decided upon after careful watching. There are, in fact, very definite reasons for the altered value of currency, and usually there are reasons for the further changes that constantly take place. All the countries that were at war have incurred debts, but to varying amounts. Their currency is depreciated in their own country, and Ihcy meet this as far as possible by adjustments in prices and wages, in the manner with which \vc are familiar. When, however, trade is done with another country these adjustments cannot be made. At bottom all trade is an exchange of goods. If an impoverished country wishes to buy from outside it must find something of equal value to offer in exchange. If it cannot find this the country which has supplied the goods has a difficulty in obtaining payment. The merchant or banker who has been paid in the cash of the country which made the purchase looks for a merchant or banker in the first country who owes money to the country which imported, and has difficulty in finding anyone. He is unwilling, therefore, to accept drafts, or to finance the business, and will onlv do so on an exchange which covers his risk and trouble. This is in the cases where matters are not desperate; iTiat is to say where there is a constant interchange of goods, but one country buys more than it sells. When, however, a country has practically nothing to sell, the exchange goes against it to an incredible extent- The Austrian krone before the war exchanged at 24 to the pound. Now the pound will buy 3000 kronen. The difference does not represent commission or profits, but roughly 3000 kronen will only buy in Austria what could* formerly be obtained for 24 kronen. Business men cannot carry on the most simple operation of importing goods for sale without running the risk of making losses to a very serious extent. The exchange itself raises prices, and the fear of losses raises them again. Until we lost it we did not understand the immense advantages which the world reaped from the international system of money changing which enabled the goods of one country to be sold in another, and made the fruits of the earth available for all. The bankers and financial men have been casting about for methods to overcome the exchange difficulty. A Mr Ter Meulcn, a Dutch banker, has put forward a scheme in which the various Governments are to assist by advancing to the exporter on the shipment < of his goods a considerable portion of the invoice value- The Government of the country to which the goods are sent is to guarantee the payment after an interval to give time for the sale of I the goods, and it will, of course, satisfy ! itself that the Arm w'; ! 'h has ordered the goods is likely to be able to pay. The system has not been adopted, and it is scarcely likely now that it will be, I although it found much favour at first. i It is felt that no amount of Government ! assistance can maintain the mark or \ the krone or any other currency at in fixed proportion to the pound unless 1 ihe country which buys goods has 'goods of an canal value to sell. The ' system would work with those coun- ! tries where trade and production are carried on though under difficulties, but would be of no assistance to the coun--1 tries which chiefly need help. Nothing will really cure Ihe trouble except, a | return to bare facts; a recognition that I trade is an exchange of goods, and that I a country if it is to prosper must be able to give as good as it gets. While this exchange of goods is at the bottom of the problem, there are constant cross-currents arising which confuse its aspect. The Germans have been making their payments through London, which has thus received a huge sum which it has then had to disburse. Large sums will have to he sent to New York to pay for wheat imports. This is an annual occurrence, j hut always has some slight effect on i exchange. Such things as these, however, arc but temporary in I heir itiflu - j once on exchange, which always tends | lo work back to the figure which cxI presses the proportion between a coun- | try's exports and imports. It may he asked why we know little or nothing I aboul the problem in this country, but I Ihe explanation is thai we have no free 'market in exchange. The rale is flxei j by the Associated Banks, and as the

bulk of our business is done with Bri- ] tain there is rarely any occasion for variation. We do, however, feel the I effects of exchange with the United States, with India, China or Jupau. We have had Eastern products first raised in price and then cut down by the operation of exchange. The United States is the country which will probably figure in the text-books of the future when exchange Is discussed. Several European countries owe money to the United States Government. The merchants of these countries owe money to the merchants of the United States, and the latter are not prepared to take goods in payment. If, therefore, they sell further goods there is great difficulty in arranging paymentThe London merchant who owes money to an American cannot find an American who owes money in London, and in consequence the dollar has gone to a height thai makes it expensive to look at a citizen of the United States, and the export trade has fallen severely. It is being brought home to them in a practical manner that trade is exchange of goods, and that tariffs arc powerless to alter this. It shows how prone men arc to run in a groove that they persist in tariffs fo impede the exchange of goods at a time when the natural difficulties in the way of such exchange are felt to be amongst our heaviest misfortunes.