THE MYSTERY OF EXCHANGE

New Zealand Tablet, 4 November 1915, Page 27

THE MYSTERY OF EXCHANGE

There is something baffling about this rate of exchange, of which we hear so much (says the Toronto World). A man in Canada owes a Birmingham manufacturer <£looo sterling for goods sold and delivered. Ordinarily that would mean that he owed him 4865 dollars. In ordinary times he would have to go to the bank and pay 4865 to get a draft for £IOOO sterling, payable at par in England. To-day he can go to the bank in Toronto and get such a draft for 4500 dollars. Now the Toronto man is clearing over 300 dollars by the break in sterling exchange, but the English manufacturer gets all he contracted for for £IOOO sterling. The Canadian merchant makes money, but who loses it? One of our big millers the other day had an English acceptance fall due for £20,000. He could not take the time to go to England to get the gold and bring it back with him at the risk of being blown up at one end of the voyage or the other. So he took the money the Toronto bank gave him for it. Six months ago that "acceptance would have been worth par. As it was, he pocketed a loss of 6700 dollars. We can perhaps think more clearly if we think in ‘ silver instead of gold. The Canadian silver coins, 1 except in {he border cities, are discounted 20 per cent.

in the United States. A Canadian visiting Central Ohio, . for example, might bring home with him four Canadian quarters, for which he only paid 80 cents. For a time we used to retaliate in Canada by having American silver. An amusing story is told about a man who lived near the, international line between Quebec and New Hampshire. This man would go into a hotel on the Canadian side, get refreshments to the value of 20 cents and tender a dollar bill in payment. He would ask for and the waiter would" cheerfully give him four American quarters in change. They were only worth 80. cents in Canada. The man would then cross over to New Hampshire * and exchange the four American silver quarters for an American dollar bill. Entering a place of refreshment on the New Hampshire side he would consume 20 cents’ worth of food and tender the American dollar in payment. He would here ask for and have no trouble in getting four Canadian silver quarters in change, the four Canadian quarters being worth in New Hampshire only 80 cents. Then he would return to Canada and resume his endless chain. ' :

He certainly made money, but who loses it?