The Dominion TUESDAY, OCTOBER 5, 1915. THE EXCHANGE PROBLEM

Dominion, Volume 9, Issue 2584, 5 October 1915, Page 6

The Dominion TUESDAY, OCTOBER 5, 1915. THE EXCHANGE PROBLEM

The obj&cfc of the Anglo-Frenoh loan of £100,000,000, whioh has just been successfully floated in • tho United States, is not to raise money for direct war purposes, but to place the commercial relations of Britain and her Allies with the United States on a more satisfactory footing. The .exohange problem has reached an acute stage, and the loan is expected to relieve the' situation. Experts consider that it will go a long way to restore the financial equilibrium which has been upset by the disorganisation of . trade caused by the war. l The great excess of. Britain's imports over exports during the past twelve months has resulted in a position which the ordinary methods of finance are unable to satisfactorily cope with, and extraordinary measures have had to be adopted. For. the year ending July 31, 1915, the excess of imports over exports was no less than £342,000,000, whereas for 'the preceding year it was only £142,000,000. This has hada very pronounced effect on Britain's foreign • exchanges, while her Allies liaye suffered in the same way,\ particularly Russia. The British Government, acting in' consultation with her Allies and with leading financial experts, has found it advisable to devise means for counteracting the trend of events in the money market. The Financial Times recently stated that for some time the American exohange on London, in consequence of the immense importations of war munitions by Great Britain, has been so low as to be a causc of anxiety t6 the Bank of England .as* the "Custodian of the national gold reserve. Large eal« to New York of American securities hitherto held by. Brit-,

ish investors have helped as a set-off against tho adverse trado balance; but the volume of securities available is limited, and this method of dealing with .the situation can only provide temporary relief, and would inevitably aggravate the position in the long run. In the opinion of tho above-mentioned journal, the best thing that could happen from tho commercial point of view, short of peace, would be tho forcing of the Dardanelles, whioh would correct tho abnormal rate of the Petrograd exchange, and, by enabling Russian grain and other produce to be exported from the Black Sea ports, would reduce Britain's excessive importations from the United States. But the Dardanelles campaign has not yet been brought to a succcssful conclusion, and it has been found necessary in the meantime to find some other solution of the exchange <problem. The expedient which has been decided upon is the raising .of the £100,000,000 loan. It is satisfactory to know that proGerpian attempts to block the loan have been frustrated, and that it will be largely over-subscribed. The general opinion seems to be that the Americans have got the best of the bargain; but the exchange rate had to be placed on a better footing. The financial journals regard this las the paramount consideration, and lib will be a valuable set-off, to the stiff. terms charged in connection with the loan. The fact that the success of the loan has caused irritation and resentment in Berlin may bfi taken, as an indication that it is recognised there that it will prove of very material benefit to the Allies. One German paper makes an angry attack .on President Wilson' for not opposing the loan, and suggests that his non-interference practically amounts to a breach of neutrality. This, contention is* of course, quite unreasonable..-No dictate 'of international "law forbids private indi ; viduals in a neutral Stats from lending money, to a belligerent. As a matter of fact Germany iierself at one time thought' of raising a loan ■ in America, but abandoned the idea bceause she discovered that American financiers wore not inclined to give favourable attention to the proposal.