THE FINANCIAL BAROMETER

Dominion, Volume 9, Issue 2667, 12 January 1916, Page 4

THE FINANCIAL BAROMETER

Since the dawn of the New Year we have had some interesting messages from New York, of a financial character, and the information contained'in these messages gives an indication of American views as to the probable duration of the war and the ultimate result. American bankers and financiers have no interests to serve but their own, and it is reasonable to suppose it is immaterial to them whether they make money out of tho Entente Powers or out of Germany and her allies. The Americans have financial relations with all the principal belligerent Powers, and their sources of information may be .taken to be reliable. For these reasons American opinion as to future prospects is entitled to have some weight, and to bo received with some respect. It was stated in one message that "Wall (which is the familar name.for the New' York Stock Exchange; is confident the war will end in 1916. Bankers in constant touch with European capitals are most optimistic, and declare emphatically that' Germany is already beaten, despite her military successes. All prominent American financiers say that commercially and economically Germany is tottering, and this is reflected in the extraordinary depression of the currency^" Mere statements of this character, valuable though they aro as indicating neutral opinion, are in them-' selves insufficient to establish a prima facie case against the prospects of the Master Criminal of Europe, but we have further convincing evidence that these opinions are well founded in the movements in the exchange. The financial barometer is dead against Germany and rising steadily in favour of Great Britain. The exchange problem is decidedly interesting when viewed in connection with the great war. The theoretical or mint par of exchange is based on the pure or fine gold in the several coinages. The gold coins of Germany and the United States are nine-tenths fine, and British gold coins arc eleventwelfths fine. The mint par of exchange worked out on the pure metal in the coins is 1 as follows: — | ,£1 equals 20.43 marks. I ,61 equals 4SS cents. 20.43 marks equal 186 cents. That is to nay, the value of the pure gold in a sovereign is worth 20.43 marks Gorman money, or 486 cents of American money. In actual business the theoretical par of. exchange does not hold because the cost of transporting the metal from one country to another and the balance of trade existing are factors that must be taken into consideration.. Just before-the Germans and Austrians invaded Serbia the exchange rate stood as under JQI equals 470 cents. 20 marks equal 420 cents. Tho difference in favour of Britain was 50 cents, that is to say, the sovereign bought more American money than the equivalent of German money (20.43 marks) was able to buy. On January 7 a New York message gave the exchange rates as follows:— £1 equals 476 cents. 20 marks equal 367 i cents. Thus, while the German rate was falling, the British rate was rising, and the difference of 60 cents which was the advantage'enjoyed by Britain prior to the invasion of Serbia, has increased now, despito the fact that Serbia has been overrnn, to 99 i cents. This depreciation of German credit is a striking evidence of the American view that Germany is becoming exhausted, and that her futiiro prospects are gloomy. The collapse of Germany will mean heavy losses to many in neutral countries, and tho American bankers, to uso , their own expressive phraseology, are taking early stops to "come from under."