LITMIR.BIZ

Скачать книгу

responsible for a further heavy demand for exchange. Whether it is because Americans are fonder of travel than the people of other countries or whether it is because of our more or less isolated position on the map, it is a fact that there are far more Americans traveling about in Europe than people belonging to any other nation. And the sums spent by American tourists in foreign lands annually aggregate a very large amount—‌possibly as much as $175,000,000—‌all of which has eventually to be covered by remittances of exchange from this side.

      Then again there must be considered the expenditures of wealthy Americans who either live abroad entirely or else spend a large part of their time on the other side. During the past decade it has come about that every European city of any consequence has its "American Colony," a society no longer composed of poor art students or those whose residence abroad is not a matter of volition, but consisting now of many of the wealthiest Americans. By these expatriates money is spent extremely freely, their drafts on London and Paris requiring the frequent replenishment, by remittances of exchange from this side, of their bank balances at those points. Furthermore, there must be considered the great amounts of American capital transferred abroad by the marriage of wealthy American women with titled foreigners. Such alliances mean not only the transfer of large amounts of capital en bloc, but mean as well, usually, an annual remittance of a very large sum of money. No account of the money drained out of the country in this way is kept, of course, but it is an item which certainly runs up into the tens of millions.

      6. Lastly, there is the demand for exchange originating from the paying off of the short-term loans which European bankers so continuously make in the American market. There is never a time nowadays when London and Paris are lending American bankers less than $100,000,000 on 60 or 90 day bills, while the total frequently runs up to three or four times that amount. The sum of these floating loans is, indeed, changing all the time, a circumstance which in itself is responsible for a demand for very great amounts of foreign exchange.

      Take, for instance, the amount of French and English capital employed in this market in the form of short-term loans; $250,000,000 is probably a fair estimate of the average amount, and 90 days a fair estimate of the average time the loans run before being paid off or renewed. That means that the quarter of a billion dollars of floating indebtedness is "turned over" four times a year and that means that every year the rearrangement of these loans gives rise to a demand for a billion dollars' worth of foreign exchange. These loaning operations, it must be understood, both originate exchange and create a demand for it. They are mentioned, therefore, in the preceding chapter, as one of the sources from which exchange originates, and now as one of the sources from which, during the course of every year, springs a demand for a very great quantity of exchange.

      The six sources of demand for exchange, then, are for the payment for imports; for securities purchased abroad; for the remitting abroad of interest on foreign capital invested here and the money which foreigners in this country send home; for remitting freight and insurance profits earned by foreign companies here; for tourists' expenses abroad; and lastly, for the paying off of foreign loans. From these sources spring practically all the demand for exchange. In the last chapter there were set forth the principal sources of supply. With a clear understanding of where exchange comes from and of where it goes, it ought now to be possible for the student of the subject to grasp the causes which bear on the movement of exchange rates. That subject will accordingly be taken up in the next chapter.

CHAPTER III

       Table of Contents

      THE RISE AND FALL OF EXCHANGE RATES

      Granted that the obligations to each other of any two given countries foot up to the same amount, it is evident that the rate of exchange will remain exactly at the gold par—‌that in New York, for instance, the price of the sovereign will be simply the mint value of the gold contained in the sovereign. But between no two countries does such a condition exist—‌take any two, and the amount of the obligation of one to the other changes every day, which causes a continuous fluctuation in the exchange rate—‌sometimes up from the mint par, sometimes down.

      Before going on to discuss the various causes influencing the movement of exchange rates, there is one point which should be very clearly understood. Two countries, at least, are concerned in the fluctuation of every rate. Take, for example, London and New York, and assume that, at New York, exchange on London is falling. That in itself means that, in London, exchange on New York is rising.

      For the sake of clearness, in the ensuing discussion of the influences tending to raise and lower exchange rates, New York is chosen as the point at which these influences are operative. Consideration will be given first to the influences which cause exchange to go up. In a general way, it will be noticed, they conform with the sources of demand for exchange given in the previous chapter. They may be classified about as follows:

      1. Large imports, calling for large amounts of exchange with which to make the necessary payments.

      2. Large purchases of foreign securities by us, or repurchase of our own securities abroad, calling for large amounts of exchange with which to make payment.

      3. Coming to maturity of issues of American bonds held abroad.

      4. Low money rates here, which result in a demand for exchange with which to send banking capital out of the country.

      5. High money rates at some foreign centre which create a great demand for exchange drawn on that centre.

      1. Heavy imports are always a potent factor in raising the level of exchange rates. Under whatever financial arrangement or from whatever point merchandise is imported into the United States, payment is almost invariably made by draft on London, Paris, or Berlin. At times when imports run especially heavy, demand from importers for exchange often outweighs every other consideration, forcing rates up to high levels. A practical illustration is to be found in the inpour of merchandise which took place just before the tariff legislation in 1909. Convinced that duties were to be raised, importers rushed millions of dollars' worth of merchandise of every description into the country. The result was that the demand for exchange became so great that in spite of the fact that it was the season when exports normally meant low exchange, rates were pushed up to the gold export point.

      2. Heavy purchasing movements of our own or foreign securities, on the other side, are the second great influence making for high exchange. There come times when, for one reason or another, the movement of securities is all one way, and when it happens that for any cause we are the ones who are doing the buying, the exchange market is likely to be sharply influenced upward by the demand for bills with which to make payments. Such movements on a greater or less scale go on all the time and constitute one of the principal factors which exchange managers take into consideration in making their estimate of possible exchange market fluctuations.

      It is interesting, for instance, to note the movement of foreign exchange at times when a heavy selling movement of American stocks by the foreigners is under way. Origin of security-selling on the Stock Exchange is by no means easy to trace, but there are times when the character of the brokers doing the selling and the very nature of the stocks being disposed of mean much to the experienced eye. Take, for instance, a day when half a dozen brokers usually identified with the operations of the international houses are consistently selling such stocks as Missouri, Kansas & Texas, Baltimore & Ohio, or Canadian Pacific—‌whether or not the inference that the selling is for foreign account is correct can very probably be read from the movement of the exchange market. If it is the case that the selling comes from abroad and that we are buying, large orders for foreign exchange are almost certain to make their appearance and to give the market a very strong tone if not actually to urge it sharply upward. Such orders are not likely to be handled in a way which makes them apparent to everybody, but as a rule it is impossible to execute them without creating a condition in the exchange market apparent to every shrewd observer. And, as a matter of fact, many an operation in the international stocks is based upon judgment as to what the action of the exchange market portends. Similarly—‌the other way around—‌exchange managers

Скачать книгу