Transcriber’s Notes: Underscores “_” before and after a word or phrase indicate _italics_ in the original text. Small capitals have been converted to SOLID capitals. Typographical errors have been silently corrected. Foreign Exchange BY HON. ROBERT L. OWEN UNITED STATES SENATOR OF OKLAHOMA CHAIRMAN OF THE UNITED STATES SENATE COMMITTEE ON BANKING AND CURRENCY [Illustration] NEW YORK THE CENTURY CO. 1919 Copyright, 1919, by Robert L. Owen FOREIGN EXCHANGE THE FEDERAL RESERVE FOREIGN BANK PUT THE AMERICAN DOLLAR AT PAR IN FOREIGN EXCHANGE Because of war conditions the American dollar is at a serious discount in all of the neutral countries of Europe and throughout the world, notwithstanding the fact that the United States had a favorable balance of trade of over three thousand millions last year, and ten thousand millions since the war began. It is important that American business men, American bankers, American importers and exporters should understand this problem and the remedy for it. The problem is not really a difficult one. It is the purpose of this little book to explain the problem; to show the factors entering into it; to show the remedy and point the path and mechanism by which to maintain the American dollar at par, and make it the medium of international exchange and of international contracts. THE U. S. DOLLAR IN SPAIN The American dollar should buy 5.18 pesetas, lire or francs on a gold par basis, but at present (August, 1918) will buy 8.90 Italian lire and about 3.5 Spanish pesetas, although the gold value of the Italian lira and the Spanish peseta is identical. The reason for this is that Italy has an urgent demand for dollars in America to pay for the purchases of the Italian Government and of the Italian people, and the credits being extended to Italy for this purpose are being furnished at enormously high rates by private banks and capitalists, while Spain is selling more commodities than she is buying, is an international creditor, has no need for dollars, and pesetas in Spain are being sold at an artificial high price by private banks and capitalists. The Allies requiring Spanish pesetas are being charged enormously high rates for the pesetas required in Spain, which means that the pesetas are selling for 28 cents apiece instead of 19 cents and that the gold dollar measured in pesetas is at a heavy discount and only worth 67 cents.