LONDON AND NEW YORK AS FINANCIAL CENTERS I 1. New York as a financial center.—Since the be ginning of the present European war there has been a great deal of discussion in the financial papers and elsewhere as to the effect of the war on London's po sition as the financial center of the world and the probability of New York succeeding in assuming and keeping the position. It is, of course, natural that the serious interruption in shipping, commerce and exchange thruout the world would minimize, for the time being, London's supremacy, especially when the stupendous task of financing not only Great Britain's munition requirements but those of her allies de volves upon her.
There is no question that at the end of the war. New York's position as an exchange and financial center will be vastly enhanced, but not necessarily at the expense of London. Sovereigns and dollars are the only two important mediums of exchange that have been at all reliable since the war commenced, and this will no doubt put both of these exchanges immeasurably ahead of the exchange of any other country at the end of the war.
2. reasons for London's suprentacy.—Lon don has been for centuries the commercial clearing house of the world. This is due not only to its cen tral situation, its immense foreign trade and its large mercantile navy, but also because, thru its highly per fected banking system, it provides facilities of such magnitude and of such entire efficiency for the final settlement of exchange operations, that drawers or negotiators of bills in every quarter of the globe gave preference to sterling over any other form of ex change. It has been estimated that nearly ninety per cent of all letters of credit issued thruout the world were, prior to the war, drawn in English money. Lloyd George, in commenting on the unique and commanding position of Great Britain in international trade and the consequent serious re sponsibility placed upon her at the outbreak of the war, said in November, 1914: We had not merely our own business to run; we were an essential part of the machinery that ran the whole interna tional trade of the world. We provided the capital to raise
the produce; we carried half the produce, not merely of our own country, hut of the whole world. More, we provided also the capital that moved that produce from one part of the world to another, not merely for ourselves, but for other countries.
I ask anyone to pick up just one little bit of paper, one bill of exchange, to find out what we are doing. Take the cotton trade of the world. The cotton is moved first of all from the plantations, say, to the Mississippi, then it is moved down to New Orleans ; then it is moved from there either to Germany or Great Britain or elsewhere. Every movement there is represented by a paper signed either here in London or Manchester or Liverpool; one signature prac tically is responsible for the whole of those transactions. Not merely that, but when the United States of America bought silk or tea in China the payment was made thru London. By means of these documents accepted in London, New York paid for the tea that was bought from China. We were transacting far more than the whole of our own business; we were transacting half the business of the world as well by means of these paper transactions. What is also important to establish is this: that the paper which was issued from London has become part of the currency of commerce thruout the world.
In considering the possibility of New York being a successful rival for supremacy as the exchange and financial center of the world, we can do no better than review some of the principal reasons why Lon don has hitherto held that position and, it will be re alized, that New York must duplicate these conditions in great part if not in entirety before London can be dethroned. These reasons and conditions can be tabulated briefly under three headings ; physical, psychological and economic. Those coming under the first heading are of course unalterable; those under the second heading can be remedied in time thru educa tion and training; and those under the third heading are matters of legislation and custom.