During the first eight months of 1915, Great Britain made large shipments of gold and securities from London, including the amount held in Ottawa for the account of the Bank of England, but these remit tances were not sufficient to offset the unprecedented exports of munitions of war and food products to Great Britain and her Allies, amounting to over $100,000,000 per month.
6. New York loans to Great was not until after the low point was reached in August that the British Government appeared to realize the seri ousness of the exchange situation and took the obvious and efficient method of correcting the rate by arrang ing the Anglo-French loan of $500,000,000. This action, however, had been delayed too long to be very effective and tho it did arrest the downward trend, further assistance was necessary. Additional ship ments of gold and securities, aided by loans arranged between the London and New York banks, gradually induced an upward movement which was further sup ported by the mobilization of American securities in London by the Imperial government for the purpose of obtaining further credit from New York, if neces sary. Under these influences sterling exchange reached 4.78 in January, 1916, and since then the British authorities have stabilized or practically "pegged" the rate at about 4.76. This rate is only two per cent below the gold par of 4.86% and is known as the "war par." The cost of shipping gold from London to New York, under war conditions, is between seven and nine cents per sovereign and the above rate is therefore close to the present gold im porting point. The New York quotations for ster ling for the past three or four years given on page 267 should be referred to.
7. Great have dealt fully with the ex change relations between London and New York and will now briefly review the other exchanges. Roughly speaking, sterling exchange has been at a premium in all belligerent countries, and at a discount in all neu tral countries. The positions at the beginning of the war have been reversed in most instances and Great Britain, formerly the general creditor nation, has be come a debtor to Switzerland, Spain, Holland, Sean dinavia and the United States, this being due in great measure to a decrease in her exports and foreign in vestments and an increase in her imports, principally of provisions and war supplies from these neutral countries. On the other hand, Great Britain has
greatly increased her exports to her Allies, while their exports to England have decreased materially; conse quently sterling exchange is at a premium in France, Italy, Russia, etc.
A study of the following table shows the value of the pound sterling in different countries from July, 1914, to January, 1917. A comparison of these rates with the par value of the £ in the first column will show when the London exchange was at a discount or premium.
When war became imminent, France proceeded to realize on her securities and call in her foreign bal ances; as a result funds in London and New York were rapidly exhausted and debtors in London who were under obligation to remit to Paris sent gold un til the French moratorium was declared. There were practically no quotations until the middle of August, by which time the rate had risen to Fes. 24.50, falling again in September to Fcs. 25.70 and rising to Fcs. 2.5.04 in December, 1914. In the spring of 1915, the effects of the heavy financing of the British govern ment for French account commenced to be felt, and by June, the quotation had fallen to over Fcs. 26, stand ing in January, 1916, at Fes. 29.85, and on January 4, 1917, at Fes. 29.81; this, notwithstanding the heavy expenditures on the British and Canadian troops en trenched in France and Flanders.
8. Dutch specific particulars re garding the exchange or financial operations of neu tral countries with the belligerents are obtainable, nor will they be until after the wai for obvious rea sons. It is therefore idle to attempt to explain the position of the foreign exchanges except in general terms, as the several rates do not by any means repre sent either the financial positions of the countries in question or their true relation to each other. Take, for instance, the ease of Holland, which appears for the time to have taken London's place as the interna tional clearing house. According to the Economist, the Amsterdam exchanges stood as follows in No vember, 1915: It will be noticed that even the dollar was at a dis count; Dutch currency has apparently become the standard of value for these centers, and the exchange markets of Holland and Scandinavia have become of importance as international clearing houses and for the time being, taking the position generally occupied by London.