What workers
remained at their posts had to produce war supplies. Yet civilian and
soldier needed food, clothing and arms. The demand for our products
increased and the United States suddenly became the work-shop and the
granary of the world.
The Allies, in control of the seas, became our principal foreign
customers. American exports soared: those of France and England declined
correspondingly. A huge balance of trade--the biggest in our
history--swung to our favour.
This balance of trade had to be settled, but on an abnormal basis. What
was ordinarily a comparatively trivial matter of a few millions
suddenly became an item of many millions and it was all owed on one
side. The demand for exchange on New York greatly exceeded the supply
and the inevitable dislocation happened. England and France had to pay a
drastic premium on the American dollar. The English pound, normally
rated $4.86, dropped to $4.50; the franc, ordinarily worth 19.29 cents,
fell to 16.94 cents. This shrinkage in values was not due to any
impairment of the resource or wealth of the Allies but because the
machinery of international payment works automatically and
unsentimentally.
Here was a crisis that without aid from us might have eventually cost us
dear. Rather than submit to the terrific drain on the exchange value of
the pound and franc, England and France could have set about emulating
the example of Germany and become self-sufficient.
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