French Foreign Trade and Foreign Exchange
In a large way we have already outlined1 the course of the foreign trade relations of France during the war. From the beginning of the war, France has bought increasingly from foreign countries more than she has exported, and there has been a continuous piling up of an adverse balance of trade. Even before the war, the physical balance of trade was "adverse" to France, but this, as we have seen, was merely symptomatic of her creditor position. A rich country with large foreign investments can afford to import more than she exports, just as an individual capitalist can afford to consume more than he produces by his current labor.
In the first six months of the war, France was a creditor to all countries and a debtor to none. In the early two or three months of the war, checks on New York and on London were at a heavy discount in the French markets, owing to the interruption of the shipments of gold and the inability of American and English banks to meet their obligations easily in Paris. But during these six months France began to buy largely abroad and at the end of the six months she had become debtor on current items, so that the foreign exchange rates all turned against her with the exception of those on Italy and Russia. The climax on sterling and dollars was reached on April 13, 1916, when a check on London was worth 28.93 francs per pound (as against a mint par of 25.22) and dollar exchange (cable) was worth 6.07 francs per dollar (as against a mint par of 5.18). This represented a discount of over 12 per cent on the franc in terms of American dollars.____________________