Gold, Foreign Trade and Foreign Exchange
We have seen that New York had been subject to heavy drains of gold for some time before the war. The excess of exports over imports of gold in 1913 was over $28,000,000; to the end of June, 1914, it was $84,000,000; and for the whole of 1914, $165,000,000. One factor which complicated the situation in the crisis of 1914 was the fact that New York City had short term obligations maturing to the amount of $100,000,000, of which $80,000,000 were held in England and France. With London exchange almost unattainable, the city's obligations were in danger of dishonor. To protect the credit of the city, a syndicate, in which all but four of the 130 banks and trust companies of New York participated, agreed to supply gold or exchange as might be necessary. As a further means of protecting the country's reputation for honoring gold obligations, a gold pool of $100,000,000 was organized under the guidance of the Federal Reserve Board involving the clearing house banks of all the reserve cities. Shipments of gold to the depository of the Bank of England at Ottawa by this pool proved sufficient to ease the situation greatly and to bring sterling exchange down to a reasonable figure.
But it was less these emergency measures than it was the tremendous volume of foreign demand for American products for war purposes which brought relief from the critical situation. In October the United States lost $44,000,000 of gold; in November they lost $7,000,000; in December, the tide turned and the United States gained about $4,000,000 net excess of imports over exports of gold. The explanation is of course the very heavy shipments of commodities on European account. From December, 1914, to May, 1917, the United States gained