TRIBUTE AS EXAMPLE
eat i EN
111
linen bought, and the tribute of one million. Foreign exchange is
no longer at par; the American exports of wheat no longer yield
bills on Germany in amounts sufficient to supply the needs of those
who have to remit to Germany. Exchange on Germany rises to a
premium in the United States; specie flows to Germany. Prices
and money wages fall in the United States, rise in Germany. These
changes will go on until a stage of equilibrium is reached, which may
be exemplified as follows :
In the U. S. 10 days’ lah
2.” U.S. 10 88%
” Germany 10
Germany 10
rr
Wages
PER Dav
at fviy
Sl. 10
TorAL
Wages
ra
v1 15}
Propuce
20 wheat
"linen
10 wheat
15 linen
DowmEesTic
SuppLY Price
$0.80
$0.80
$1.15
$0.762
Wages have fallen in the United States from $1.70 to $1.60 ;
they have risen in Germany from $1.02 to $1.05. The money cost
of wheat has fallen in the United States from $0.85 to $0.80 and is
now considerably lower than the German money cost of wheat ;
the money cost of linen in Germany has risen to $0.762 and is now
not much lower than the American money cost of linen.
At these prices suppose the movement of goods to be -
10% millions of wheat at $0.80 exported from the United States = $8,200,000
9.4 millions of linen at $0.762 exported from Germany = $7,200,000
The exports of wheat from the United States exceed in money
value the exports of linen from Germany. The difference is a
million dollars, precisely the sum which has to be remitted to Germany
; that is, it suffices to yield the volume of bills in Germany
which are wanted by those persons (private individuals or public
officials) having the remittance in charge. The demand for bills
is just met by the supply; foreign exchange is at par; equilibrium
has been reached.
The equilibrium, it is to be noticed, is one in the “balance of
payments,” not one in the “balance of trade.” The payments to
be made by the United States to Germany are completely met.
But the balance of trade — the balance of merchandise operations
— 1s “favorable” to the United States ; her exports of goods exceed
