Less "Unfavorable"

Secretary of Commerce Hoover reported on the balance of trade for 1923 and found that we had an "unfavorable balance" of only $152 million as compared to $725 million in the previous year. The terms "favorable" and "unfavorable" balance of trade originated with the conception that all real profit lies in getting money. That idea has been modified in recent times.

A "favorable balance" means that the value of goods exported is greater than the value of goods imported. It means in general that money, or gold, must be paid to the "favored" nation to make up the difference. This kind of a balance is favorable inasmuch as it means a healthy export trade.

An "unfavorable balance" means that the value of imports is greater than the value of exports. It ends in general in the paying out of money or gold. But this kind of a balance can be favorable, too, in a sense. If a nation is a great creditor--as is the U. S., if already it has most of the world's gold in its coffers, so much that it does not know what to do with it because it can't eat it or wear it, or do anything with it except keep it in strong boxes, it can get its debts satisfactorily paid--not by receiving more gold--but only by receiving goods. In the case of the U. S., if the immense foreign loans are to be repaid it must be in goods. It means that for some years the U. S. will have to take much more in goods than it sells in goods abroad.

This condition is more or less certain to be forced upon us. The fact that we have so much gold, so much money, makes prices high here. Consequently foreigners will not care to buy in this country, but will be glad to sell here; and we will be inclined to buy abroad because their prices are cheap compared to ours.

Part of this buying on our part which has assumed large proportions in recent years is in the items of so-called "invisible exchange." This term includes such things as tourists' expenditures abroad, and money sent home by immigrants. Last year it is estimated that American tourists spent $500 million abroad as compared to $100 million spent by foreigners here. In effect this amounts to canceling 400 million dollars of the world's debt to us in exchange for foreign travel given to Americans.

The surprising thing about Secretary Hoover's report is that we, a creditor nation, should have reduced our "unfavorable balance" of trade last year. As far as the actual exchange of merchandise is concerned we actually had a "favorable" balance of $389 million. This is explained simply by the fact that Europe in her disorganized state has not the goods to supply her own needs and is still compelled to buy from us. But it means that we, at some future time, will have a larger "unfavorable balance," more imports than exports--that is, provided our debtors are to pay us--provided we are going to get any return for the goods we are sending to the rest of the world.