y 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. It was not a month's
work or even a year's work, but ultimately it would have made these
countries more independent of the United States after the war is over.

Of course England and France could have met the situation by shipping
gold. Each had a large reserve but the United States had all the gold it
wanted, and still has. Besides, in such an emergency gold is an inert
and unproductive commodity.

Again, the Allies might have "dumped" their American securities
representing an investment of over three billions of dollars, which
would have upset the American stock market and sent prices down. Either
one of these performances would have done us no good.

It was important, therefore, for the benefit of all interest involved,
that the Allies establish a credit in the United States that would
enable them to buy freely and remove the costly handicap on American
exchange. In a word, instead of having to pay their bills through an
intricate mechanism that rose and fell with the tides of trade and put a
premium on trading with us, a medium was needed that would restore the
whole economic trade balance. It was as essential to us as to our
customers.

Hence the Anglo-French Five Hundred Million Dollar Loan was floated and
Uncle Sam became a war banker. This loan, however, was nothing more or
less than the setting up of a credit of half a billion dollars for
England and France in the United States. To put it in another way, it is
just as if the two Allies had deposited this sum in an American bank and
then drew checks against it for goods and raw materials made or mined in
America. In a word, we lent to ourselves.

Put out at a time when money was scarce, the loan would have been
unpatriotic and uneconomic. But our banks were