The international acceptance market

The international acceptance has been develoeped principally as a means of financing short-term debts in international trade. Before the war, the largest acceptance market was in London, mainly for "natural" reasons. Here the banking system depended on this market to a considerable extent for the investment of short-terms funds; and acceptances greatly facilitated the regulation of the international balance of payments by the Bank of England. After the war, attempts were made in Paris and New York to build up local acceptance markets in order to obtain the same alleged advantages. But international competition for acceptance business is in danger of destroying the very advantages which it seeks to obtain. Experience since 1929 has been particularly discouraging, especially in connection with the competitive extension of short-term credit to Germany. The so-called "liquidity" of the acceptance in the domestic market has been shown to be a dangerous illusion in English experience (as might have been expected from theoretical analysis) ; and recent financial history suggests that this is no less true in the international sphere. If centrak banking policy can draw the moral from this successfully, there appears to be little probability of any further exetension of the number of local acceptance markets seeking international business, or of the degree of competition between the existing ones.