n
Steam Navigation Company, brought suit in the Federal Courts for the
possession of the vessel, on the ground that, having been brought into
a neutral port, she lost her character as a German prize, and must be
returned to her owners. Pending a determination of this action, the
_Appam_ was seized by Federal marshals under instructions from the
United States District Court, under whose jurisdiction the vessel
remained.

After twelve months of war Great Britain became seriously concerned
over the changed conditions of her trade with the United States.
Before the war the United States, despite its vast resources and
commerce, bought more than it sold abroad, and was thus always a
debtor nation, that is, permanently owing money to Europe. In the
stress of war Great Britain's exports to the United States, like those
of her Allies, declined and her imports enormously increased. She sold
but little of her products to her American customers and bought
heavily of American foodstuffs, cotton, and munitions. The result was
that Great Britain owed a great deal more to the United States than
the latter owed her. The unparalleled situation enabled the United
States to pay off her old standing indebtedness to Europe and became
a creditor nation. American firms were exporting to the allied powers,
whose almoner Great Britain was, commodities of a value of
$100,000,000 a month in excess of the amount they were buying abroad.
Hence what gold was sent from London, at the rate of $15,000,000 to
$40,000,000 monthly, to pay for these huge purchases was wholly
insufficient to meet the accumulating balance of indebtedness against
England.

The effect of this reversal of Anglo-American trade balance was a
decline in the exchange value of the pound sterling, which was
normally worth $4.86-1/2 in American money, to the unprecedented level
of $4.50. This decline in sterling was reflected in different degrees
in the other European money markets, and the American press was
jubilant over the power of the dollar to buy more foreign money than
ever before. Because Europe bought much more merchandise than she sold
the demand in London for dollar credit at New York was far greater
than the demand in New York for pound credit at London. Hence the
premium on dollars and the discount on pounds. It was not a premium
upon American gold over European gold, but a premium on the means of
settling debts in dollars without the use of gold. Europe preferred to