New-York tribune. [volume], August 18, 1918, Page 10, Image 10

About New-York tribune. [volume] (New York [N.Y.]) 1866-1924

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? Wealth Markets and Commerce $g
Finance - Economies
WALL STREET OFFICE: . Telephone
Mills Building, 15 Wall St. Hanover 6514
Statistics just published by the;
Federal Department of Labor Sta-j
tistics show in a striking way the J
results of the Russian policy of!
financing the war by unlimited in?
flation. The unskilled laborer who
got a wage of from 62 to 77 cents
a day in July, 1914, received $4.12
in August, 1917. Skilled machinists
who earned from 90 cents to $2 a
day before the war were worth
nearly $5 after three years of pre
? -posterous currency and credit infla?
tion. The average advance in the
wages of4 workers in eight trades
approximated 400 per cent. But
that is only part of the story, for
commodity prices climbed to even
more fantastic levels as Russian
currency cheapened and confidence
in it evaporated. Meat rose from
400 to nearly 800 per cent in price;
clothing, 900 per cent; shoes, 1,700
per cent, and so on with everything
from pleasure to housing. It was
an impossible situation and a col?
lapse was sooner or later inevitable,
even if there had been no other con?
tributing factors. It is from this
view that we recommend the study
of the figures, for they carry a les?
son for this country the importance
of which cannot be overestimated?
a lesson that Is clearly presented in
an article in another column by one
of America's foremost economists.
"Russia should afford an example
?extreme, no doubt, but most illu?
minating?" says Professor Daven?
port, "of the dangers of financing
war by methods of currency infla?
tion. There was?there still is?no
difficulty with Russia's resources,
her margin of available surplus
product to maintain war?though
she probably attempted to make her
. armies overlarge for her powers
of maintenance. But once her
money was discredited, her me?
dium of exchanges and of payment,
all her resources became unavail
?ble?and they remain so. For her
to have borrowed through bonds
marketed by bank inflations, had
this been possible in Russia, would
have somewhat extended her period
of endurance. But the limits are
none the less inexorable. No finan?
cial policy can meet the endurance
test that commits the blunder of
piling up indebtedness or the blun?
der of pyramiding prices, or com?
mits both blunders at once in the
guise of bonds floated through bank
inflations.
"Nor, in fact, is there any bor?
rowing method that promises the
utmost possible civil contribution to
the burdens of war. Patriotic lend?
ing or low-interest lending or any
lending at a rate of interest, no
matter how high, that still leaves
the option not to lend must fall
short,of transferring to the govern?
ment all that the citizen can get
along without."
There is, as Professor Davenport
states, no limit to America's powers
cf endurance in the war. Indus?
trial and economic exhaustion are
.impossible. But there is a limit to
current income, and It is certain
that we must adjust ourselves to
that limit and rely not on credit
.inflation but on "production and
self-denial." In no other way can
the danger of financial disaster be
averted. After sixteen months of
participation in the war, the gov?
ernment is still relying on exhorta?
tion to save the labor and materials
required for war, but everywhere
there are evidences of extravagant
spending; saving by one class is off
fet by the improvidence of another.
But labor and materials must be
saved, no matter what the political
effects of compulsion may be. Dras?
tic taxation on consumption is one
ay of bringing it about.
I
Money and Credit
Loan? and discounts of the New York
.'Clearing House banks decreased $31,
323,000 during the last week, bringing
the total to $4,515,418,000, according to
'he weekly statement made public yes?
terday. Moreover, the reserve of these
'.'?tjanks in the Federal Reserve Bank
.propped $10,804,000, indicating why it
was necessary to call in loans. To meet
the final payment on the Liberty bonds
of the third issue on Thursday and
withdrawals of government funds, the
DM m
banks found it necessary to call many
-demand loans on the Stock Exchange
ail of last week. United States d?pos?
ait? decreased from $522,310,000 to $442,
?49,000.
?* The Federal Reserve Bank of New
York, in its weekly statement, reported
?71 increase of some $30,000,000 in bills
-??(??counted and bought. The growth of
-?this item resulted largely from the
-??trlngency of the money market, which
made it necessary for member bankers
m many cases to exercise the redis?
count privileges to an enlarged extent.
The aggregate of gold in the vault? of
? the bank and in the settlement fund de
? reased from 1634,660489 to $469,196,
~>5 last we?k. 'Ihe number of certifi
Tsrtes of indebtedness bought from the
oank? with agreement that they would
repurchase in fifteen days increased
,'fourfold dum?g the ?reek.
Bank Acceptances, Owing to the
firm money market the demand for
bank acceptances is somewhat lighter.
Rates yesterday were as follows:
Thirty Sixty Ninety
Spot de- days. days. days.
livery: Per cent. Per cent. Per cent.
E 1 i g i b 1 e
member
banks....4A@4 4A@4/4 4A@4^
Eligible i
non-mem
bcrbanks.4,/4@4!/a 43,8@4i*i 4%@4A j
I n eligible
bankbills.5'/4@4 6!?@4% 5'/4@4% I
For delivery within thirty days:
Per cent.
Eligible member banks.4'/2
Eligible non-member banks.4^'s
Ineligible bank bills. 6
Discount Rates.?The following table
gives the current rates of the twelve
Federal Reserve banks on commercial
paper on all periods up to ninety day
,-Maturity
g.
r. 3 ? C
:aa5 : ? : &
?S3-.? ? ? ? ?
? asfa ? s ? ? ?
? ti.* ? ? ? ? ,
Poston. 4 4% 4^
New York.4 434 4%
Philadelphia.... 4 4% 4%
Cleveland. 4!4 4% ?%
Richmond. 4% B S
Atlanta. 4 4*4 4%
Chicago. 4 4% 6
St. Louis.4 434 4?4
Minneapolis.... 4 4% 8
Kansas City.... 4^ 6>? 6!*
Dallas..4 4% 6
San Francisco. 4 454 4%
Bank Clearings.?Bank clearings In
Philadelphia were: Exchanges, $72,
045,328; balances, $14,393,918.
Sub-Treasury. ? The banks lost
$240,000 to the Sub-Treasury yesterday.
Silver.?Bar ?liver in London was
4St?d, unchanged; New York, 99%c,
unchanged; Mexican dollars, 77c, un?
changed.
London Money Rates. ? LONDON,
Aug. 17.?Money was unchanged at 3
per cent. Discount rates were: Short
and three months' bills, 3 17-32 per
cent. Gold premium at Lisbon re?
mained 130.
The Dollar in Foreign Exchange
In a market that was otherwise rela?
tively stable francs continued their
steady upward movement during the
last week. As a result of the efforts
of the Allied Financial Committee to
bring rate3 on Paris closer to par;
which foreign exchange men say are
being made, francs rose in the seven
day period from 6.67% to 5.64% for
cables and from 5.68% to 6.65% for
checks.
Sterling exchange, which showed
much strength a week ago, was easier
all of last week and rates on neutral
exchanges were consistently weaker.
Bankers said that the great Allied
successes on the Western battlefront
were a factor in the movement of
neutral rates. Pesetas moved down?
ward again, in expectation of an offi?
cial announcement of the progress of
the negotiations that are being carried
en to secure a loan for the United
States in Spain to reduce the discount
on the dollar there.
It was ascertained last week that an
agreement had been reached between
the United States and Bolivia to stabil?
ize exchange. A $5,000.000 fund, which
can be raised to $20,000,000, has been
deposited in the name of the Bolivian
Minister at Washington at the Federal
Reserve Bank, and moneys due Bolivia
in this country are to be paid at the
Reserve Bank.
Canadian exchange remained steady
at a discount of 1 31-32 last week and
the prospects of narrowing the dis?
count have lessened with the depreci?
ation of the present wheat crop in the
Dominion. In diagnosing the reason
for the present exchange situation,
Thomas White, Canadian Finance Min?
ister, has recently made the following
statement:
"Owing to many complex causes aris?
ing out of the war, and due partly to
world-wide conditions, Canada's ex?
change with New York, which is the
great exchange centre of America, has
has been for some time past unfavor?
able. The late against us has at timeb
exceeded 2 per cent. It is to be pointed
out that in this, with war conditions,
there is nothing exceptional. Great
Britain's exchange with the United
States has ror two or more years been
at as high a discount, and exchange
rates with neutral countries have, in
the case both of Great Britain and the
United States, been at times unfavor?
able to the rate of even 30 per cent,
and this upon an immense volume of
purchases. Adverse exchange is not an
unmixed evil to a country at war. Eco?
nomically speaking, it is the natural
corrective of national extravagance and
of unduly large outside investment of
funds needed for war issues at home.
"If it costs 2 per cent to obtain New
York funds there will be less impor?
tation of luxuries and other commodi?
ties we do not need and less buying by
our people of outside securities offering
high interest yields as against the rate
of our war issues. An unduly high rate
of exchange, however, penalizes the
importer of necessary raw material
and commodities actually needed by
?the public and, consequently, enhances
the general high cost of living,
"Judicious interference is therefore
justifiable to palliate or obviate its
worse effects. To ?ssist in adjusting
the balance of our International ac?
counts arrangoments have been made
which will, I think, bo materially help?
ful and at least hold exchange within
reasonable bounds. Orders placed in
Canada for American war require?
ments, such Canadian issues as may
be permitted in New York, prohibitions
upon non-essential Imports by order
?n council, together with special stabil?
izing financial expedients, will all con?
tribute to this result."
If you calculate the cost of the dol?
lar in term? of foreign money at par
value -that is, if you were buying dol?
lar?- with pound?, marks or francs?itM
value at the close of last week, m
compared with a year ago, would be
about as follows:
--Cost of one dollar-^
Yesterday. Year ago.
In English money... .$1.02 $1.02
In French money .... 1.09 1.11
In Dutch money.79 .94
In Swiss money. .78 .86
In Swedish money.80 .80
lu Russian money.... 3.85 2.37
In Italian money. 1.69 1.40
In Spanish money.72 .82
Closing rates yesterday compared
with a week ago, follows
(Quoted dollars to the pound.)
Week
Yesterday, ago.
Sterling, demand_$4.7560 $4.76
Sterling, sixty days.. 4.72% 4.73|/8
Sterling, cables.4.7,660 4.77
Sterling, ninety days. 4.71% 4.72
(Quoted units to the dollar.)
Francs, checks.5.65i/2 5.68'/4
Francs, cables.5.64'/2 6.67?/2
Lire, chocks. 7.50 7.90
Lire, cables.7.49 7.89
Swiss, checks.4.01'/2 3.96
Swiss, cables.3.99'/2 3.94
(Quoted cents to the unit.)
Guilders, checks_... .51% .52^
Guilders, cables.51% .52/2
Rubles, cables.13.00 13.00
Spain, checks..,..24j65 26.10
Spain, cables. >..24.75 26.20
Sweden, checks.35.50 36.00
Sweden, cables.35.65 36.75
Denmark, checks.31.30 31. i)
Denmark, cables.31.45 31.60
Norway, checks.31.50 31.75
Norway, cables.31.65 31.80
Argentina, checks.44.55 44.85
Argentina, cables.44.65 44.60
India, rupees, checks. .37!/s 37.50
India, rupeo3, cablea. .37J/4 37.75
India rupees, cables,
Reserve Bank rate...37'/t 35.73
Below Is given the current exchange
vajue of foreign money in dollars and
cents, together with the intrinsic gold
parity, as calculated by the United
States Mint?
Current
exchange Intrinsic
value. value.
Pounds, sterling .$4.7560 $4.86%
Francs.0.17.5 0.1S.3
Guilders, .0.52 0.40.2
Rublos .0.13 0.51.2
Lire, checks. 0.11.39 0.19.3
Crowns (Denmark)... 0.31.40 0.26.8
Crowns (Sweden).0.35.70 0.26.8
The above rates express the cost of
foreign money in terms of the Ameri?
can dollar. You buy an English pound
sterling at, say, $4.7560. The intrinsic
parity is $4.86% per pound. Thus you
say either that pounds are at a dis?
count or that dollars are at a premium,
which is owing to the fact that in Eng?
land the demand for dollars with which
to settle accounts in this country is
greater than the demand in this coun?
try for pound? with which to settle ac?
counts in England.
Relevant Comment
May Start for Siberia This FalL
Observers of conditions in Russia are
fretting over the tardiness of Allied
i plans for the economic rehabilitation of
| the land of the former Czar. It has
| been pointed out that the Russian win
i ter will soon prove a bar to effective
i aid, and it is already too late to make
[ use of the Northern trade routes.
: There is reason to believe, however,
! that the American economic policy in
j regard to Russia is fast drawing to a
focus, and an important statement on
this subject may be forthcoming this
week. Moreover, there are indications
that the proposed Russian economic
commission will be promptly named
? and may start moving to the emaciated
! Slavic country before the first of Octo
i ber. It is considered probable that
part of the suggested commission will
i sit at Washington and part of it will
i go to Siberia and penetrate as far
: westward as practicable. The State
Department, it is understood, has been
I taking a lead in devising plans to aid
Russia with life's necessities, but the
entire Cabinet has been vitally con
| cerned with the matter.
Magnitude of Russian Problem
Representatives of Russian associ?
ations who have been consulted by the
I Administration In regard to economic
i aid for Russia say that the magnitude
I of the problem has been one of the
| prime causes of the delay. To effec
| tively assist Russia would mean put
! ting some 160,000,000 people on their
feet again, and even the mere starting
? of Russians on the road to economic re
? covery looms up as a colossal task.
| But those who perceive the importance
. of Russia and Siberia as reservoirs of
: raw materials for which the nations of
? the world will have the direst need
i after the war regard the problem as
: one the Allied nations cannot afford to
; shirk. And then, too. the humanitarian
| side of the question has been strongly
i brought to the consideration of the Ad
i ministration.
Little Has Been Shipped
Until the latter part of June, virtu?
ally no American goods were ship?
ped to Russia from the time the
Bolshoviki emerged from the realm
of idle talking into control of the
destinies of Europe's largest nation.
For nearly six months the flow
of supplies was cut off, and during
the last two months, as far as known,
only a relatively small amount of goods
has been shipped there. Though the
government is reported to have some?
what relaxed its ban on the shipment
of goods to Russia in the last two
months, no authoritative statement, as
to the amount of goods that has been
released has been made. A represent?
ative of a Russian association esti
ma'ed that the amount of ?oods
boucrht and paid for in this country
during the Kerensky regime which were
never shipped from the United States,
amounts to $80 000 000. It is pointed
out in Bomo quarters that this vast
store of materials would make an ex?
cellent starting point for trade resump?
tion with Russia, and much of it prob?
ably would. But, on the other hand, a
great part of it is railroad equipment
and machinery, which, though they will
be needed eventually, are of secondary
importance at present to small tools,
which are needed at once, compe'ent
observers say, to save the population
from widespread famine and disaster.
Money Strain May Be lessened.
The intention of the Treasury De?
partment to resume the offering of 4
per cent certificates which may be used
in payment of the war profits and ex?
cels profits tnxes provided for under
the new tax bill is expected to relieve,
for e period at least, the strain upon
national banks due to the bi-weekly
?ale of Treasury certificates issued In
anticipation of tho fourth Liberty Loan.
For thin reason bankers predicted yes?
terday that there might be a somewhat
Federal Reserve Banks
?
WASHINGTON, Aug. 17.?Discount operations of Federal Reserve ?ank8
in the last week were somewhat less than the previous week, bills on hand
,at th close of business last night amounting to $1,497,000,000 as compared
with $1,541,000,000 a week before. Members' reserves increased $44,000,000.
The Federal Reserve Board's weekly summary of the banks condition last
night follows i
RESOURCES
Gold coin certificates in rault.
Gold settlement fund (F. R. Board).
Gold with foreign agencies.-.
Total gold held by banks.
Gold with Federal Reserve agents...
Gold redemption fund.<
August 16.
$385,017,000
600,083,000
5,829,000
$990,929,000
961,498,000
40,116,000
August 9.
$395,410,000
606,854,000
9,696,000
$1,011,460,000
940,692,000
38,149,000
$1,990,301,000
54,222,000
Total gold reserves. $1,992,543,000
Legal tender notes, silver, etc. 52,980,000
Total reserves. $2,045,523,000 $2,044,523,000
Bills discounted-members. 1,285,368000 1,332,473,000
Bills bought in open market.-.. 212,204,000 208,567.000
Total bills on hand. $1,497,572,000
United States government long term securities 31,497,000
United States governm't short term securities 32,546,000
All other earning assets. 82,000
$1,541,030,000
34,931.000
17,404,000
102,000
Total earning assots.
Uncollected items.
$1,561,697,000 $1,593,467,000
623,495,000 584,758,000
Five per cent redemption fund against Fed?
eral Reserve Bank notes.
All other resources.
866,000
10,803,000
735,000
11,410,000
Total resources._.?. $4,242,384,000 $4,234,893,000
LIABILITIES
Capital paid in_.~?. 176,906,000
Surplus .'*.. 1,134,000
Government deposits. 95^55,000
Due to member banks?Reserve account.... 1,464,011,000
Collection items. 461,202.000
Other deposits, including for'n gov't credits.. 115,234,000
Total gross deposits. $2,136,082,000
Federal Reserve notes in actual circulation.. 1,985,419,000
Federal Reserve Bank notes in circulation,
net liability. 15,167,000
All other liabilities.-. 27,707,000
$76,876,000
1,134,000
179.976,000
1,420,705,000
433,347,000
127,050,000
$2,161,088,000
1,955,276,000
13,736,000
26,811,000
Total liabilities. $4,242,384,000 $4,234,893,000
Ratio of total reserves to net deposit and Federal Reserve note liabil?
ities combined 58.5 per cent. Last week 57.9 per cent.
Ratio of gold reserves to Federal Reserve notes in actual circulation
after setting aside 36 per cent against net deposit liabilities 76.4 per cent.
Last week 76.3 per cent.
Federal Reserve Bank of New York
The weekly statement of Federal Reserve Bank of New York, as of Au
gust 16, compared with a week ago, follows:
RESOURCES
Gold coin and gold certificates:
Gold in vaults and settlement fund.
Gold with F. R, agent and in redemption
fund?F. R. notes.
Gold with foreign agencies.
August 16.
$459.196.215
293,539,415
2,010,962
August 9.
$534,660,189
294,022,815
3,345,217
Total gold reserve.
Legal tender notes, silver certificates and
subsidiary coin.
Total reserve................
Bills discounted and bought:
Rediscounts and advances ? Commercial
paper .
Rediscounts and advances?U. S. obli?
gations .
Acceptances bought...?.
$754,746,592 $832,037,222
43,941,930 44,948,867
$798,638,522 $876,986,029
143,857,706 127,000,257
298.207,051
112,691,695
285,454,891
113,105,840
Totals
$554,756,453 $525,560,989
Investments:
United States bonds and notes.
U. S. certificates of indebtedness purchased
from the banks with agreement to repur?
chase in fifteen days.
Municipal warrants.
Totals .
Due from other Reserve banks.
20,192,150
50,520
$20,242,670
5,043,450
50,520
$5,093,970
Total resources ...
LIABILITIES
Capital .
Member banks' deposits (net).
Non-member banks' deposits (net).
Government deposits .
Due to other Federal Reserve banks (net)..
Due to War Finance Corporation.
Federal Reserve notes (net).
Foreign government accounts.
Other liabilities.
?jrplus.
Total liabilities .
Federal Reserve notes outstanding.
Against which there is deposited with Federal
Reserve agent:
Gold and lawful money........
Commercial paper.
$1,373,687,646 $1,407,641,049
$19,999,000
574,120,731
3,260,666
7,523,701
16,594,716
1,119,508
640,877,920
103,634,656
5,907,383
649,363
$1,373,687,646
691,971,650
278,539,415
554,756.453
$19,988,580
592,696,966
3,431,973
25,595.465
4,874,057
8,882,419
638,916,820
107,467,298
5,193,184
649,363
$1,407,641,049
696,796,960
279,022,815
525,560,989
New York Clearing House Banks
The actual condition of the member banks, shown by the
yesterday, with the changes from the preceding week, follow
Loans, discounts, investments.$4,515,418000
Cash in vaults of Federal Reserve members... 97,191,000
Reserve in Federal Reserve Bank. 489,122,000
Cash in vaults of state banks and trust co's.. 11,540,000
Reservo in depositories. 8,222.000
'Net demand deposits....???... 3,611,636,000
Net time deposits. 161,814,000
Circulation. 35,593,000
Aggregate reserve ............ 508,884,000
Excess reserve ..... 30,074,080
Clearing House
s:
Dec.$31,333,0OO
Dec. 2,489,000
10,804,000
424,000
571,000
5,974,000
2,910,000
143,000
9,809,000
Dec.
Inc.
Inc.
Inc.
Inc.
Dec.
Dec.
Dec. 10,765,300
?United States deposits deducted, $442,949,000.
j easier tone to the local money market !
'. during the next few weeks. Figures i
' made public at the Federal Reservo!
Bank showed total payments for this '
district on the third loan of $62,687,- !
418 up to the close of business on Fri- I
day. The total due is $73,919,088. Re
ports from seventy-three banks have j
not yet been tabulated.
General Motors Active
? Activity In General Motors has not '
I thus far been materially curtailed by I
the ruling of the Stock Exchange
clearing house committee that here
after the common stock shall not be j
cleared under the direction of that
body. Yesterday's dealings were un?
usually heavy, considering the high
price at which the stock is selling. On
a turnover of 2,600 shares the quota?
tions rose from 154% to 156%, with the
final at 156, a net advance of 2 points.
September Maturities
Corporate maturities for September,
according to a compilation by Dow,
Jones & Co., aggregate $47,203,790,
compared with $43,826,660 in August
and $50,729,963 in September, 1917.
The character of the obligations falling
due and the condition of a majority of
the issuing companies, it is declared,
make it unnecessary for them to call
on the War Finance Corporation for aid
to any great extent. Railroad issues
total $33,529,170. of which $15,000,000
consist of $15,000,000 Chicago & West?
ern Indiana 6 per cent notes, due Sep?
tember 1. Tho company is now negoti?
ating with the railroad administration
for a plan to pay off these notes.
Boston Clearing House Protest
Opposition from bankers In other
cities to the recent ruling of the New
York Clearing House Committee plac?
ing a collection charge of one-tenth of
1 per cent on out-of-town bank accep?
tances passing through the clearings,
has developed into official action by the
Boston Clearing House. This body has
adopted a resolution protesting against
the charge as "being excessive, un?
necessary and contrary to the tendency
everywhere prevailing to reduce
charges for exchange to a minimum.'
The Boston Clearing House committee
?3 instructed to send a copy of its me?
morial to the Federal Reserve Boarc
at Washington, to the governor of th?
Federal Reserve Hank at Boston and tt
the chairman of the Clearing House
committees at New York, Philadelphia
Chicago and St. Louis and "to tak<
such further action as the members o
the Clearing House committee deem:
best to bring about a chango in thi
regulation above cited."
Allied Powers of War Endurance
Without Limitations Save Those
Imposed by Unsound Financing
With America's Vast Resources Thrown In, Conflict Could Be Carried
On for Centuries Without Danger of Economic or Industrial
Exhaustion if the Nation Would Abandon Present
Improvident Methods of Credit Jugglery
H. J. Davenport
Professor of Economic? in Cornell University |
THE debt of England is now
nearing $40,000,000,000?
$1,000 per capita, $5,000
per family. This, however, need!
not mean that England has now be- !
come a poor nation or even is on
the way to become a poor nation.
In the main, the English debt is
held in England. The aggregate
wealth of a country is neither'the
less nor the greater because of do?
mestic debt relations. It is only
with respect to the ownership of
its existing wealth and to the dis?
tribution of its future income that
the volume of Indebtedness is sig?
nificant. For every debit there is a
credit. Cancel the debt, and as
much as the debtors are richer the
creditors are poorer. Increase it, and
as much as the creditors are the
richer the debtors are the poorer.
In a national accountancy these
items of domestic debt are neutral
items. In an inventory of national
wealth they cancel out.
Nor in any other aspect of wealth
need war mean national poverty.
Rarely doe3 war seriously diminlsn
wealth. The lands of England are
still there, unwasted and unworn;
its factories wanting nothing in
equipment, its warehouses nothing
in goods, its dwelling houses unde
cayed, its railroads intact and with
ample rolling stock. At any rate,
deterioration can hardly be ap?
preciable, and if appreciable can
hardly be serious. The war toll of
life has been heavy. But this means
that the rate of loss in life has far
outrun the rate of loss in wealth.
Stated in terms of per capita wealth,
England may to-day be richer than
before the war, rather than poorer.
Redistribution,
Not Exhaustion
How, then, can England a yeai
ago have been approaching, or be
now approaching, war exhaustion ? Ii
may be easy, no doubt, for any on?
man to lose his wealth?the heir tc
dissipate his estate, the borrower tc
become insolvent. But what ont
man loses to another's gain does noi
impoverish the realm. So, again
it may be easy for any one indi
vidual to consume more than hi:
income and be compelled to dispos?
of his property. But the main ef
feet of this is merely to redistribu??
tho property. Speaking in the large
the prodigal consumption of on<
merely displaces the consumption o:
others; and these others, as thei
indemnity, come into possession o
the prodigal's estate.
And as with any individual in i
society, so with any one natioi
among nations. One country ma;
get into debt to another. Or, in
stead of issuing obligations agains
its existing wealth or its future in
come, one country may sell out t
another the titles of proprietorshi
to its domestic wealth or to it
wealth of foreign investment. Bu
nothing of this involves any chang
in the total of world wealth, bu
only a redistribution of it in poin
of ownership.
England has, no doubt, grievousl
' diminished its patrimony, not onl
by the sale of war bonds in Americi
I but still more by marketing enoi
: mous holdings of international s<
! curities in America. And note als
that all these sales of securities i
America by which England ?3 s
much the poorer relatively to Ame
| ica have gone none the less to swe
I the government debt to individu:
investors in England, the debt c
which the taxpayer must make goc
the interest burden. The investo:
are no poorer, but only Englan.
They now hold English consols i
place of the securities that ha^
: been marketed abroad to furnn
i England with purchasing powt
here. By marketing its new issui
of consols here, or by selling he:
the securities purchased in Englar
by consols marketed here, Englar
has supplied itself with Americi
goods far in excess of what Englii
exports of products would buy??
export of obligations and titl
rather than of products. Instea
therefore, of its old position i
creditor abroad or of owner abroa
England has been moving towa:
the status of a debtor nation.
What England
Lost America Gained
But all this is only for that sha
of England's war needs that has hi
to be financed abroad. In the mal
England's industries and Englanc
current income of products, rather |
than England's accrued wealth or|
foreign credit, have financed its war. |
Only to the extent, then, that bonds j
have had to be sold abroad or se- j
curities marketed abroad is Eng- !
land now the poorer for its four
years of stupendous effort. And [
even so far as England has been j
compelled to sacrifice its patrimony,!
no serious reduction of wealth has
taken place. As rapidly as England
has been growing poorer in the
process America has been growing
richer. The aggregate resources of
the two countries remain substan?
tially unimpaired. The war has
been financed out of current in?
come on terms of the sacrifices and
privations made necessary in civil
consumption, not in any consider?
able part through the deterioration
or the consumption of the existing
stores of wealth. Taken as a whole,
the Entente has not been nearing
economic exhaustion, is not now
nearing it, never need near it in
the future, and only by gross blun?
dering can ever near it.
The fact is that in the large and
in the purely industrial aspect war
has only a present tense. Any one
country, it is true, can sell its pres?
ent accumulations of wealth held
over from the past to the end of
obtaining a present increase of war
supplies, or may mortgage abroad
its future income in order to induce
the assignment of present product
to it. But none the less is it clear
that in the main only present
product can be consul"od in the
present. Future bread cannot be
eaten now, or future cannon loaded
now, or future powder exploded
now, any more than future men can
man the trenches now. ??or in the
main can the products of the past
supply the needs of the present.
Few of these products will keep,
and most of them that will keep are
not consumable for war purposes.
We cannot eat or wear or explode
lands, or houses, or factories, or
machines. Most of these forms of
wealth avail for present needs, not
as themselves fit for consumption,
but as rendering incomes of con?
sumable products. For the world
a? a whole, and especially for a
world at war, the things of the past
equally with the things of the fut?
ure are not at the disposal of pres?
ent needs. True, some degree of
wear-out or deterioration is possible ;
but it cannot be allowed to pro?
ceed far and cannot count for much.
Present Income
j All That Counts
So again, a country may, in some
slight measure, have prepared for
war by storing war bread or by
making accumulations of armament
and munitions. But these can last
only for the early beginnings. In
the large, it still holds that neither
the products of the past nor the
products of the future but only the
present incomes of product can sup?
port a present war. Society as s
whole has to live off its current in
i come.
It is, in short, a profound mis?
understanding to suppose that wai
' can destroy much wealth or make
I any serious inroads on wealth. 11
! destroys income?subtracts mer
j from current production and ah
?sorbs in military uses much of th?
current product that else woulc
? serve for civil consumption. Onlj
j in the sense of preventing an in
i crease of wealth or of the limit?e
' degree in which it prompts to de?
terioration or wear-out or tempts t(
i some degree of incidental or wantor
; ravage can war subtract from th<
| present sum of human possessions
I Its chief significance, clearly, is ii
i its encroachments on present con
sumption for ordinary needs. Th?
* piivations that war imposes have t<
' be borne now?present hardship
; not past or future hardship. It is noi
: through the lack of farms or textil?
! machines that wo suffer now, bui
j only through the lack of current
; crops against hunger and of curren'
I textiles against cold. In truth, the
j improvidence of deterioration, ii
j whatever degree it is possible anc
? is permitted, is in its prompt reac
tion to limit correct income.
Men Not Wealth.
j But Owners of It ?
War consumes men, no doubt
and at a frightful rate. But the mei
are not a part of the existing wealth
they are the owners of it. It is, in
deed, not incredible that with th?
reduction of the world population
through casualty massacre and ft?
ine, the world is to-day even richer
per capita than it was four year,
ago.
All these war burdens mean, then
substantially nothing in terms of
their effect on the sum of existing
wealth, either for increase or fot
decrease. But they mean much for
the distribution of the ownership of
existing wealth and still more for
the distribution of the future in
come from wealth and from human
labor. The children of some of us
must pay interest to the children of
others of us. The bonds are obli
g?tions of the people in general to
the bondholders. By virtue of hold
ing these incumbrances on the fut?
ure revenues of the government
revenues which are to be collected
partly out of future property in.
comes and partly out of future in
comes from human effort?the in
vesting classes are holders of mort?
gages on the wealth and the man
power of the country.
It is no part of the immediate
task to inquire how far the issue of
these bonds is well or ill, fair or
unfair, necessary or gratuitous, in
the policies of war finance. There
are men enough to believe that,
having to get the funds somehow, we
cou'd get them In no other way?
thr t how much we can collect from
the citizen depends not on what
share of his income he can spare
above his necessities, but rather on
the nature of the slip of paper that
he receives in settlement of his pay?
ment, whether it be a receipt or a
promise, refers to past or future,
evidences release from obligation or
acquirement of obligation.
Bonds and
Endurance
The question of immediate inter?
est, however, is quite another. What
do these bonds mean to any nation
for purposes of war endurance? h
purely economic and industrial as?
pects, war needs not carry with it
any menace of exhaustion. Man
power may be lacking to go over?
seas to the firing line, or man power
may be lacking at home to maintain
the soldiers on the firing line. More
men may be call i to the colors than
the civil population can maintain.
In any of these ways economic d??
b?cle may befall. But never need
it be a question of the progressive
sapping of the property resources
of any country that must rely or
does rely on its own productive
powers. Economic exhaustion,
wealth exhaustion, is one thing
financial exhaustion another and a
quite distinct thing, no matter htm
constantly they may get confused.
The Entente is not now nearing
economic exhaustion, and need nev?
er near it. The warring countries
are safe from seriously compromis?
ing themselves in point of wealth?
for the sole and sufficient reason
that they cannot.
The Limits
! Of War Effort
But they are in serious danger
! of using up their credit?precisely
because they can. Tempted by the
delusive ease of credit extension,
we may engage our?elves in effort*
and undertakings disastrously be?
yond our powers of maintenance
and performance. Economic po?r
has economic limits. Two nun??
men are costing us now?with oor
other tasks?eighteen billions ?
year, $9,000 per man; and yet, wit?
fifty billions of annual national in?
come, we are talking of placing '
000,000 men in the field and of se1*'
ing at the same time as base of sup?
plies for our associate nations in t
war. Again it is possible to hj*
floated so many bonds that we ?
it impossible to float more. We W
reach political upheaval by ??PJ
ing sacrifices unfairly or by ?**
ing them impossible or intolerable^
Continued on r^V* tu'elvt
Correspondence
Invited
We invite correspond?!? *" lfcJ?
market commitment and ?"
vestment subjects. Freqvf* ??
hdcal reports issued and **"?
gratis. Special n>eekb colion%,
1er and grain review upon r?J0?"
E.W.Waqner&CO;
Member? New York Stoc* *,r"*f
33 New St. ??,ho??, llro?d **09, "'
Mr Seeuritv ?? "??