TPe. EFFECT of Wars & Revolutions on Government Securities fxter^nal and Intefmal HQ (StOtntU Imoctattg SibratH 3tl;ata, Neui Jortt J^ra.A.d,\(kvi:e. Date Due — ;iAW — ^ 1959 HP^ MCr ^STPt^ wnii-9- ' &i Z3233 '"'m'" (/.&#>■ HG4715 W ""'""'"" "-""^ ^"^inuifJmiilK?'* * revolutions on governme olin 3 1924 032 431 961 The original of tliis book is in tine Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924032431961 The EFFECT of Wars & Revolutions on Government Securities External and Internal BY E. Kerr, Librarian 1917 William Morris Imbrie & Company ESTABLISHED 1882 NEW YORK CHICAGO ^^5^]'^-. Copyright, jpi7 Wm. Morris Imbrie & Co. New York The EFFECT of Wars & Revolutions on Government Securities External and Internal IN this book are presented a few facts and ideas upon the effect of wars and revolutions on government securities, external and internal, with a brief review of the relations between events, wealth, indebtedness, government bond issues and their prices, of the modern nations. While in any investigation of prices gold production, trade, commerce, exchange, relative amount of paper money and the self sufHciency of the nation under con- sideration are important factors, it seems best not to complicate this outline of the history of government securities with any discussion concerning them. Where authorities differ, as in esti- mated figures such as population, wealth, etc., the most conservative or that most generally accepted has been used. Normal exchange has been used in con- 4 THE EFFECT OF WARS ON verting all values into United States dollars. All public debts are stated as the total indebtedness less cash in treasury, and in many cases the figures include a large non-interest bearing debt. It should also be borne in mind that where indebtedness has been incurred for public improve- ments, the value of these should be considered as in part balancing that indebtedness. It will be noted that, in the tables of relative growth, dates of change in the world's history have been taken. As the largest countries are also in many respects the most representative, these only have been reviewed. The first foreign state loan is said to have been that made by Carthage to finance her struggle with Rome for the supremacy of the Mediterranean two thousand years ago, and to the present time nations have continued to tax the future to provide for present necessities, improvements and developments. With the older countries, war would seem to be the chief, in fact almost the only, factor of increase in the public debt; but GOVERNMENT SECURITIES 5 with the newer countries, the principal increase has been made for permanent improvements such as railways, canals, etc. The former constitutes a dead weight of debt, while the latter is one which should be less burdensome. There is, of course, always. the ques- tion of whether government ownership brings more revenue to the state than that indirectly derived through taxing the somewhat higher income which pri- vate ownership usually obtains from the same enterprise. However, in many cases the government debt takes the form of a subsidy to a private company. But in considering public indebtedness, it means at least a debt productive of revenue in itself and sometimes more than self- sustaining. In very few cases have these obligations been entirely paid off and all indebtedness cleared away, but, on the contrary, they have remained in one form or another as a permanent investment of part of the capital of the world. In considering the effect of wars and revolutions on the external and internal 6 THE EFFECT OF WARS ON loans of countries it is necessary to con- sider two points — how the equity back of the loan is affected and how the investor's income is affected. There are very few occasions on which the interest on the bonds of responsible governments has been defaulted, repudiated or funded. Only in the case of new and untried governments has this happened except as a result of anarchy and the subsequent repudiation by the responsible incoming administration. Even in this latter case the repudiation has usually been tempo- rary. In the case of South American countries it has sometimes been impossible to pay off a loan at maturity, but the coun- tries' undeniably great natural resources have made this a mere matter of waiting for a more propitious time. The investor's income does not necessarily suffer. As a rule, although wars and revolu- tions may retard civilization, they have the immediate effect of stimulating human thought and endeavor. Thus in the case of war, there usually follows a period of expansion and invention in the defeated as well as in the victorious GOVERNMENT SECURITIES 7 country. The opening of the West and the industrial development of the South after the Civil War; the stimulation of manufacture and agriculture in both France and Germany as the result of the Franco-Prussian War; the industrial and political awakening of Spain and the stimulation of agriculture and commerce in Cuba, Porto Rico and the Philippines following the Spanish-American War; the introduction of modern ideas on eco- nomic development in Japan, together with a serious effort to compete for a place for her products in the world's markets, and the beginning of industrial occupa- tion in Russia resulting from the Russo- Japanese War; all these may be regarded as after effects of war. In the case of revolution, there is usually a change for the better, a country having generally reached the state where nothing seems worse than existing con- ditions before such an upheaval is suc- cessfully attempted, and a better and, presumably, a more stable form of government eventually comes into being, accompanied by more just and sound 8 THE EFFECT OF WARS ON economic conditions. Both of these lead to a better equity behind the bonds of the government. The only objection to a government bond as distinguished from any other is that in case of non-payment of interest a country cannot be forced into a receiver- ship and the only means of collecting is "by w^arship." The present situation created by a war absolutely v^^ithout precedent in its size, scope, methods and destruction, is so abnormal that it would hardly seem possible for any man to foretell its effects. But if we take past wars as a precedent, then, since this war is on a larger scale than any which have preceded it, the results should be larger; the debts will be greater, but the expansion and stimu- lation of energies that will follow will also be greater. The period following the Napoleonic Wars saw an enormous change in the economic, industrial and governmental conditions and methods of the world, while from about that time date most of the debts of the modern nations. The GOVERNMENT SECURITIES 9 world's development has been practically steady and continuous since then. It will be noticed that the prices of government securities have declined since the beginning of the present century. Though due to a variety of causes it is probable that the increased gold pro- duction and the many and attractive opportunities for investment in corpora- tions of all kinds have been partially responsible for it. The United States occupies a unique position in relation to all this in that part of its lowest yield bonds are available as a basis for note circulation, which tends to keep their price on a higher level than would otherwise be the case. It would seem that, while wars and revolutions have for a short time caused a lowering of prices of government bonds, they have not affected either the income of the investor or the security of the investment, and to those who have bought during the temporary depression of prices they have brought large gains. It is doubtful if wars, external or internal, have had as much effect on lO THE EFFECT OF WARS ON governmental securities as the economic and financial conditions through which the countries have passed and which have considerably modified the effects of spe- cific events. These, rather than the political dissension, would seem to be determining factors in the rise or fall of the prices of government securities. GREAT BRITAIN GREAT BRITAIN at the end of the Napoleonic Wars found her- self in the position of a victor who had piled up a huge debt, even though this was in part offset by her gains in colonial territory. This debt, added to that which had been accumu- lating since the sixteenth century, was funded into the Consolidated Annu- ities, inaugurated in 1751 and having no maturity, though reducible by purchase. "Consols" have been added to, replaced by new issues, etc., but their interest has always been promptly and fully paid. On March 31, 1914, British Consols amounted to $2,851,448,857, with an in- terest rate of 2j^%, selling around 78. In addition Great Britain had terminable annuities outstanding to the amount of $145,623,784, which, however, were more than covered by the value of the Suez Canal shares held in the Treasury. Great Britain's maximum debt, previous to 1914, was reached in 18 17. 12 THE EFFECT OF WARS ON Throughout the years 1805 to 181 5 "consols" fluctuated in price, superficially affected by the succession of events, but after Waterloo they rose fairly steadily and continued to do so all through the great political and industrial changes which immediately followed. These changes were so radical as to practically constitute a peaceful revolution; never- theless, in the period which saw the con- version of Great Britain into a democracy and the replacing of hand labor by ma- chinery, with all the attendant unrest, "consols" reached par, and this in sjiite of severe labor troubles at home and constant war in India. During this time (1815-1850) Great Britain managed to pay off a considerable portion, about $1,944,000,000, of the national indebtedness. The Crimean War in 1853 to 1856 and the Sepoy Rebellion in 1857, fol- lowed by the taking over of India by the British Government from the East India Company, caused only a temporary drop in prices and this was followed by another rise to the maximum of 114 in GOVERNMENT SECURITIES 1 3 July, 1896, and of 113% in 1897-1898, broken slightly when the interest rate was lowered in 1889 from 3% to 2^%. Even through the Soudan Campaign in 1884 the rise continued. The Boer War in 1899 to 1901 brought a drop in bond prices which has continued to the present time, partially due, at least, to the financial depression of the last ten years, the depreciation of the purchasing power of money and also perhaps to the many openings for capital in industrial enterprises and foreign government loans. How much colonial expansion and its consequent addition of opportunities for profitable investment has worked against the attractiveness of "consols" and thus tended to lower their price, it is hard to say, but it would seem as though the acquisition of territory had tended to p-roduce the opposite effect — that of keeping prices up, as shown throughout the Afghan Wars, etc. Wealthy and rich colonies do undoubtedly increase the equity back of a country's obligations, though, as in the case of Great Britain, 14 THE EFFECT OF WARS ON they may not be a source of special profit to the home government. Great Britain is financing the present war as far as possible by taxes, war loans being called for only to meet what the taxes cannot provide. As the British Government is paying for a part of the supplies needed by her allies, as well as her own and, in addi- tion, is financing them where needed, this debt of the United Kingdom represents in part the credit that has been extended by her to her allies. Just how great the amount of this credit may be is difficult to say, but it probably is around $4,700,000,000. Though it places Great Britain partly in the creditor nation position, nevertheless she is to a certain extent mortgaging her future. But although the present per capita debt exceeds that at the close of the Napoleonic Wars, the per capita income and wealth have increased, and the rela- tion between indebtedness and wealth is approximately the same now as in 181 5. In the years following the wars with Napoleon, as stated above, the United GOVERNMENT SECURITIES 1 5 Kingdom paid off about half of the debt incurred through them and this at a time of great political dissension and change, when the nation was expanding in India and elsewhere. What the nation has done once ought to be a fairly safe precedent as to what the empire can accomplish again. Comparative Debt of Great Britain Total Debt Per Capita 1815 $4,320,000,000 241.93 I914 3,485,000,000 77.50 I916 17,336,000,000 382.00 i6 THE EFFECT OF WARS ON Pi oq W Pi o s°^ ^^^^^^^ 0\ 10 r<5 fO ON ■<*■■* to OS d M w »0 Tt- ■-< « w i-r N I. CO VO « H4 0\ £2 OS ■* M r^ 00 M M 10 « r* PO « Tj- fO N 00 t^ r^ 00 e* M M CO £,^ OS »0 VO M N W CO OS « M *|t CO -^ d r^ 10 ci -^ r^ t~ 10 00 OS Su VO OS CO CO 00 S M M M M ■* -^ »o VO H 00 so ^ Os t^ w-S ■* 00 •* Q -"T OS OS so « M Tj- lO IN t~ CO CO »~ 00 CO ■* CO T^ CO CO CO CO CO t^ w 000000 • 000000 000000 MJ 000000 000000 -|! 00 s^ CO ■^f 00 M 00 00 •* SO in SO OS 00 so Tt- M so CO M so so HI C» CO »o >o 00 OS w m ^1 N so « VO so OS II 00 ■* OS CO OS 00 so 1 * Oi CO ■* N OS so t^ t^ w 00 10 M C< CO CO ■* -^ . ui ■* T T ? 7 s ■+00 r^ « so Q M Tj- r~ 00 " M 00 00 00 00 OS OS Os GOVERNMENT SECURITIES 17 2=^i9 5 imIj II I Ij I i i i , I I I 1 8 SOME QUOTATIONS ON BRITISH CONSOLS NAME CONSOLIDATED STOCK * 3?. - 2M* - 2j^* Year High Low Year High Low 1814 67>^ 54M 1865 gi'A 86K 15 72 J^ 61K 66 go'A s^H 16 es'A 53% 67 g6H 89% 17 84K 62 68 96'A 91H 18 82 73 69 g''A 91K 19 79 , 64% 1870 94K 885^ 1820 70K 65?« 71 94 , 91M 21 78M 685i 72 93?< gi% 22 83 75?i 73 94 91K 23 855i '^ , 74 93^ 91 24 96'A 84?^ 75 95H 91% 25 94/4 75 76 9l'A 9iH 26 845< "P 77 9?H 93 27 Sg'A 78 98 94% 28 885< 8o?t 79 99f4 94% 29 94H 85?« 1880 looJi 97^ 1830 WA 77}i 81 103 98V 31 84K 74% 82 102K 99 32 85M 8if^ 83 1024^ 99?i 33 91 Ji 8454: 84 102^ 98% 34 93 , 87M 85 loiji 94^ 35 9'% 89V 86 102^ 99?^ 36 g2'A 86fS 87 103K 99% 37 93% 87% 88 103H 98^4 38 9SH, 9ofi •89 99 5< 9&% 39 93% 69^ 1890 97» 93^ 1840 93!4 85?i 91 94K 4" 90>4 ^iVt 92 96% 93a 42 94% 88'2 93 98 5< 95% 43 975^ 925I 94 102 Ji 97^ 44 101 J^ 96K 95 108}^ I0354 45 loifS 91% 96 114 105 J4 46 97?i 94 97 113% lOsH 47 93% 785i 98 113% 106K 48 9° , 80 99 IllJ^ gin 49 98% 88^ 1900 lOSii 96K 1850 gm 94H 01 97% 91 51 ' 99H 9SV» 02 97% 93H 82!^ 52 102 95% 03 86% 53 lOI to4 9^H 85 54 95% fd °S 91H iiM 55 93?i B6% 06 91 » 85A 56 95% 8SH 07 87A 80K 57 94}< 86}^ 08 88K 831% S8 98% 94!^ 09 86 82,'|, 59 88?f 1910 83K 78M i860 95% 92X II 82A im 61 94K 895^ 12 79/3 72% 62 94 ?4 91/. 13 76}l 7.A 63 94 90 »4 68 64 92 87H IS 54 1 16 62}< 50 •Reduced to 2^16 ■ tReduced to 2^^. FRANCE IN France the wars of the early nine teenth century left very little debt, due to the shrewd management of Napoleon, who believed in making war pay its own way. The restored Bourbons, however, had large indemnities to pay to their allies and the emigres, and as they also, to their great credit, refused to repudiate the imperial expenditures and deficit, the principal of debt, in 1815, amounted to $248,320,000. The main portion of the funded debt, as in England, is perpetual. The total amount of bonds at the beginning of the present war amounted to $4,252,910,182 of "Rentes Perpetuelle" and $657,338,930 of "Rentes Amortissable," both having since 1883 an interest rate of 3%, and formed the largest public debt, absolutely and per capita, of the world. After 18 15 France passed through a period of political turmoil which lasted until the Coup d'Etat of 1851 that placed Napoleon III on the throne. By 1830 22 THE EFFECT OF WARS ON the price of Rentes had gone to a pre- mium, being 102, but the July Revolution of 1 83 1 caused a drop to 84, which, however, was transient and by 1845 the 5% Rentes were selling for 122.85, the 4% for 1 10.5 and the 3% for 86.4. But the Revolution of 1848 brought about the lowest price since the Napoleonic Wars, the 5% dropping to 50 and the 3% to 32 J4. Again a steady rise occurred, until in 1870 the 3% Rentes were selling at 75.10, and this in spite of the Crimean, Mexican and Italian Wars. Throughout this period the Rothschilds had a prac- tical monopoly of the flotation of the government loans. Railway bonds had dropped abruptly in 1848, due to the inability of the people to understand the huge sums needed for construction, but the Second Empire undertook to guarantee the principal of the bonds of the six great trunk lines, and in 1857-59 the credit of these roads rose rapidly, although France was then at war in the Crimea. The Franco-Prussian War caused a heavy fall in quotations, the 3% Rentes GOVERNMENT SECURITIES 23 dropping to 50.35, but although France went through the heaviest strain of war financing known up to that time, besides the revolution once more creating a republic and two funding operations which reduced the interest rates to 3%, the price of her bonds recovered until in 1897 they reached their maximum of 105.25, remaining above or near par until the beginning of the present war. The Franco-Prussian War cost France $1,746,000,000 and the payment of the war indemnity, demanded by Germany, is a proof of the resilience of a great nation. This was fixed at $970,000,000 which was lowered as far as actual cash was concerned by a small amount already paid by the City of Paris and the value, estimated at $63,050,000, of the railways of the conquered provinces. Besides this, $24,650,000 was to be in the bank notes of the Bank of France, a private institution which cooperates with the government. Thus $941,103,055 (in- cluding interest) was actually paid to Germany inside of two years. Most of this amount was raised by two 24 THE EFFECT OF WARS ON internal loans. In 1871 the government issued a call for subscriptions to an issue of 5% Rentes representing a principal of $388,000,000 at the price of 82.5, which was subscribed twice over ; and the second issue, of 1872, also for 5% Rentes representing $388,000,000 principal and issued at 84.5, received in advance sub- scriptions amounting to $8,536,000,000; $5,044,000,000 represented foreign capi- tal and $3,412,000,000 that of France. And this was less than two years after a disastrous war and the Communist insurrection. The reason for this excellent public credit is to be found in the steady, vigorous economic activity which came as the reaction to these disasters; and in the fact that the Bank of France had been so ably managed that in spite of its forced loans to the Communists (which were largely a total loss) and its advances to the City of Paris and the Government of France of $291,000,000, its credit was good. By 1874 Rentes were once more quoted at par. During the nineteenth century France GOVERNMENT SECURITIES 25 had been extending her colonial posses- sions in Algeria, Tunisia, Anam, Tonkin, the French Congo, etc., and much money had been spent on the various wars of conquest thus necessitated. But they are colonies which contain much natural wealth and so have added to that of the nation at large. The critical years of France and the interest charge on the outstanding funded debt of the country at each of these periods was as follows : — 1814 $12,281,681 1830 39,188,000 1848 47,336,000 1 85 1 46,948,000 1^70 77,988,000 1 914 127,458,000 As the public debt of France is per- petual, in theory at least, it is usually stated on its interest basis. The faith of the small investor of France, always partial to safe rather than highly remunerative investments, is shown in the fact that there are esti- mated to be over 4,500,000 individual owners of Rentes in France. 26 THE EFFECT OF WARS ON France is financing the present war out of the savings of her people — that is, by the issuing of Rentes, war loans, etc. There has been little increase in taxation. At the close of the Napoleonic Wars the country had a comparatively small debt. The population at that time was 70% of the present one so that the public debt per capita shows an unusually large pro- portionate increase compared with other countries whose population has increased 300% or more during the century. The strength of the present situation lies in the fact that the country's resources for additional revenue from taxes are almost untouched, and it is well to remember that the small investor in France has always been partial to gov- ernment securities. France, to a large extent, is capitalizing her thrifty past. Comparative Debt of France Total Debt Per Capita 1815 $339,096,000 $12.55 I914 6,607,000,000 159.95 1916 18,005,000,000 455-00 28 THE EFFECT OF WARS ON w u < o ^^^^^^^ .2SS lo w 00 ir> M t^ O Tt 00 00 to i-i d 00 W 1-1 M N u;^ vn o\ O 00 vo lo O ^-s ID t^ « On ro OS O N «' 00 o Lo OS m •So w ^ c* Ti* CO in lo Q M M M Tt* u ■+ SO to W5 M t^ • a,« to SO to O vn to w-S'S. ds to to iH t^ ro •3,« O to to O r~ Su to lo OS w CI U-) ^ tH M M O O O O O O O O O O « O O O O O lo ■* o so" o" o~ o" ^f tT o" ■K OS O O O to N o «.-s O O t< M 00 so o Q ds oo" cK m" to to m to ■* M OS 0> ■* O to N ■* O 1-1 to H « so u^ so 00 M o o o o o o . o o o o o o o o o o o o O O O O o o o o o o o O r^ O O O 1^ ■* o o « o ■* M « w O so t^ so r* to ^ 00 t^ to N so tT IH to Tj- ^ so . so so O O lO t) c lo r* O O t^ O «.2 «^ M O O OS II O w O O »^ O to t-- O O i-i so SI o\ 00 o oo m so ; so~ cfs so" oo" oo" ^ • N 01 CO to to to • irj O ■* W VO Os M «> II 1 1 5 Tf 00 t^ O M so Q 1-t -^ t^ 00 O 1-1 M 00 00 00 00 OS Os OS GOVERNMENT SECURITIES 29 30 SOME QUOTATIONS ON FRENCH RENTES NAME PERPETUELLE » % 3J^-4* 3 t Year High Low High Low Hisrh Low 1814 80. 45- 15 81.5 52-3 16 64.4 54-3 17 69. 55-05 18 80. 60. 19 73-15 64.85 1820 79.6 70.1 21 90.65 73-75 22 95. 83-35 23 93-65 75-5 24 104.8 93- 25 106.25 90-5 26 loi .05 95-75 "l 104.7 98-5 28 109. 101.25 29 110.65 106.5 1830 109.85 84-5 31 98.8 74-75 32 , 99-85 92. 33 J05-5 99-65 34 107. 103-7 35 no. 3 106.4 103-5 99-65 76.35 59-8 36 no. 3 103.2 95-25 90- 72.35 63- 37 III. 106.25 95-1 89-5 73-7 66.15 38 III. 85 107.05 100.5 91. 76.1 66.8 39 112.85 108.25 100.5 100.25 86.1 73-95 1840 119. 4 100.3 113-5 95-5 86.65 65-9 41 117.05 110.45 106. 5 101.2 86.6 75-6 42 120.8 116. 108.5 105. 82.25 76.6 43 123-7 119. 6 109-75 107.25 83-2 78.7 44 126.3 118. 1 113-25 109.25 85-65 79-75 45 122.85 116.5 116.25 III. 5 86.4 80.9 46 123.6 116. J15- 110.25 85- 80.4 ♦J 119. 1 113-35 110.25 103. 80.2 74-65 48 "7-5 50- 104. 48.5 75-2 32-5 49 92.7 74- 81. 66. S8-S 44-7 J 850 97.4 86.7 8S- 76. 58-8 53-9 51 103. 89.1 -91. 78. 67. 54-5 52 106. 5 99.1 107. 88.75 86. 63-9 53 106.5 98.75 82.15 71.7 54 101. 88. 76.35 61.5 ^l 99-4 89-75 71-75 63-85 56 97- 89-S 75-45 61 -5 57 95-5 90. 71. 1 65-85 58 98- 92.4 74-95 67-S «S 98-5 87-75 72.5 60.S i860 98.25 94-75 71-4 67.1 61 99. 94-5 70-15 66.85 62 101, 95-25 72-9 67.4 63 99-5 94- 70.6 66.1 64 95-7 91.4 67-75 64.45 SOME QUOTATIONS ON FRENCH RENTES 3 1 AMORTISS- NAME PBRPETUELLE ABLE » 5* 3}i- -4X 3 % 3* Year High Low High Low High Low High Low i86s 99- 93-9 69-57 66.3 66 100.25 91.5 70.6 62.45 67 lOI. 93-9 70.75 65.25 68 103. 98.4 72.05 68.25 69 105. 100. 73-9 69.8 1870 105.75 76. 75-1 50.8 71 96.1 83. 85. 75- 58-45 50-35 72 92.1 83- !3-5 75- 57-25 52.4 73 93-43 85. 84-5 77-25 59-1 53-25 74 100. 5 92.05 93-1 83-5 64.8 57-8 75 106.4 99.6 98.5 90. 66.95 61.6 76 107.25 101.8 105. 94-25 73- 65- 77 108.7 101.7 105.3 94. 74-35 66.10 78 iiS-95 106.7 109.5 100.25 77-75 69.95 87. 77-25 79 118. 8 108.95 116. 107-75 84-S 76-3 86.8 79- 1880 120.85 115-35 118.85 112. 5 87-3 81-1 89-3 82.85 81 121. 2 113.25 117-5 110. 87.25 82. 89- 83.8 82 118. 7 112.7 "5- 108.4 84-75 78.65 85- 79-9 83 116. 1 107.65 109.45 104.3 82.65 74-15 83-2 76.6 84 109.15 79-5 75-1 82.3 82.3 76.27 85 no's 107. 82.4 76,2 84- 78-5 86 no. 9 108.3 83-9 80.1 86.65 82. 87 110.4 106. 82.9 76. 85.8 81. 88 108. 103.3 84.6 80. 9 87- 84. 89 106.3 103-55 88.4 82.5 93- 86. 1890 107-4 103.8 96-37 87-4 97- 91.1 91 106.05 103.4 96.7 92,2 97.8 92.5 92 106.2 104-5 100.7 95- 100.7 95-9 93 107.2 103-45 99-6 93-6 99-5 95- 94 105-9 104. 104.5 96.8 102.5 96.75 95 108.65 104.8 103.7 99-6 102. 99-65 96 107.4 104.2 103.25 100.6 101.75 100. 97 108.35 104.97 105.25 I01.6 105.1 100.25 98 107.7 103.9 104.3 '01.35 103.25 100. 99 104.7s 101.25 103.05 98.75 101.7 98.9 1900 103.6 101.4 102.3 99-15 100.9 97-8 01 103-75 100.65 102.45 99-85 100.75 99-1 02 102.8 100.5 102. 98-45 101.45 98-5 °3 100.17 96.25 100. 96.7 °4 99-1 94- 99- 95-55 '1 100.5 97-7 100. 1 97-S 06 99-9 94-9 99-8 95- 07 96.2 93-75 97- 94-55 08 97-65 94-15 98.6 95-7 09 99-25 96.25 99-5 97-1 1910 99-2 96.4s 99- 96-5 II 97-55 93-S 97-75 94-S5 12 95-6 88.25 96.1 92. 13 90.8 83-45 94- 87-S 14 88. 76.5 15 69.5 56.5 16 58. 52.5 GERMANY THE financial standing and history of Prussia and Germany very closely correspond, although the German Empire was not formed until 1 87 1. The Government handling of finance more nearly resembles.that of the United States than that of any other European nation, the Empire being a confederation of semi-independent states. Their record for financial good faith and payment is excellent. The debt of the German Empire before war was declared in 1914 was $1,177,418,000, the total for all Germany being $4,913,320,000. A large part of this, principally that of the States, is productive, representing the bonds issued for railways, mines, iron works, public improvements, etc. ; but the Imperial debt has been largely created for military purposes — by wars and expenditure for the army and navy, the Kiel Canal, etc. At the beginning of the Napole- onic Wars, Prussia had in her treasury 34 THE EFFECT OF WARS ON $58,500,000 in specie which was used to finance the struggle against Bonaparte, but in addition a war debt was accumu- lated by the combined German States of about $148,000,000. Prussia's share in this was the "English loan" of $25,000,000 floated by the Rothschilds, and some idea of the credit of Germany at this time is shown by its being issued at 70, 72J4 and 75. The interest rate was 5%, and even at the low price it was not fully subscribed. The German States had paid ofif approximately $48,000,000 of their debt by 1842, but in the years following the revolution of 1848 a series of deficits increased the obligations of Germany. From this time on, much of the capital raised by loans was used to construct railways and in 1870 almost half of the public debt was represented by these investments and the interest on it was a small burden to the various states as it was met to a large extent out of the net receipts from the public iron works, mines and railways. The Franco-Prussian War cost Ger- GOVERNMENT SECURITIES 35 many $438,010,144, but as it resulted in the acquisition of Alsace-Loraine, and $1,072,237,873 in indemnities, etc., the newly formed Empire was not only out of debt, but had $579,617,973 of cash on hand. Of this, three-fourths was reserved for military purposes and the rest divided among the States and used by them chiefly to repay war loans which they had independently contracted. In 1873 Prussian Consols reached their maximum price, but in the following years of business depression and poor harvests they dropped. They reacted to above par in 1880, but beginning in 1898 they gradually dropped to their low price of July, 1914. This may have been due in part to the large amount of unsecured paper put in circulation by the Govern- ment during these years. Great industrial and economic progress has marked Germany's development in the period since 1870. The efficient and intensive methods in all branches of in- dustry, trade and agriculture, might, but for her huge naval and military appropriations by Imperial and State 36 THE EFFECT OF WARS ON Governments, have placed her in a position to pay off all obligations. Germany has been obliged to finance the present war within her own territory and so, having no external indebtedness, may dispose of the problem as she pleases. Without the extraordinary expenses of maintaining her army and navy, the nation should be in a better position to take care of its indebtedness, the govern- ment ownership of so much productive enterprise constituting a great asset. Probably, however, there is a large amount of paper in circulation which is not included in the figures given as the national debt and together with a gold reserve presumably much depleted, the nation's power of recovery from the economic stress will depend somewhat upon how this situation is met. Comparative Debt of Germany Total Debt Per Capita 1815 $187,200,000 $7.54 I914 5,198,000,000 80.10 I916 16,978,000,000 255.00 38 THE EFFECT OF WARS ON w o g°- • ^^^^ •2SS 1 0\ t- ■* o o , t^ Th fO Cn • lo w o w Tj- M O VO O « O 0,2 in O* CO On M vo O -£& ri 0\ ti «' d fo »A ■So M -^ lo r^ lo 1 Q M u V Tt- t^ t^ Oh is ■ r» 0\ O »5'a d lo M ^.x •♦ 00 VO go *^ VO M ^ M c c o o o o c c c o o o o c c c o o •* o * c c ~ d' vo" ■* o c c O Ov lo o «.-s « CJ ■^ h VO vO O Q t- * H 00 0\ 00 oo 00 f* ■) 1- 00 to ro «^ H r< •) f - O lO lo Ov pT fT rf vO~ M o o o • o o o °- °^ °. Is o~ o o o o o «-a3 ° "O o. r d S. o o •* o O VO 00 VO 00 VO CO CO t~ • >o ■^ ■ -^ ■coo •o « o N ■<1 • o o o o " .2 w > \c oc o o o II (* 5 w 5 00 O IT) VO f 5 1-1 1/ 1 o •* ■* ,1 §• 00 M o vo_^ CO w W(S ■^ ■ VO >H ~ oo" vo" vo~ M re 5 -"l ■ H^ VO VO v > O o ■♦ M u- 1 0\ H u 1 I 1 1 5 ■^ - 00 o t^ O f» \o Q M ■<* ■ r^ . 00 O M HI 00 00 M 00 M 00 ON Ov 0\ H) M M HI GOVERNMENT SECURITIES 39 ^ :? 5?: '•if i ■'A* 1 1 ^ 5$ JB J H i Si i| 1 40 SOME QUOTATIONS ON GERMAN BONDS Prussian Prussian Imperial Imperial Prussian State Debt Consols Consols Consols State Loan * 3'A* 4-3 J^^ 3* 3* 3* 1880 1891 1890-94 Orig'l Amt M3, 592,667,850 Mi,030,2i9,8oo M 646,300,900 Mi, 241,994,500 Year Av'ge Price High Low High Low High Low High Low 1851 87 5= 9^'/i 53 54 S3?i 55 85 , 56 WA 57 BsH. 58 84^ 59 82 i860 84>^ 61 SS'A 62 90H 63 89K 64 90 65 90V 66 84K 67 84 68 83!^ 69 81^ J 870 li% 71 83K 72 90K 73 90 74 925^ 75 91X 76 93ft 11 '!| 79 93S 1880 96I ^00% 97 81 98 J^ 103 975^ 82 102 98 «3 ro2 98 «4 103 100 85 1045^ 100}^ 86 1055^ 102 87 107 lOI 88 I07?< 104 89 107 104 1890 107 103JS 91 106 103 84 8i?i 84 82 92 107K i03j< 88 84 88 83 93 107K 104 87V 84M 875^ 84M 94 107X I°2K 96^ 8s. 95K 93 96 84 95 106 I02l^ 99 WA 99 94M 99K 1005I 94K 96 106 J^ 102^ 100 9sn 99K 965^ 96 97 *I04 lOlJ^ 985^ 95K 98 9SJi 98;^ 9SH 98 103 IOC 9lK 915^ 9f'% 9254 98 92 99 loi 96 94 8s?i 93 87 94K 86 J900 98 92 89^ 84Ka 88M 84 89 83K 01 101 94M 91K 855i 91 85 9iM 85 02 102 98}^ 9^A 89 93 88 9^% 89 03 102 99fi 9=J« 88 92 88 Ji 92H 88 04 102 98K 91)^ 87M 91 87 91 87K "5 104 98K 91K 86|i 90 87 91 06 100 955^ 89 83K 89 85 89 84 07 97 9°}i 86}^ 80 87 80 86M 80 08 95 ^9% 84?^ 79?| 85 80 84K 80 09 96 9i>6 87 81K 86f« 82 87 81X 1910 9*.. 9°?^ 85 80II 85 82 85 81 II 94M 91 85 19% 85 80K 85 80 12 92 86 82 75 82 76 82 75 13 87 82 77K 72f« 77K 71K 78 73 14 86K 81 77 71 79 1-^H 78K 7» 15 65K 52?< 58M 40 sm 47X 58« 50K m 16 58/8 50^ 515^ 44K SI 43^ 43M •Reduced 103}^* RUSSIA RUSSIA is a country of great extent, and this geographical fact is somewhat responsible for her large national indebtedness. While this debt is partially due to the fact that there have been many years of deficits and large issues of paper currency; on the other hand, much of it represents public works, mostly railroads. Previous to 1810 Russia had no national debt, but the invasion by Napoleon caused her to borrow, up to 1820, sums amounting to $170,100,000, which were loaned by Dutch merchants at rates as high as7>^%. In 1 8 15 the acknowleged public debt was small, about $98,000,000, but the Government was responsible for an issue of $661,000,000 of paper money. Loans payable in paper were contracted by the Government, an internal loan in 18 17 with an interest rate of 6% selling at S^Vs, an external 6% loan in 1818 at 85. There was also a silver loan contracted 44 THE EFFECT OF WARS ON abroad in 1820 with an interest rate of 5% at 72. In 1822 $29,165,006 bonds were issued at 82, the interest being 5%. This was during the period in which Russia was conquering the Caucasus States. To this beginning has been added at various times bonds to a total of $4,493,803,871 in 1914, of which a large portion represents railway construction. Russia has always met her external obligations. France has been the great market for her bonds, as well as her principal creditor. The Crimean War increased Russia's debt without adding anything in the way of territory, but the Turkish War of 1877 gave her undivided control of Trans-Caucasia. At this time her 4% bonds sold on a 6.49% basis, but by 1891 these same bonds were selling on a 4.06% basis. The war with Turkey is estimated to have cost $631,800,000, and the territory acquired at first did not pay its way. Many railroads financed wholly or in part by the Government were built GOVERNMENT SECURITIES 45 at this time. The close of the Franco- Prussian War was marked in Europe by a great outpouring of capital into pro- ductive enterprises, notably railroads, and of these Russia built over 11,000 miles in the years immediately following, developing her fertile river basins, etc. The acknowledged control of Man- churia following the railroad concession of 1898, came as a result of the Boxer uprising in China, and led to the Russo- Japanese War, which proved a costly one for both nations involved, the com- bined expenses being estimated at about $2,500,000,000, of which more than three-fourths was borne by Russia. When the war broke out, Russian bonds, of which about $1,400,000,000 were held in France, declined sharply in price, but they quickly rallied, and it was in Paris that the greater part of the Russian financing of the war was done, in 1905 about $500,000,000 being obtained to cover the war expenses and in 1906 about $400,000,000 being raised. This last was for other necessities as well. The issue price of these loans was 46 THE EFFECT OF WARS ON 89 and the interest rate 5%. These rose to above par in 1908 and continued so until 1914. During these years the amounts of bonds issued for railways averaged a little less than half of the total indebted- ness. This w^as a time of great internal turmoil, the founding of the Duma being accomplished with much friction, but the prices of external bonds did not drop materially. Since then, in spite of the great unrest at home and dissatisfaction with the Government, Russian securities, both internal and external, have been stable in price, with not more than four points, and in most cases less, fluctuation between the extreme selling prices. Russia, in the present war, has been the heaviest borrower from the other allies. Great Britain alone having lent her $1,250,000,000 which must some day be repaid. Although Russia has nearly doubled her indebtedness since the war began, she has a debt which seems small in comparison with those 6i her two great allies. The present per capita debt of the GOVERNMENT SECURITIES \^ country is less than that of most of the nations before the war began. It is a country of enormous natural resources, which, according to all prec- edents, should be developed with new energy and realization of their greatness when peace comes once more. Comparative Debt of Russia Total Debt Per Capita 1815 $696,000,000 $15-47 I914 4,537.000,000 28.30 1916 7,161,000,000 43.70 48 THE EFFECT OF WARS ON CO en Pi «°^ ^^^^ ■2sS CO O "^ VO o O vo fO to CO d " 00 tH M M M U J' CO t^ lO « Tj- 00 CO O fcS ■>*■ fO o t "t ° T" ^jSS vo VO d dv ■* r^ CO q" w « CO N C» Tt s O •* w • pK„ vo Ov M ; «_^*S. pi d oo' O CO CO • CO M « ^ o o o o o o o o o o o o o ■* o o o o ■+ o ■** c c o O O "1 o «-s c vo 00 00 vo o Q vo « H 00 00 00 M c ^ f< 1 Tf M ■+ CO vo VC •^ vo M lO H CO CO •* «^ o o o • o o o • o o o • JS5 o d d '. O o . «B2 o_ o_^ o^ . w o" d d ■ ■* ■* o • 00 00 o • r~ O ■ C< CO ■* • c 1 c O O CO O • ■s§ c > c > o O H O • c ) c ) o O M O • ** T! s s c > c > o O w . S-g c c ) o Own. « §• c c > o O C« Ov . r^ O Wo, u r) OC N P) OS r^ ■ T f VC ao Ov « vo MM' u n c O Tt- H u j r> ?" T ^ T U O I 1 a >• Tt < t- 00 O H M oc > 00 M GO 0\ 0\ Ov M M M M GOVERNMENT SECURITIES 49 7i r ™ V' g ' ;,^ ;V ,1 ' (v J n? '; 1 iiiii ^ ,000 ;£S, 500,000 ;£l2,000,000 ;f8,000,000 Issued ax 82 93 66'A 92 Year High Low High Low High Low High Low 1864 91 86 BBii 82M 55 52 86 83 6s 94 87 9o5i 86 57>^ 52K 89% 83J^ 66 92 80 87^ 855^ 56 49 87K S7H 67 90K 84 55 5° , — 68 92 82 87 87 57 5°K 84 84 69 91 84 92 85 56 5iJ^ 1870 89 P 91K 84 5*,, 50 88K 83 71 93 , 83 94 86 6c,}i 53 90 90 72 97¥ 9°J^ 94 90 65K 57K 73 100 93 96 90 69 64 92 86 74 104 96 98 91 75 64 87 87 75 106 97 99 92 74 64 76 103 68 96 69 71 47 95 69 77 86 63 84 64 68 45 82 6S 78 85 69 82K 69 64 52 — 79 87 77 88 77 68 56 — — 1880 91 80 92 81 68 60 — 81 93 86 93 86 72 65 — 82 88 80 91 82 70 62 84 84 83 88 80 92 83 70 63 84 96 83 96 87 75 64 — 85 98 79K 96K S2H 73 , 64K 90 85^ 86 104 94 98 9=J^ 7BH 69 96 88 87 965^ isy. 97 9' , 78^ 68^ 935^ 88 88 98 85 100 9°H 76J^ 93K 90M 89 I09?« 98 102 96M 84 75 lOI 92 1890 119 "5 1035^ 99 SvH 81M loiK 99H 91 124 108 91 75 92 "9,^ 109 82 76 93 122K "5 86 79 94 129 122 94?^ 84J^ 95 142 128M 97« Sg% 96 M7K 129}^ 94» m 97 ■54 , '39 , 94 90K 98 I5i>^ I46J^ 96 i9H 99 148 I27J^ 91 85 1900 136M 124 87M 81 01 135 , I26J^ 845^ 81 02 H^'A i=7>^ alii 82K 03 13m 126M 86M 82 04 126K 107 83 rM 05 "9% 94 78 06 lOsK 5° , 69 56% 07 lcx>J^ 9'K tin 57 08 no 96H 69 lla 09 "3 , looji 73 66 1910 J22'X no 77>« 7i5< 76}? II 127 122 80}^ 12 125 "9,. 77ji 73 "3 122% ii95< 76}^ 72% 14 123K 1155^ 77}^ 72K 15 IO7K 102 J^ 16 I02>^ 84>^ 6~ii 44M SOME QUOTATIONS ON RUSSIAN BONDS 5 1 Name 1862 Anglo-Dulch 1864-66 Nicholas Ry. 1867-69 Charkow-Kr'ch'g Ry. i 5 * 5* 4* 5 * Orig'lAmt. i£iS,cx»,ooo ;£l2,000,000 ;£23, 1 10,000 ;£l,7l6,000 Issued at 94 85-86 61 So Year High Low High Low High Low High Low 1864 895i 85 89 8S 65 93^ 86K 97 87K 66 92 78K 96 85j^ 67 89 83 92 81 68 895^ 83K 94 85 63?^ 62 69 89K 83 94 J^ 87 69^ 62j^ 84 74K 1870 89 79 94K 835^ 70K 60 87?^ 78 71 93K 33 97 88 75 66 9IK 82 72 96 89 100 95 77K 72M 95 90 73 100 9^% Toa'A 96 82 74M 99 9oJ^ 74 ^°\, 96 ^°\, 97 86 755^ I02 93 75 io5>^ 94 104K 95 88 79 104 94 76 lOI 72 looM 74 85 63 98 65 77 89 68 93 71 78 64 84 64 78 845^ 69 90 74 76 64 85 72 79 88 78 93 84 79 70 90 78 1880 91 82 96 86 80 72 94 81 81 9=K 855^ 97 90 82 74 95 87 82 88 80 94 86 79 70 91 So 83 88 80K 96 875^ 79 74 89>^ 83 84 96 83 100 92 84 755^ 95 85, 85 96K 82 99 84 86 76 96 79% 86 100 94 lOI 96 92 85 lol 9VA 87 98^ 9i¥ 99 91^ 86 80 97 89, 88 102 91 lOI 92 88K 78 96 33J^ 89 J04 100 95 86 103 95 , iSgo 103 100 98 93 , 103 ViVz 91 100 iS% 92 98 90 93 98/8 94^ 94 102 98 95 102K 98H 96 '°5,^ 98 97 104% roi 98 104K 99% 99 103M 98 1900 loi 97 01 102K 98 02 io3f^ 98K 03 1035^ 97 04 995^ 865< 05 96 7sn 06 87 69 07 83 73 08 89 82 og 9iK 35 1910 94K 9' 11 95K 92 12 95 88 13 92^ 87 14 90^ 85 IS 81K 69 16 76 65 52 SOME QUOTATIONS ON RUSSIAN BONDS Name Moscow-Jaroslaw ProT.-Orel-Vite'k Charkow-Azov Cons. Ry. Series 1870 i si ii 5 ^ 5* Orig'l Amt. ;il,920,000 ;£4, 500,000 ;£4.349>28o ;£l2,000,000 Issued at 78 77K 80 80 Year High Low High Low High Low High Low 1869 84K 77 85j^ !(■% 84K 74J^ 1870 88 75 89 78 87J^ 78 71 93 93 91 82 92 , 82 92 82>^ 72 95^ 89 95}^ 89 95>^ 90 955^ 89M 73 99 91 99 91 98}^ 9' 99 9IK 74 Z02 94 103 94 102 94 105 96}^ 75 103 93 104 93 104 94 107 96 76 98 73 99 69 99 65 104 73 77 92 70 86 65 84 65 9*,^ 69 78 94 82 86 71 85 72 905^ 76 79 99 89 90 79 90 78 91 83 1880 100 90 93 84 94 81 93 82 81 102 96 95 87 95 87 93 ^ , 82 lOI 94 92 81 91 80 88 80M 83 lOI 96, 89 83 89 83 90 8j5^ 84 103 91% 96 84 95 ^5^ 95 85 85 103 93 95 80K 96 79M 99,/ 81 86 104 99 100 94 lOI 94K I02>^ 96 87 »°3 99 97K 91 97 89 lOI 93 88 104 98^ 99?^ 88M: 96 83}^ io2«: 92 89 105 lOI 103M 98 1890 105 100 104 99K Name Trans-Cauc'n Cons. Ry. I Cons. Ry. II Cons. Ry. Ill * 3i6 4* 4 * 4^ Oriff'l Amt. ;<;8,9o4,2oo .£27,685,000 ;£49.i 20,784 ;^I2,656,O0O Issued at 55 — Year High Low High Low High Low High Low 1883 55 SI 84 63M 52 85 65 S7J^ 86 72 63 87 65 63 88 65 57K 89 83 71M 1890 835^ 80 99K 925^ 995^ 9^% 100 91 86 i^M 100^ 86Ji 100 86 ji 100 87 92 80 72 98?i 91^ 99 91 J^ 97^ 9°, 93 81 755^ 101 95K lOI 96 99 93K 94 88 78Ji I03J^ 98 i°35^ 97K 102 0M 95 94/^ 86}^ 104K 99?^ 104 99 103 99 96 <^% 88K 105 , 100 I05H 100 io6Ji lOI 97 95 90 105H lOI^ J05K lolJi 105 loiK 98 95 91 106 100 J^ I04?i lOI 104^ 100 jl 99 92ji 845< 103K 99 i03ji 98K 103 98 1900 85 81 102 95fi 102 96H lot 96 01 85^ 84 1025^ 89J< J02 98K 102 J^ 975^ 02 865< 84 I03>i 989i 103 99?^ 102^ 99 03 88 82}^ 103H 97K 103 9754 103 97 04 83J^ 73K 98% 87J^ 98M 87 98 86 05 81 65K 9S?4 77M 69H 95K 78 95 775^ 06 695^ S9J^ 87 86}< 69}^ 8< 68J^ 07 68 61 82j^ 7154 82 71/^ %i T°¥t 08 '^, 66K 89 ia% 88K 80K 87^ 79, 09 78M 68 95 825^ 94« 82}? 92K 80,', 1910 77>^ 74>^ 9=5? 96g 9i>? 94 90 ir 82 T,% 97K 95K 93H 97« 935i 91% 92 12 79 , 72M 84M 955< 85 92M 85;^ 13 im 71JS 92 87 92 87j< 91 87 14 7SM 71J4 90 79 89K 79 90 80 15 54M 54>^ 81M 69f« 81K 69}< 73 73 16 54M 54» T^y^ 63M 72^ 63K 73 t-oA SOME QUOTATIONS ON RUSSIAN BONDS 53 jJaine Cons. Ry. Cons. Ry Cons. Ry. Cons. Ry. Cons. Ry. Series 1871 Series 1872 Series 1873 Series 1875 Series 1880 % , i* S% 5* , *'A* . 4^ Orig'lAmt. ;tI2,000,000 ;£l5,000,000 ^15,000,000 £15,000,000 ^24,000,000 Issued at 81K 89 93 92 75 Year High Low High Low High Low High Low High Low 1869 1870 7^ 72 95J^ 89 94>^ 895^ 73 98 J< 91 99 9°n 74 103 95K 103 95 102 945^ 75 J05 95 105 95 104 97 95 86 76 looK 71 loo-^ 71 looK 74 93K 68 77 88 67 895^ 66 89 68 84 60 78 87 72 87 71 87M 73 80 65 79 89 80 89 795^ 81M 80 72 18B0 93 82 g^a 84 9i}t 84 85 75 81 95 87 94H 87 95 88J^ 86 77 72 67 82 88 81 ^1% 80!^ 87}^ 81 80 72 75 68 83 89 82H 89 82 88K 81 80 73 79 71 84 965^ 84 96 84 96K 83J^ 885< 7S% 78 78 85 98 81 97 80 97>4 82 9°>^ K% 86 100 94 100 93H ioo5i 935^ 96 «7 87 975^ 9° 97 BgH 99 90^ 92 81 88 98 86 98 J^ loi^ 89 94^ 82 Name Rentes 4^^ 1895 Dvinsk«Vit'lt 1906 1909 % i%i 4!« 5* i'A Orig'l Amt. R2-65o,ooo,cioo ;Cl5, 820,000 ;£3.026,240 ;£89,235,ooo ;£55,58o,ooo Issued at 89 88J< Year High Low High Low High Low High Low High Low 1882 83 84 8S 86 87 88 89 1890 91 92 93 94 95 — — ■m 9^„ 102 97^ 96 — — lolK 93J^ 103 99 97 — — 102^ 98^ io4j^ 100 98 103 99,, 102 5^ 99 104 97 99 lol^ 95^ lOI 93 103 96 1900 — — 95 90 ioo>^ 95 01 — — 97 J^ 92K loiM 96H 02 ioo5^ 97 98 J^ 91 102 97H 03 lOI^ 97 100 92^ 102 97 04 98M 88 93 77?i 97K 87 05 90K 73 iM 67 9iH 75 06 81^ 66 nVi 60 83 65 07 76M 69 72 62K 79 69H 91 80 e8 80 72/4 79M 70K 85>^ 775^ 995^ »95^ 09 9o5i 75M 86K 72K 92 8ifi 96K ^% 93?« 1910 97 89 88 845^ 94ji 905^ 106 J^ loiM I02fg S6K II 96, 91K 90K 84 9i'4 90 106^ 102^ i°3K 12 4. 87K 88 78 93H isK 106^ 100 102% 9SH 13 89}^ 85 775^ 91 85 105K 101^ IOlJ< 97'A 14 95>^ 89 82>^ 7Jj4 Sg% *3 , io45i 93 looj^ 90 15 68}| 59!^ 82 65^ 9»H 84 90K 73'/ 16 69 54!^ 64H 56K 7"% 66 J^ ^iH 76fi 835^ 73K CHINA THE history of modem China is mainly a history of her loans. In 1865 the first foreign loan was obtained from Russia to finance an expeditionary force to Hi. It was repaid a little later, an unusual action on the part of China. However, China in spite of tangled finances has always met the interest on her bonds and although for a short time unable to pay off the instal- ments of the Boxer Indemnities promptly, is now paying them on time. The present national indebtedness dates from the war with Japan in 1894 and with the later additions now amounts to $1,112,245,423 foreign obligations and three internal loans totaling $54,367,640. In 1866 the first secured loan was made, it being a first charge against the Maritime Customs. This led, in the end, to their reform and administration by Europeans, an excellent thing for the country and, during the recent revolu- tions, one of the principal things that 56 THE EFFECT OF WARS ON saved China from having to default temporarily the interest on her bonds. Several loans followed this, the largest being for $10,659,000, made just as the country was recovering from the Taiping Rebellion. These have all been paid off. The war with Japan in 1894 resulted disastrously for China, and Japan exacted an indemnity of $152,000,000. Russia came to her aid and raised $77,600,000 in France, while $155,520,000 was raised by an Anglo-German loan. As that did not suffice for internal needs, an addi- tional $32,236,400 was borrowed from various sources. The people of China are singularly averse to paying money to the gov- ernment, therefore the interest charges on the foreign loans, amounting to $13,200,000, were upsetting and this, added to the corruption and recklessness of the official world, produced a most tangled financial situation. The Young China party had an idea that this could be adjusted by the flotation of an internal 5% loan of $66,000,000, but as was to be expected from the disposition of the GOVERNMENT SECURITIES 57 people, it was a complete failure, only $2,640,000 being subscribed and this was eaten up in the expenses of flotation. Prices at this time for Chinese bonds ran high on the exchanges, keeping well above par; in 1896 two issues of 6% bonds were selling as high as iioj4 and 115%, a 5% at 102, and the 7% Silver Loan at 122%. In 1895 began the competition of foreign nations for Chinese territory, concessions, and the chance to lend money and so increase their share of influence. All this has undoubtedly helped to develop China, but it has put her under large and perhaps unnecessary foreign obligations. Russia posed as her best friend and proposed to raise a loan in France for China, but England and Germany would not allow this, and instead they loaned her $77,760,000 in 1898. The Boxer Uprising was made an excuse by the foreign powers to exact large indemnities and, as it was mani- festly impossible for China to pay them, they were funded into a "loan" of 58 THE EFFECT OF WARS ON $297,000,000, bearing 4% interest, the customs tax and then the salt tax being specified as their security. Strangely enough, these disturbances caused no appreciable depression in the prices of Chinese securities. For a few years the provinces made a slight effort to bear their share of the charges on this debt, but soon fell in arrears. Thus China was unable to pay the interest at first, but she found little difficulty in borrowing as much as was needed for this purpose, due to the policy of the powers; the United States alone waived the excess of indemnity above the actual losses of her citizens. Many railway bonds have been issued, guaranteed by the government, and great belief was shown in their value, as in the case of the Hukwang Railway Loan of $29,160,000, which sold on issue at a premium of J^ of i % and was subscribed several times over. One of the railroads whose bonds were guaranteed at this time is the principal source of revenue for the government at present. The total amount of Chinese rail- GOVERNMENT SECURITIES 59 way loans up to 19 14 amounted to $252,478,920, of which about $7,000,000 has been repaid. Almost all of these loans were contracted after 1900. The railway itself is the security pledged by the government besides its own guarantee and sometimes certain taxes. The main railway lines of China should pay good dividends if properly managed, and were run at a net profit of $2,300,000 for the six months ending Dec. 31, 1914, and this in spite of the European War, which reduced shipments. In August, 191 1, the Revolution oc- curred and no one was willing to lend to one party as against the other, the powers seeming to feel that it was a purely national affair, and not one with which foreigners should interfere. Once the abdication of the Emperor was pro- claimed, Russia was only too willing to help, but found no government, no revenues and, in fact, nothing but debt. The new government took over the indebtedness of the old, but this did not give them any revenue and they found it practically impossible to collect any. 6o THE EFFECT OF WARS ON the entire country being disunited and in disorder. Fortunately, all through the Revolution the customs, in accordance with the terms of former loans, had been under the control of the foreign powers and this had paid the interest on the external loans, but the payments on the indemnities were in arrears. Several loans were partially negotiated, among them those of the Currency Reform, Crisp, and Anglo-Belgian Syn- dicate, and finally China obtained the "Reorganization Loan" in 1913 of $121,500,000 from the Six (later five) Power Group. It provided for a reor- ganization and administration of the salt tax by the representatives of these powers. The net receipts from the salt tax in 1 914 were over $29,000,000. The sum obtained from this loan was only about one-half the amount needed to set the finances of the country in order, but it was sufficient for the refunding and adjustment of the external obligations. No reorganization of internal affairs being possible this additional burden, combined with the disorganized political GOVERNMENT SECURITIES 6 1 situation, precipitated the struggle of July, 1913. In 1914 and 1915 two "conversion" loans aggregating $22,000,000 were added by the Republican Government and now a much needed loan of $5,000,000 is being negotiated. In 1 9 14 a new departure was made in Chinese financial history when a $16,000,000 internal 6% loan was issued. Being oversubscribed by $8,000,000, it was raised to $24,000,000 and again in 191 5 an internal loan of $24,000,000 was issued at 90, also with an interest rate of 6%. This was successful, many sub- scriptions coming from Chinese living in foreign countries. Aside from the pressing necessity of reorganization and peace, the dis- couraging factor in Chinese financial administration is just this — while, theo- retically, the form of government is modern, many of the old practises persist, especially in the collection of taxes. Then, too, foreign nations have insisted that no higher customs duties may be levied than the agreed upon 5% — now in 62 THE EFFECT OF WARS ON reality only about 2j^%, due to the rise in prices of which the specific duty cannot take advantage. So that China cannot, like other nations, increase her revenue from this source. China's debt should not be the heavy burden it appears to be, as her large natural resources are practically un- touched and railways will enable them to be developed. It is interesting to note that Chinese Bonds were recently selling on the London market at within i % of the best British issues. Back of all China's bonds is the good faith of a government which has never repudiated a debt. 64 THE EFFECT OF WARS ON <1 • ^^ • t^ Ov ■ VO VO ; vd M Ht Is • VO VO CO Ov . VO r^ Ov 10 * N ro u r • • • • o' . to to VO o_^ o_ o_^ o_ 0* o~ 0; to 00 to H >0 to r^ ov VO N VO VO VO N Ov tH M Estimated Wealth 0' § 0" ■ ll 1.1 0000 ■ o_^ o_^ 0^ • 10 VO* 0" o" ." « to Ov vo_^ 0_ 0_^ . r* 10 * VO t^ VO N N to to to ■ Date ■* Ov M r~ T». « VO r^ 00 Ov w M 00 00 00 ov 0\ W M M H H 66 SOME QUOTATIONS ON CHINESE BONDS Name % Orig'lAmt. Issued at 1874-76 8)8 /627,61s 95 1877 ^1,604,276 98 1884 ;£l,000,000 98 1884 7% Year High Low High Low High Low High Low 1877 78 79 1880 81 82 83 84 85 86 87 88 89 1890 107 107 109 109 no 112 no 98 98 lOI lOI 102 105 103 105 109 no no 112 no 98 100 lOI 102 los 104 116 118 n6K 114 in}^ 109}^ III "3 1095^ io5>^ 104 103 119 120 119K 118 113K 109 112 "5 ni 108 108 103 Name % Orig'lAmt. Issued at 1884 6% 1884 6% Silver Loan 7^ ;£i,635,ooo 98 1895 6% ;£3,000,000 0% Year High Low High Low High Low High Low 1885 86 87 88 89 1890 91 92 93 94 95 97 98 99 1900 01 02 03 04 05 06 07 08 09 19 10 II 12 13 14 109 I IS "3 iiiM iioK 107 105 ^ 108 J^ 107 los los 101 no 114 114K III i^ 107 108 106K 104M 104 lOI 120 122^ n65^ 102 Ji 108K 1041^ I025< 93 98^^ i°5K 107 IOOj< 865i 97% 90 n2H 98K 95>^, 975^ 92ji 98 83 86 83!^ 91M 96ji 945^ 87K 83K 81 82 81K noji niK 109' 106 107 107K 106 J< 106K 107 107 107 107K 108 J< 108 io6«: I04g 102 98X 103 i^X looK 103 102 I02?i 102 J^ 103 103;^ 103 102 icoK 100 SOME QUOTATIONS ON CHINESE BONDS 67 Name % April 189s 6% i8g6 1898 Imperial Ry. Orig'l Amt. ;^I,000,000 ;£l6,QC10,000 ^16,000,000 ^2,300,000 Issued at 106 98K 90 97 Year High Low High Low High Low High Low 1896 115^ 104 102 97?^ 97 Ii4?4 109K 102 J^ 96 98 112 106 1025^ 94K 89% '3, 99 IIO^ 104K 101% 94 88Ji 78^ 97, y 83 igoo 107 93 102 80 86 64?^ 93}^ 71 01 i07j^ 100?^ 99 93 igK 80 96 80 02 107K 104 1035^ 97^ 94 88 935^ 90?i 03 107 102 J^ 103 97 94K 89/8 98}^ 92 04 1065^ 99>^ 103?^ 94 , 9316 S3% 98K 82!< OS 106K i°3!< 106 100^ looK gm 106 }i 97?^ 06 106K 103 io5>S looj^ loiK 9%% losji 99K 07 1065I 102 J^ 104 99M loofS 93H 104K 99M 08 i°7a I035« losK looM lOI 95K 10454 TOOj^ 09 laiyi i°3K I06I/J 102^ I025< 98JI 105K loiM 1910 108 I035< losK 1025^ 102?^ 99?^ io65i 102 11 108 I02M- io5?i 99/i lOifJ 94» 105K, 99 12 104 J^ looK 103J4 98« 98f^ 93K 102^ 98 13 104}^ i°°!i 102% 97H 96 ig^ 102 96 J^ 14 102 102^ 96K 95 87 lOlJ^ 98K IS looj^ 91/8 9=% 82 97'A 16 95 88 83 7iH 91 79?^ Canton Shanghai N'chowN^gpoRy Tientsien Shanghai Name Kowloon Ry. Polcow Ry. Nanking Line % i% S)S S^ OriglAmt. ;£l,SOO,000 ;^I, 500,000 ;^7,COO,000 ;£3,250,000 Issued at 100 9 9 98K 97K Year Higli Low High Low High ;Low High Low 1905 107}^ 98 06 106X 100^ 07 losK 99 08 104X 99 103}^ looK 104K 99K, 104 J^ 100% 09 I07/4 102 los looi^ 106 101J4 I07K I02j^ 1910 io7« 103 106K lOI^ io63i loij^ 107 IOI?J II 106J3 97K 104 J^ gb% 105M 975^ los?^ 97 , 12 lOI 95M 100 94K IOtYz 95 loiji 95K 13 99 98?< 87K 98M 87,=^8 99 , 88 14 92 82 89J^ 82 9'-% 86 giH 84 IS 81 70-% 82 73 83 76 82 70 16 77 69K lt% 715^ 76?^ 69 76?* 69H Name 1908 Hukuang Supplement'y 5« Reorgan'tion Rys. T. P. Loan Loan « S« ii 5% igi2 5^ Orig'lAmt. £t„aoo,aoo ^6,000,000 ;£4, 800,000 ;^IO,000,000 ^2S,ooo,ooo Issued at 98 ioo>^ looK 95 90 Year High Low High Low High Low High Low High Low 1909 io35< lOOj^ igio 107^ 102 J< II 106 96H i04fS 97K 104K 97}^ 12 100^ 94 loi!^ 95/^ iooJ!| 945^ 13 97}^ 845^ 97 91M 97 86K 95 86M 90?^ 89 14 93 81 94 9154 ig% 81M 915^ 80 92 81M 15 78 7°K 82K 77 80K 85 75 82 70 16 75 68 , 78 72^ 76?i 67;! 79K 71 80 72 JAPAN THE national indebtedness of Japan dates from the beginning of the Meiji era in 1867, when the power of the Shogun gave way to that of the Mikado and Occidental in- fluence began to be felt. It was then neces- sary to indemnify the feudal nobles and samurai, for which purpose $93,835,000 of bonds were issued and later $10,535,000 in bonds was also given in part payment of their debts. This and the $7,350,000 debt from the Satsuma Revolt in 1877, together with a few small amounts borrowed for public improvements, rep- resented the total debt of Japan until 1894. The Chinese-Japanese War in 1894-95 brought about a comparatively large increase of debt, about $66,150,000 being added. This was followed by a period of great domestic expansion and indus- trial activity during which the currency of the country was placed on a gold basis. For this the surplus revenues and the JO THE EFFECT OF WARS ON Chinese war indemnity of $152,000,000 did not suffice and in 1899 made necessary the first large external debt, $48,600,000 being borrowed in England at an interest rate of 4%. These bonds were issued at 90, going within a year to 105. Except for a drop to 893^ during part of the Russo-Japanese War they remained near this price until redeemed in 19 10- 12. The war with Russia in 1904-05 brought Japan once more before the world as a borrower and two 6% loans were floated at 93 J^ and 88, respectively, which on the announcement of her victory went up ten points. This enabled Japan in 1905 to raise abroad a 4^% loan which was issued at 875^ and has averaged higher in most years since. Also, in 1907 she was able to redeem all higher interest bearing loans by one bearing 5% interest. The Russo-Japanese War added in all $714,910,000 to the national debt, of which $198,450,000 was internal and $516,460,000 external obligations. Japan now entered upon a period of intense development, for which were GOVERNMENT SECURITIES J I borrowed large sums. The $845,640,000 sometimes calculated to stand for her war debt includes these. High taxes also helped to carry its burden. Japan's expansion into Korea, Formosa and China has added greatly to her material resources and a large portion of her debt represents a consolidation of old debts and permanent public improve- ments, such as railways, telephones, and telegraphs. The present funded debt of Japan is $1,251,316,800, of which, roughly speaking, 32.3% is due to war, 20.8% represents railways and 40% is the consolidation of the old feudal pensions debt. All of Japan's external bonds have risen in price from that of issue, as may be seen from the following table: Year Amount Interest Rate Issue Price 1912 Price 1899 $43>740,ooo 4% 90 96J4 1902 23,300,000 5% 100 lOI 1904 22,356,000 6% 93J^ Redeemed 1904 26,244,000 6% 90>^ Redeemed I9OS 65,610,000 4J^% 90 98^ 1905 43,740,000 AV^fo 90 98^ 1905 28,431,000 4% 90 96M 1907 55,404,000 5% 99 J^ 103M I9IO 50,787,000 4% 95 Conversion 72 THE EFFECT OF WARS ON Japan occupies the unique position of a warring country which has been able to reduce its indebtedness. This is prob- ably due to two causes — the sale of munitions to the other allies and the fact that it, alone of all the nations of the present war, is not fighting for what it believes constitutes its existence. Besides paying off $5,000,000 last year, she has called for redemption $2,480,000 of bonds this year. Comparative Debt of Japan. Total Debt Per Capita 1870 $240,000,000 $6.11 I914 1,251,000,000 23.92 I916 1,234,000,000 23.30 74 THE EFFECT OF WARS ON < Oh < o Tf 00 10 M M lO M o N O ■^ M 00 ON CO w *0 lO CO CO u V NO • CO - NO 00 • .1 a 48,000,000 240,000,000 253,934,400 1,251,316,800 1,234,000,000 •►I's • • ° ■ 0" : ■* . . oi '■ ^1 II ^1 >0 M rj- CO • 0\ 0\ 00 CI P- \0 ON -* On "^ 10 '. M VO M 00 • w *0 OS * i CO On t^ N CO CO Tf lo • Date ^ ON M 1 1 r^ w \0 t^ 00 w M 00 00 On ON On tH M M M M GOVERNMENT SECURITIES IS 76 SOME QUOTATIONS ON JAPANESE BONDS Custom Loan Silver Name For Railways 1870 Loan 1873 1892-93-95 1897 9% 7* ii- 5* Orig'l Amt. ;£l,000,000 ;£2,4CX),00O Yen 175,000,000 Yen 43,000,000 Issued at 98 92j^ Various 10354 Year High Low High Low High Low High Low 1864 65 66 67 68 69 1870 71 112 99 72 114 106 73 113 105 74 113 96 102M 88 75 116 104 J^ 106 96 76 "4 100 106 92 77 115 104 — — 78 115 105 — — 79 ii8 103 I08K 105 1880 III 104 8i 116 106 8z "5 105 83 112 105 84 III 102 85 114K 104 86 118 108 87 H95< no 88 ■I7K I09?« 89 "5 , 107 1890 114K 106 91 113 107 92 iioK i<=3K 93 no 104 94 i09li 103 95 III 104 J^ 96 53>^ S2 97 53K 46 105^ •M 98 49K 44k: 105K 99 99 5054 43 108K ",/ 1900 48>^ 43 105 93% 01 48M 45 I03« 9°. 02 48?^ 43K io65i joo)4 03 49 43^ 32K losK »7}i 04 44?^ 9° , 75/^ 05 49K 4i» I03}< 87M 06 48}^ 455i loiM lOC^ 07 47>^ 44 , 103 S*,/ 08 46 41M 102 9S?i 09 103?$ 100 1910 II 12 ■3 14 15 16 SOME QUOTATIONS ON JAPANESE BONDS TJ Sterling Sterling Sterling Name Loan 1903 Loan Loan 1899 1904 190S f, 4X s* 6% ^'4* Orig'l Amt ;£lO, 000,000 Yen 50,000,000 ;£lO,000,000 ;£ 30, 000, 000 Issued at 90 1021V 935^ 90 Year High Low High Low High Low High Low 1899 88Ji 83 19CX5 86 75K 01 83 74?» 02 iia 74K 03 Bgi4 76K lOlK 87f^ 04 78K 62 9o!< 72^ 97?i 92K 05 gsA 7SK i035< 87J^ 102^ 94K 98^^ 88Ji 06 93H 87 I03H. IOO>^ lol>^ 965^ 99K 93% 07 89 80 103 96 looj^ 96H 98fS 87K 08 86% 79K 102 9S3i 9SJ^ 88^ 09 93K ^*V looK 945? Z910 965^ lOI^ 98 J< 11 93'/= 86^ lOI^ 12 88 8ijJ 99?< 93K 13 825i 77» 9S?i 14 78^ 7=i 96>^ 86K 15 74>s 62 94^ 83 16 7SK 67J^ 9SH 89li Sterling Loan Sterling Name 2ad Series 190S Loan 1905 1907 1910 * 45^!* 4« 5* 4* Orig' I Amt. ;£3O,OOO,0OO ;f25,000,000 .£23,000,000 /ii,ooo,ooo Issued at 90 90 99J^ 95 Year High Low High Low High Low High Low 1895 96 97 98 99 1900 01 02 03 04 OS 9«% g°H 06 97^8 92K8 90?^ 86^ 07 965^ 87 89 79}i 102% 95^ □8 94% 86?^ 87 78 , loijl 95?^ 09 9911 9^K, 93M 83K 100 igio 102H giH 96H 91!^ 107}^ 102^ 9954 94 90?^ II lOI^ 95H, 96 9°K io6?i 93J^ 8g3^ 12 98K 92% 93 83K ioS}< 97K SSH 82 13 9S?« 87K 89 102 94'A 85K 76 14 94>| 83 86J^ 77 looK 94K 85^ 71 15 83 79 71 94 88K 74^ 6> 16 95^ 89K 83 73J^ ii^ 875^" 73K 6> SOUTH AMERICA SOUTH AMERICA is very often considered as including also Central America, and this mistake should be especially avoided in considering the financial history of the Southern con- tinent. Neither should it be thought of as a continent whose governments are subject to revolutions, for if one compares the history of .Europe during the last hundred years with that of South Amer- ica, the latter's revolts, insurrections and wars appear insignificant in size, expense and adverse effects. The economic situation of the South American Republics is very much the same as that of any new and undeveloped countries. Being thinly populated, much capital is needed, the charges for which fall heavily on the limited number of inhabitants, constituting a fairly large item in the annual budgets. As much of the local wealth is devoted to develop- ment work, there is little free capital at home to invest and, therefore, the South 8o THE EFFECT OF WARS ON American Republics have had to contract more or less heavy foreign obligations. Their per capita national debts, in the majority of cases, are large as compared with the United States of America, but small as compared w^ith some of the countries of Europe. While it is certainly true that some of the South American countries have been large and perhaps reckless borrowers (partly on account of the extreme readi- ness of Europe to lend them funds) and some, at times, have been uncertain in meeting their payments of interest and maturities, still, much of this would seem to have been due to extravagance, over- estimation of the rapidity of development, and, most of all, to inexperienced govern- ments, rather than to intentional bad faith. While the European governments have been able to obtain their financial ex- perience through a period of several centuries and to do their experimenting on a comparatively small scale, the governments of South America have had to gain their knowledge of national GOVERNMENT SECURITIES 8 1 finance entirely in modern times and on the large scale demanded by this era. In South America much and rapid development of natural resources has been needed, and for this the various governments, sometimes perhaps over- enthusiastic, have contracted a large proportion of their indebtedness. In the end this means debts which are or will be more or less productive of revenue. The natural wealth of the countries is enormous; their future appears bright. Much has been accomplished by the South American Republics under adverse conditions and in the very few failures to fulfill absolutely the obligations under- taken, there usually have been extenuating features. We are too apt to speak of the South American countries as having one identity instead of ten, and those, ten distinctly different ones. The three most important — Argentina, Brazil and Chile — have had stable and responsible governments for many years and their indebtedness is not large compared with their resources. But resources are not always readily 82 THE EFFECT OF WARS ON convertible into gold and silver money, especially in such partially developed countries, and the great future of South America sometimes finds it difficult to meet present obligations. Until recently these countries were in somewhat the same position as that of our Western states at the close of the Civil War — great natural resources, but insufficient population, railways and facilities for developing that wealth. In the case of South America there is little domestic capital to draw upon, such as was in our East, and its place has had to be taken by that of Europe. There would seem to be a constantly increasing probability that in the future South America will have the capital to buy back from Europe its external bonds. The point in the development of these countries is being reached when the money invested in public improvements, railroads, etc., is beginning to provide revenue, to make accessible the natural wealth, and to greatly increase the capital held in the countries themselves. GOVERNMENT SECURITIES 83 The wealth of South America, esti- mated on the same basis as that used for the nations is about $30,000,000,000, giving a per capita wealth of $545.45. This takes little account of the natural resources of the continent. The many experiments with their currency have afifected adversely the credit of some South American Repub- lics, but the idea now being worked out in several of them gives promise of stability through the various "offices of conversion." The general principle on which these operate is the same in all the countries. Paper notes are issued against deposits of gold, which latter may, on demand, be used to redeem them. This tends to check excessive rises either way in ex- change, and so gives as near a fixed value to the currency as possible. The large immigration of the last twenty years should soon begin to show results in revenue returns from the hitherto unpopulated though naturally rich districts. It is raising the general level of the industrial classes, while civic 84 THE EFFECT OF WARS ON capacity is increasing, and Europe has recognized the brilliance of the South American political mind since the first Peace Conference at The Hague, when it "discovered South America." ARGENTINA THE ARGENTINE in 1810 re- volted against Spain and in 18 14 established its independence and later that of Chile, Peru, Bolivia, Paraguay and Uruguay. With the ex- ception of two short but fierce wars against Brazil and one with Brazil against the Paraguayan tyrant Lopez, Argentina has had an uneventful external history but much internal political dissension. The Paraguayan War in 1866- 1868 made it necessary for Argentina to raise a loan of $12,150,000, which was issued in London at 75 and 725^ and was repaid in 1889. With this exception the national debt has been contracted principally for railroads and public improvements, among which may be mentioned the Trans-Andean Railway and the wonder- ful port of Buenos Ayres. The railroads, many of whose bonds are guaranteed by the government, have had some difficulty in paying their 86 THE EFFECT OF WARS ON interest charges, due to their being built in new and undeveloped territory, but although these have had to be funded in several instances they have never been repudiated. In 1889 the Argentine government contracted two large conversion loans having an interest rate of 3^^ and 45^ per cent, with which they repaid or took over practically all the earlier 6% bonds. This meant a great saving in interest charges, but in the decade from 1880 to 1890, the principal of debt had increased from $83,266,249 to $343,203,737, and in 1 890- 1 89 1 it became necessary for Argen- tina to fund the interest on most of her bonds coming due between then and 1 894. The outstanding principal of this funding loan of £7,630,680 was finally paid off in 1906. At this time the prices of Argentine securities declined heavily, as was to be expected, but they soon rose again to normal prices. In 1893 it was apparent that the payments of interest and maturities could not be resumed in the following year as agreed, and an arrangement was made GOVERNMENT SECURITIES 87 to fund or extend the time of payment of the various loans and part of the interest charges until 1 899-1 901. The resumption of full payments was antic- ipated by one year and by 191 3 the government had paid off a total of nearly $io7,ooo,ocxD of her national indebtedness. The national debt of Argentina in 1914 was officially stated as $545,023,470, of which approximately four-fifths is ex- ternal, while a number of provincial bond issues are guaranteed by the central government. 88 THE EFFECT OF WARS ON < I— I o Pi < o : ^ : : : • 00 • • " • HI . . ' ■ M • • ■ W5 VO •* VO N \0 Tt- rri vn KB tA 0\ ci O ci N 00 M \0 VO r , )H ■ > • ; r~ • ; ; • d\ : ■ • ■ t^ . . . -i O O O o O O O t^ o "-L °. 1 t ° o" o* o" W to O O O N « O O O 1- M « O ■ M H OS O t '^ t "^ : o" lo vo" o' • ro ■* M o • 00 Ov 0\ O 1 i-T t^ fo c> • 1 2. "^ 0\ M 1 1 O r~ « »0 •^ 00 O M M 00 00 o\ o\ 0\ M M M M M GOVERNMENT SECURITIES 89 I ■? • a 90 SOME QUOTATIONS ON ARGENTINE BONDS Buenos Ayres Bonds Taken Over by the Government "Hard Name 1824 1824 1866-68 PublicWorka Dollars" * 1871 1872 Orig'lAmt. 6% 3% def'd liS 6* 6% r "■* Issued at j£2, 500,000 72J4— 75 ;£6, 122,400 *4i5oO|Ooo 76 Year High Low High Low High Low High Low High Low 1865 945^ 9' 39 37 66 95M 84 38^ 32 67 86 78 42 32 76 , 69 68 93 i^% 53 40 79H 71 69 94 88 i7}i 51 93H 1870 9!,% 83 61 54 95K 83 71 100 93 75 60 lOI 89 94 87 72 103 0, 76 70 loij^ 89 96 89 84}^ 75 73 1025^ 97K 76 1^% lOI 94 97J^ 90 87J^ 8a 74 100 90 76 6S% 99 86 96 i^% 85 68 75 96 82 73 73 97 86 95 So 78 58 76 90 35 70 25 91 29 85 ^1% 66 18 77 70 59 60 50 74 59 71 47 49 34 78 75 , 62 72 58 82 66 71M 58 49 40 79 875^ 64 77J^ 77}i 93K 67 88 575^ 68 39 1880 92 80 80 70 9=,/ 82 9iii 71 78 49 81 100 90 I02>^ 92 ioo>6 90 92 71 82 lOI lol 104 95 100 93 90 81 83 1035^ 99 lOI 97 89K 82 84 104 99 102 95 94 83 85 104 94 102 92 83 58 86 104 lOI 104 97 82. 69 87 105^ 100 105 zoo 78 69 88 „^ l8go 105 5i lor 105 99K 745< 67H 91 92 93 94 95 96 97 98 99 1900 01 02 03 04 05 06 07 08 09 1910 It X2 13 14 15 16 SOME QUOTATIONS ON ARGENTINE BONDS 9 1 Name Railway Treas. Cons. 1881 1682 1884 1886—87 1886 * 6t 6% s« 5)8 5 * Orig'lAmt. ;£2,450,000 ;£8i7,ooo ^£1,683,100 ;£8,330,000 ;£624,O00 1 Issued at 91 92M 84K 855^ — — Year High Low High Low High Low High Low High Low 1865 66 67 68 69 1870 71 72 73 74 75 76 77 78 79 1880 81 975^ 91 82 100 89 83 100 J^ 9^% 99 , 92 84 lOI 92 loo'A 92 835^ 835^ 85 995^ 88 98 , 90 86 75 86 i°3j^ 93 loij^ 94 89}^ 80 90K 80 87 105 99 I03K m 95?^ *5. 95M 85 SB 107 100 losK 98M looH 9^'A 99}^ 90J4 99^ 90 89 IZ2H 99 101 9°n lOI 90}^ gg'4 90;^ 1890 104K 88 94K 67'A 95K 69 9S'4 64^ 91 90 35 68 29 79 S3 , 67 26K 92 S9J^ 40 47 3° , 76 HVa 45 30 93 60 45 5° 33» 72 58 , 49 , 35 94 55M 445^ ^'i 38}^ 6gH. 60% 46'A 38/ 95 63M 47 39 7554 64 53 39>^ 96 80 S6% fizj^ 45 87 68«- 61 46 97 87 , 69 67 S3?i 963/ 94 J^ 77}^ 69K 54 98 92K 80 73 61 84 74 62 99 95K 875^ 7^ 69 g6'4 88M 77'A 67 1900 99K 87 74fi 67 9S , 87K 74a 67 01 IO.?f 94 88}i 70 99'/i 89 B7A 70 02 103 97J^ 885< 72% looji 88 85 70 03 104 100 96 S6H 102H 97H 93 , 84 04 105 100 100 9' , 104M 985^ 98K 89^ 05 104 zoo 102 98 J^ 104M 100^ 102 J4 06 I02jf 99M 104^ 103V 98M 07 102 97 I03?i 99^8 101^ 97 08 i04fS 99 , ^°sH ioo>^ 103 , 98 °9 105 100^ losVt 102 io4« 100 1910 104K lOlJi losK I025< 104^ looV 11 103J4 looH 105 102 Ji I04}< 12 103M 100 106 ioi|^ 104 99K 13 102 Ji 995^ 104 looJi 103 98 14 ioi« 95 104 100 102^ 99 . 15 97 ^ 87 ICI 97 96 84^ 16 96J^ 89 99M 9' 92M 85 92 SOME QUOTATIONS ON ARGENTINE BONDS Name Central Tnt^rnsl National Sterling Railway 1888 Cedula Bonds 1889 1888 i883 1889 % si 4%% 7fl 4^^' 3'A* Orig'lAmt. 91K— 94— 97 ^^3,953^900 $I5,000,CXX) ^£5,263,560 ^£2,659,500 Issued at 90 Year High Low Higli Low High Low High Low High Low 1881 82 85 86 87 38 995^ g^'A 63^8 55 89 lOI 92 91 81M 59M 48 1890 93% *5,, 84K 56 5°M hn 83K 56 65% 43/^ 91 68 27ji 59,^ 26 31 14 60 265^ 47 22% 92 ■^S,, 25 41K ^' , 33 20 4^'A 27 22^ 93 48K 33 43 34K 33 24 44K 35 33K 2S% 94 46Ji 36 44 35M 31 , ^3% 48Ji 36K 33 2yV 95 5^r^ 40 50 39 , yH ^*H 53 39M 37 25 96 66 J^ 46 S7 43« 33H 25 57 45 47 33 97 67^ 53H 62 50H 33K 26^- 64 52 465i 39 98 ''^■„ 59 . 72 57 , 4°K 32 73 59 54 4SJ^ 99 77H 65^ 76 65}^ 42ji 35^ 78 69 55 47 1900 P,. 645i 74 *5, 41 35J^ 74K 67 S3 44?i 01 B9'X '°„ 77 ^ 63J^ 43K 37 79J^ 62}^ 625< 49 02 87 7°M 77J^ 66 44 37K 78K 67 66"i 49 03 94M 83K 87 77 46>^ 43K 88 77K 69 585« 04 100 B6'4 94 84,, 46Jf 42^ 94 B5}i 78K 64 05 102^ 97% 99 , 93K 47j^ 44K 995^ 93 82'J ^ll 06 102^ 99'A 99M 93^ 45K 43}l 100 94 823^ 07 lOI 9^^ 96Jf 90 45K 43 98 88 77J^ 70 08 104K 97?J 983X 91 47 435< 98 91 78>^ 71 09 I04J< 100 J^ looK 96 4SK 43j^ loija 96 80 1910 '°5,^ loljl 102 98K 102K 985^ 85 78^ II io4g ioo5<: 102 97 , 102 9iH 87 82K 12 104K 100 lol 9SJ^ lOI 96% 85 79 13 103 99K 98 92 99?^ 93 8g 74^ 14 103 99 , 96/a 91K 100 91 K 81 77 15 looK B5K 89K 78 88« 79K vji 69 16 96JJ- 84 86 77 86 77M 7' Name Ext. R'y Loan Ext. Ry Loan Int. Gold L'n Irrigation Treas. Bonds i '??^ 1910 igio 1914 1915 , i'Ai 5* 5% 5X 6Jf Oritr'l Arot. Issued at ;£2,38o,952 88J^ Ai,047,62o 96'A ;£i, 209,600 lOi ;£i,367,5oo 98 iCi6,coofioo Year High Low High Low High Low High Low High Low 1910 «*,/ 93 iSfl 96 102 96M II 96M 90 96 104M TOoK 92K 84 102 gsa 12 94?i 88K lOlJ^ 96 104^ 100 88 8.K 103 i«yfi 13 91 B3 98W 90 104 985^ M 84 78 0M S9% 102 97f5 15 41 3^^ 53!^ 47M 92 87 16 47 39Ji 52M 44 91K 83 SOME QUOTATIONS ON ARGENTINE BONDS 93 Naqic Funding Loan Central Railway B.A.W.S.&Dr. Ry. Guar. Resc. * 1890 6% fr 1892 ^ 5* 1896 4^ Orig'l Amt. Issued at £y,63p,6Bo ;£2,976,000 87 £6,324,400 £11,607,100 Year High Low High Low High Low High Low 1891 68f^ 48 92 78K 49 93 7554 59K 57% 52 94 74K 63 62 J^ 49f^ 95 80^ ilVi 65ji 54 96 87K 71K 73 56 97 77!i 72^ 61K 60K 56 98 93}^ 81 78J^ 64 63% 51 99 97 88?< 8iji 7oJ^ 65% 54 igoo 96K 89?i 79 ^ 71 635^ 55% 01 looj^ 88 933i 74% 73% SS 02 lOI^ 91K go'A 77?i 72K 0^ 03 103}^ 995i 95^ 86 96H 87% 80% 04 105J5 100}^ looji 88}^ ioi% 89K 88/, 74 °5 106K looYz 102 J^ 98M i^ 104?^ 1005$ 94K 88^ °7 lol 96^3 103 97% 93 82 qS 104 98}i 105 99% 94 , 8S?i 09 104 looW I05K 100^ 97% 9o5< 1910 104'^ loij^ losJ^ 102 98 fi II i03?i iooJ< 105 102 12 i°3K 100 105 /4 looJi 95% 13 102 J^ 99>^ 103K 100 91% Z'A 14 102 98 i03>i: 98J^ WM 79 15 97 89% 100 91% S^H 78 16 91 86 97K 87 81% 74 Name 5 Issues Port of B. Ayres Internal Loan Internal Loan i 1897-99 4^ 1891 i 1913 1907 /r? Orig'lAmt. £16,787,723 £7,ooo,oc» £7,000,000 97'A £10,000,000 Issued at 99 98 Year High Low High Low High Low High Low 1893 63?« 51 99 64^ SI 1900 63?^ S3 OI 71^ 53J^ 84 77M 02 71 56 86 78 03 78« 70M 94 '3 , 04 86JI 72K looH 9^% 05 93 8S>4 I04J< 99H 06 93«: 845^ 104 >i 99'A 07 89 79 103 96H 08 89 83 i04?S 98 103 9Sji 09 9^'A 85^ loSfS lOZ 104^ 99% 103% lOl}^ 1910 93 , 89 104M looK I04« 101% 105% looH II 865<- 88J< 104% 10 1 104 J^ loofg 104 5i looK 12 89 82 10454 99 ^oiH 100 5^ 103% 99% 13 86 80 loiJi 99K 102% 98% 103 98% 14 SsU 74 102 98 102 J^ 97M 103 98% IS 9M 69^ 92% 84 935^ 87 95 85 i6 li% 64 87K 82 89i!f 825^ 92K 85 BRAZIL BRAZIL became independent of Portugal in 1823 and at that time took over $7,290,000 of Portugal's obligations. The first foreign loan was made in 1824 with British interests and was for $6,479,838. In 1827 the national indebtedness was consolidated and an attempt to create a sinking fund was made. In 1825 the country went to war with Argentina, the outcome of which was that Uruguay became independent and the national debt was augmented by an external loan of $3,738,312. In 1848 Brazil was again fighting Argentina but nevertheless the decade from 1850 to i860 was a time of pros- perity and one of the few periods free from yearly deficits. It was followed by the War with Paraguay, which termi- nated in 1870, having cost Brazil at least $243,000,000. This of course entailed the contracting of large foreign loans. In 1889 by a peaceful revolution, 96 THE EFFECT OF WARS ON Brazil became a republic. Several unimportant insurrections occurred in the succeeding years but on the whole the Brazilian Republic has had an uneventful history. There are two factors which have contributed to form Brazil's large debt: the costly wars in which she has engaged and a reprehensible habit of covering deficits with borrowed capital. Both are fortunately now things of the past. The present government is fully alive to the necessity of reducing the debt of the country and is making a great effort to economize in its expenditure in order to make the revenue meet all expenses of the government. The present external debt of the nation is $528,243,120, the internal debt is $190,001,700 and the paper circulation amounts to $313,022,000 of which $289,382,000 is inconvertible. 98 THE EFFECT OF WARS ON < pq ■M a VO 00 o VO On OO Ov M Ov lo to ^ »o w w « -^ to ^ o O N VO lO w O f^ O O O O ro VO VO O O O « Ov lo M O O O 00 tF to to O ■^ to vo" o '^ t^ ^ o N VO N lO M VO M OV ts ir> CO w 0\ O ro N lio On u^ 00 *^ M to r^ 00 o o o o o\ o tJ- to OS O li-j rc ^O O O CO O O r^ O ro N )H O H o N O t^ O CO CO H o ro O CO in o"" rf i>! T^ O Tj- IT) OS tH 1 I I ^00 O t>. O « VO N Tj> t-* 00 O >H M 00 00 00 CO OS On 0\ GOVERNMENT SECURITIES 99 § LM. lOO SOME QUOTATIONS ON BRAZILIAN BONDS Name 1852—1858 1839- -1859 i860 1863 * 4M» 5 s 45^* t'Af: Orig'l Aoit. Issued at ;£i,373.o°o 90 ;£3.8S5,30O 88 Year High Low High Low High Low High Low i8«4 86 83 103 94 86 83 86 So 65 85 67 102 92 85 67 85 67 66 68 62 98 92 63 62 70 60 67 — — lOI 94 — — 67 60 68 — — — — — 7' 63 69 79 , 72 — — — 75 66 1870 93M 74 93-/5 iiH 86 73 83 73 71 — 88 81 88 SS 72 94 865^ — — 93K 85 92K 83 73 98 88 98K 94 98 87 85 74 ^.. 92K 96 96 96 91M 96 87 75 99H 92 96 89 95 85 76 100 90 96 84K 9^H 80 77 looK 95 94 89 92 82 78 lOI 95K 96 91 95 84 79 lOlK 94 100 92 94 83 1880 Z02 96 lOI 96 99 92 8r Z02 98 102 98 lOI 94 82 102 97 102 97 102 98 83 looK 96K 103 98 84 — — 103 98 85 100 100 lozH 98 86 102 99 87 102 99 88 I025< 99 89 1890 91 92 93 94 95 96 97 98 99 1900 01 02 03 04 05 06 07 08 09 1910 11 12 13 14 15 16 ■ SOME QUOTATIONS ON BRAZILIAN BONDS lOI Name 1865 1871 ■»75 1879 * 5» 5* 5* 45^* Orig'l Amt. ;£6,963,500 ;£3,459,6oo £5,301,200 i£5,837>o62 Issued at 74 89 96}^ Year High Low High Low High Low High Low 1864 65 66 76K 66 67 77 70 68 71 69 885^ 77M 1870 93>^ 84}^ 71 97% 89M 945^ 87K 72 100 93 99K 9^% 73 100 J^ 93 99 93 74 102 95 103M 95 75 loij^ 91 10154 90 98 5° . 76 99 83 98 82 98 81}^ 77 97 88 95 86 95 87 78 99 89 96 84 *♦ , 84 79 97 86 94 85 94J^ 83 1880 100 94 99 92 99 91 87K — Si 104 96 104 95 I03>^ 95J^ 95 WA 82 104 98 103 98 104 98 95 89 83 104 98 103 97 103 96 91 87 84 102 93 i°3 92 103 91 90 83 85 100 93 99 91 99 91 88 82 86 lOI 96 rol 96 ICO 96 95 87 87 I03?i 98 103 98 104 97^ 99 93K 88 104 99« 104 99H 105M 100 100 96K 89 102K 81M 1890 95 81 91 94 60 92 86 68 J^ 93 86 61M 94 87 65K 95 92 84 96 92 73 97 84 65 98 71 48 99 68 56 1900 67 57 01 75 625i 02 ^H 70 03 84K 73^ 04 87 78 OS 94M 86 06 94fl 87 07 89 82 e8 89 82M 09 94K 83 1910 11 12 13 14 15 16 I02 SOME QUOTATIONS ON BRAZILIAN BONDS Name 1883 1 i83B 1889 1895 * *H * 4>^ 4* 5* Orig'lAmt. ;Ct,599i6oo ;S6,297,300 ;£20,000,000 ;£7,442,ooo Issued at 89 97 90 85 Year High Low High Low High Low High Low 1M4 65 66 67 68 69 1870 71 72 73 74 75 76 77 73 79 1880 81 82 83 90K 85^ 84 87 81 u 87 82 93 83 99 94K 87 96V 90H 102M 96}^ 88 lol 94 104 ICM 89 102K 78 io55i 99K 1890 93 73'A 92?i 79 8s;« 76 J^ 9^ 65 S3ii 85>^ 5"5^ 79?f 49 92 77 S« 77K 56« 68K 5*,. 93 76J^ S9 77 56 73 ssK 94 82 S8 82K 58 77K "„ 95 32 6« 83K 67 80 6i?S 96 3a M eiH 65 75K 60K 82 68K 97 7^H 61 74 61 71 Ji 59H Bi 65 98 68 44 6i5f 43 61% 41K8 6q% 46 99 69f^ 56 69 555^ 68 55^ 1\% 63!^ 1900 69 57 68 58 675f 57^ 76 *5, 01 77 6k 75^. 64 7i>5 62ji 85H 7=5) 02 82j^ 70K 84 68M 77M 66K 90 80K 03 85 79^ 855^ 81 79H 75 8s4 04 BSH 77!^ 89 81 86 ''^ ^ 97^ °S 94% 83ji 97¥ BjH 92^ 32K 102 J4 96}^ 92)4 06 96 86 jl 97^ BiVi 92ji 86^ 82jf 102 07 90 Bo 94 83 765| 78X 99?^ oS 92 83H 92 84«: 85^ 89^ 98 9054 09 95 HH 94K HH 79n 102% 9254 99>4 rgio lOI^ 93H 102 94 92» 38 103?^ It looK 9S}i 102 97 91K 85H 103K 103H 100 12 102 96K 102 96K 9° , 81 995^ 13 98 93K 102 87 ^51 72K 103 90» 14 89 79 95 80 64M 9* , 82 IS 64K 5'« 58K 45 56 43» 67K 5i5^ 16 61 ■■i SO^ 6i 48^ 57K 4454 73 565^ SOME QUOTATIONS ON BRAZILIAN BONDS 103 Name W. of Minas Funding Bonds Ry.Gar.Res. 1902 i9°3 * s* 5 » 4* 5» Orig'lAmt. i;3,7io,^ 78% 87^ 102^ 93/i 1910 105K lOI^ %% i04>i 100% II 105 J( 102^ 85K I04j^ IOO|< 12 io5« 99 8i>^ 104 lOoK 13 104K 99 WA 74)4 103 95 14 loij^ 95 , 77 ^ 645^ 98?^ 92 15 99J^ 88K 565^ ^',% 92/4 75?S 16 WA 84 57 4=5^ WA 76 Name 1908 1910 I9ZI 191 1 1913 » 5* 4* 4)« 4« s* Orig'l Amt. ;f4,000,000 ;<;iO,000,000 ;^4,5oo,ooo ;£2,40O,00O ;£l 1, 000,000 Issued at 96 87K 92 97 Year High Low High Low High Low High Low High Low 1893 96 97 98 99 1900 01 02 03 °4 05 06 07 08 09 I02>^ 93U 1910 I02j^ 99?^ 9° , 86^ II 103 99?B 89K 83?^ 92K 885i 12 IO3H 99 87 78/s 94^ 9oJ^ 83 79 13 102 95 85A 71 95% 84 82 71 J< 74^ 72 14 94K ^9% 77 60 91 75 75 64K 93K 69 IS 70 55 56 415^ 59 41 54 40/8 61% ii% 16 nM 58J^ 58^ 445i 59 45 57 43 69K ssH CHILE IN 1810 Chile began her struggle for the independence which was finally established in 1824, and in 1833 the constitution was drawn up and the country united. Her first public loan was raised in London in 1822 for $4,860,000. Three small revolts, boundary disputes with Argentina, Peru and Bolivia and a short war with Spain, were none of them important enough to have much effect on the general peace and prosperity of the country. But in 1 879- 1 882 Chile was at war with Peru and Bolivia and though she gained most of the nitrate fields, a great source of wealth, it added a large amount to her national debt. The present debt began at that time. In 1 89 1 civil war broke out, caused by political differences, but it lasted less than a year and with that exception Chile has had little serious political dissension. Much of Chile's debt represents money Io6 THE EFFECT OF WARS ON used for railway construction, harbour improvements and public works. Chile has always met her foreign ob- ligations. It is stated that, during the Balmaceda Civil War, on the day when payments on the external loan were due in London, a representative of each fac- tion was waiting at the bank with the amounts due. In 1914 Chile's total funded debt was $209,376,082, of which $168,901,968 was external and $40,474,114 internal. io8 THE EFFECT OF WARS ON t— I Is 1^ • CO w *o ; Ti- lo lo • H 00 M -1 ■* m O O M r^ O O fO w O" w' t^ »o" O u^ fO ro fO ■>? ^ o' so vo O M 11 II M M O •♦ O O t^ ^ o o 00 0^ M ■* M lO »C ■* 0~ CO t^ N « O O ui OS IH N W W ^ a a -0- 00 O m M Tj- r. 00 w OO 00 00 ^ OS M M M M M GOVERNMENT SECURITIES 109 no SOME QUOTATIONS ON CHILEAN BONDS Name 1858 1866 1867 1870 t >,%% 1* bf, 5« Orig'lAmt. Issued at Yeir High Low High Low High Low High Low 1864 84 Bo 103 98 6s 83 72j^ lOlJ^ 98 66 67 75 66 9* , 86 102 92 68 77 66 104K 90 104 98 69 79 71 loS 100 J 870 — — 108 98 102K 93 91 82 71 87 V 108 102 105 98 98 88J^ 72 T 82 109 103 105 100 101 93 73 89 83 109 100 105 99 99 91 74 86 8oJ^ 107 102 105 96 90 75 '86 80 108 lOI i°S 98 89 76 85 67 109 93 104 83 95 71 77 80 70 107 96 102 95 9° 82 78 81 55 106 85 102 73 100 60 79 75 5° 100 68 90 S8 80 50 1880 71 60 105 91 95 82 83 69 81 86 66 III 100 106 90 98 78 82 87 79 110 103 106 97 99 87 83 — — — — 106 ic» 98 91^ 84 — — — — 106 100 101 85 9*,/ ^1% 108 J^ 100 xoriYi looji: 104 9SH 86 lOI^ 89K 108^ 103 105 vM 87 106 lOI 88 105 loiM 89 104K 101 1890 104 looK 91 92 93 94 95 96 97 98 99 T900 01 02 03 04 OS 06 07 08 09 1910 11 12 13 14 15 16 1 SOME QUOTATIONS ON CHILEAN BONDS 1 1 1 Name 1873 187s 1885 Conversion Loan 1886 * Si 5J <%* A%i Orig'lAmt. — ;£8o8,900 ;£6,0I0,000 Issued at — 85-65* 96 Year High Low High Low High Low High Low 1865 66 67 68 69 J870 71 72 73 74 95 89 75 94 85 94 85 76 9° 73 90 73 77 90 82 82 78 89 58 89 58 79 78 49 78 49 1880 81 67 81 67 81 95 76 95 76 82 94 87 94 87 83 96 9' , 84 — — 1005^ 90^ 85 1025^ 94 103 9-M 86 105 ^ 94?< rol% 99%, 103K B8?i 87 102}^ 101^ 102 lOI^ 103 98M 102 ^„ 88 97?^ 103 97K 89 106^ loof^ io6?i looM 1890 104K 99K 1055^ 98K 91 100 75 99K 745^ 92 93^ 88 9<,/ 87M 93 75 895^ ",, 94 95}^ 79 96H 8oJ< 95 985^ 92 , 99M 93 96 95?i 84K 95?i 86 97 88 76 90 '5,, 98 84 635i "■t , 64^ 99 82M 71 875^ 73K . X900 84 77 88J< 80K < 01 83K 74 84M 76K 02 85M 73i>^ 88 74 03 04 87 92M 80 78?i 88 97^8 81 19% 05 97?i 87^ 99M 89M 06 97 90j^ 97K 90>^ C7 93 86 93j« 85 08. 97?i 845^ 98}^ ^5. 09 96K 91 97^ 90>4 19x0 100 93 «*, 92?^ 11 99 , 95 99A 945^ 12 95j^ 91 96 9' , 13 97 873/ 98 89K 14 96?i 90 94 89 15 89?i jiH 90 68 80 J^ 16 ~ 90 112 SOME QUOTATIONS ON CHILEAN BONDS Name i8«7 1 889 1892 1893 * ^%i ^%i 5 * 45^ !« Orlg'lAmt. ^1,160,200 ;£i,546,400 ;^I,800,000 ;£63O,000 Issued at 96 97 95 Year High Low High Low High Low High Low 1864 6S 66 67 68 69 1870 71 72 73 74 75 76 77 78 79 1880 81 82 83 84 85 86 103 99J^ 102% 100 J^ 89 106^ looJi 105 97^ 1890 los 98^ 100 73 , 9' 99K 73 93K 87K 92 94 87K 90 79!^ 97H 97}i 93 89 75 96 81 96M 82^ 80 73« 94 955^ im 99>^ 93 102 J^ 885J 96 75 95 98K 92 96 70 I04K 995* 98J^ 9' , 96 94 85 90 Si I03» 92 935| 845^ 97 88 76 85>^ 74 96% 82 76 98 82 63 88 79 , 9°yi 73K 82^ 63 99 82H 705^ 94 84J^ 93% 80 83 '' , 1900 83 nV^ 96^ 9°>i 94 ^ 87K t^ 77K 01 82 74 98 9>K 94^ 93^6 82 73K 02 855^ 74 99 95>4 835f 85 74 03 83 80 91% 89K 96 90» 87 04 94 , 79 , looii 93K 100^ 89 , 92» 78^ 05 98/. 895< 98 92 103 95>^ 9S?6 87 06 97 90K 94 86 102 95 96}< go 07 93 85 94 84K lOI 91 93 88« 08 94?i 83K 965f 90 J^ 101}^ 9^}i 92|f 9576 irU 09 9* 90A 98 9^^ 9SM 102M 97 89^ 1910 II 97K 98 , & flH 103 103^ 99j| 96A 97» 92% 12 95K 94 8^* 102 97}f 9454 90 13 93 88 j| 92 87 looK 96 88 14 93 88 82 76 98 94>^ 88 * 84 15 82 65 82 73 90 76K 80 70 16 84K 74 — — 91 81 — SOME QUOTATIONS ON CHILEAN BONDS 113 Name 1893 .1896 Coquimbo Rwy. 1903 ^ * 4>^* 5!< 4'A* 5^ Oriff'lAmt. ;f 2, 000, 000 ;C265,000 ;^4,000,000 ;£i,35o,ooo Issued at 93% 100 955^ 9SM Year High Low High Low High Low High Low 1896 95 87K 97 94 , 82 95 89M 98 ilH 75 90 88^ 99 81 71K giH 79K 1900 83 78 93 86 75 7^H 01 82 73 , 92% 825^ 795^ 72J2 02 86 73?i 935i 82ji 81 73 03 il% 79 96!< 90 86 79 04 91 79K 100^ 89}< 91 775^ 05 96K 88K I02>^ 96 94^ 86 I025i IOOj< 06 97 , 88 loa 95 94?< 89 102 9S'A °7 9=M 82 looM 9°H 9°?< 84 ioo5< 92 08 9=«: 84 101% 92 9' , 82 101 92 09 9S , 89K 92n 1025^ 96^ 93?i 89 , 102 97 zgio 97« I03>4 99VI 95K 90M 1035/8 99K IZ 98, 92 !< 104?^ 99/s 95li 9^'A I03K 99 12 94^ 87 103 , 96 , 93 , 89 I02H 97 13 92 86 1005^ 95M goH 861', lOO 96 14 91 84 98 9^H 87K 84 98 94 15 81 69 87 76 79>^ 65 88 74 16 86 7iKs 90 78«- 89K 79 1st ;£4,905,ooo AricaS iValp. 2nd;£5,ooo,ooo Series A.B.C. Name 1906 1909 19 [O of 191 z 1912-13-14 i 'Mt 5^ 5 ( 5% k% Orig'lAmt. ;£3, 700,000 ;^3,000,000 ;£2,6o 0,000 ^£9,905,000 ;£4,026,000 Issued at 92?i 96K 96. )75 985^ Year High Low High Low High Low High Low Higrh Low ,1899 1900 01 02 03 04 05 06 955< 89 07 93}4 82 08 92 84 09 955^ 88}^ 102 965^ 1910 975^ 92 }i I03j^ 99}< 1025^ 99K 11 98K 91J4 103K 98% 104K 97M^ 102 99/8 12 97 102 97 102K 97 ^ 102 95 99H 95 13 96 88 100 95 100 955i^ lOI 93 99 93 14 935^ SiH 97H 9^'A 96 J^ 93 98K 90'A g6H 86 J^ 15 815J 75/2 86 74 , 86jJ 74 875^ So 83 7°H 16 79 73 38 76J^ 85?^ 77 90 75K 86 75^ UNITED STATES OF AMERICA TIE United States of America is fortunate among nations in hav- ing a very small national debt, approximately one-half of which is non- interest bearing. It has also a fine record for the prompt payment of interest and maturities. Since 1790, when the present form of government was inaugurated, the nearest approach to repudiation of federal debt was in 1887, when the Postmaster General declared that all stamps issued prior to i860 were no longer acceptable for postage or redemption. The wars in which the country has engaged have been largely financed by treasury notes or short term internal loans; the financing of the Civil War is too well known to need description. The public debt of the United States began, of CQurse, in the Revolutionary period, and the first external obligation was incurred in 1777, when the Conti- nental Congress borrowed $400,000 from 1 1 6 THE EFFECT OF WARS ON the "Farmers General" of France, a semi-official private corporation. This was followed by many others. France, and later the Netherlands, on the credit of France, were the principal creditors of the struggling country and Spain also loaned a small amount. Altogether these loans amounted to approximately $6,500,000, while the in- ternal indebtedness was $26,188,909, besides which there was in circulation about $159,498,880 in paper money. Much of this continental currency was never redeemed, and "fell gently asleep in the arms of its last possessor." As the Continental government found difficulty in meeting the interest on its indebtedness, several loans were raised abroad to pay the arrears of interest, but this reprehensible method of meeting obligations was resorted to only during the war and the period of organization which followed. In 1787 Dutch bankers had purchased a considerable portion of the domestic bonds at a very heavy discount and the last loan raised to pay interest on another GOVERNMENT SECURITIES II7 loan was obtained at this time. These same bankers profited largely on their transactions in American bonds. In 1790 when the present form of government came into existence, the total indebtedness of the United States, exclu- sive of paper currency, was $52,788,722, of which $10,098,706 was external, $28,858,180 was internal and the rest represented back interest, officers' pay in arrears, and amounts owing for military supplies, etc. In addition to this the federal government assumed state debts amounting to over $18,000,000. The foreign debt was funded with an interest rate of 5% and was repaid by 1795 ; the domestic debt was also funded and gradually repaid, the interest rate being reduced to 6%, 5j^%, 4^% and 3%, in various ways. The years of peace from 1801 to the War of 1 81 2 were a time of great national prosperity and expansion and a remark- able reduction of the public debt was accomplished. The total indebtedness in 1800 was $82,976,294, to which was added the $11,250,000 purchase price of 1 1 8 THE EFFECT OF WARS ON Louisiana. Nevertheless the debt was decreased by more than half, over $49,000,000 being paid off by 1812. In 181 1 an attempt was made to introduce United States bonds on the London market, and the 3%'s were quoted at 65 to 70.71 and the 6%'s at loi to 102. This effort was temporarily frustrated by the War of 1812, but by 1816 they were again quoted there; the 3%'s at 51 and the 6%'s at 8iJ^ to 82. At the same time these were quoted in Philadelphia at 61 and 92. During the war the price of government securities had dropped, and had England continued to trade in them at this time the British investor might have made considerable profit. A 6% loan put out in 18 13 was sold at 88^. The War of 18 12 added about $88,000,000 to the public debt, and in 1816 it stood at $127,334,933, but the following year the floating debt had been reduced to such small proportions that payment into the sinking fund recommenced. Another period of prosperity began GOVERNMENT SECURITIES II9 and in 1836 so much had been paid off (the residue amounted to $328,582) that the federal government distributed $28,000,000 surplus revenue among the states. The Mexican War did not interrupt this prosperity, and a 6% loan which partially financed it was issued at par. This war, which brought the Pacific territories to the United States, added, roughly speaking, $49,000,000 to the national debt. The Civil War, one of the most expensive and exhaustive wars of history until the twentieth century, is stated to have cost the government in the neigh- borhood of $3,000,000,000 on the basis of all claims being adjusted. The debt of the United States in 1865 reached its maximum of $2,756,431,571, of which $1,1 10,000,000 was funded, $1,276,000,000 was floating and $460,000,000 was paper currency. The most popular war loan was the 6%, 5-20-year of 1862, of which $515,000,000 was placed at par. At the close of the war refunding and redemption operations were at once I20 THE EFFECT OF WARS ON begun and continued until 1879. The surplus revenues of these years were used to pay off the short time loans. From 1870 to 1877 refunding operations re- duced the interest rate to 5%, then 4J^%, and in the latter year to 4%. All issues were at not less than par. The last war loan bond was finally redeemed in 1907, when the few remaining "4s of 1907" were paid. The progress made in reduc- ing this debt was remarkable and especially impressed Europe, where its repayment in such a short time was regarded as astounding. During the years of war the prices of the 6s of 1 88 1 were as follows: Year Low High April 1861 84J4 94 1862 87>^ loyji 1863 91 J4 ijo}i 1864 102 1 18 1865 1035^ 1125^ Yet during this period of war and intense anxiety in government finance, three great public works were con- structed: the Union Pacific and Central Pacific Railroads were built, being opened to the public in 1869; the trans- GOVERNMENT SECURITIES 121 Atlantic cable was laid, being completed in 1866; and the telegraph, developed as a military necessity, came into general use. The reduction of the debt of the United States which took place up to the Spanish War may be gauged by the following summary : Year Debt 1865 $2,674,815,856 187s 2,090,041,070 1885 1,375,352,443 1895 838,969,476 During the Civil War the Confederate States also issued bonds to finance their government. In all, about $355,000,000 were sold, many of them taking the form of "produce loans," being issued in ex- change for food-stuflfs and cotton. There was only one external loan raised, although many of the internal bonds were bought abroad, especially in England. This loan was made in 1863 through Erlanger & Company of Paris and was purchased by them at 'j'j and offered on the market at 90 in Paris, Frankfurt, London and Amsterdam. It was oversubscribed and soon rose to 95^, 122 THE EFFECT OF WARS ON but on the reverses of the Southern armies being made public, it dropped until it reached 65. It was looked upon by most brokers as a cotton speculation since the security for the loan consisted of a large amount of cotton held by the Southern States. This cotton, however, could not, in any large quantities, be gotten out of the states until after the war should be over on account of the blockade maintained by the United States Government. The money obtained from the loan was used to finance privateers such as the "Alabama." During 1864 the prices of these bonds on the London market fluctuated between 84 and 57. One reason they did not drop more was that the interest was paid fairly promptly, part of the principal obtained being used for this purpose. Then, too, the purchasers of these bonds hoped, indeed expected, in spite of the American minister's declaration to the contrary, that even in case of victory, they would be assumed by the United States government. After the war several GOVERNMENT SECURITIES 1 23 attempts were made to have this done but the idea was never seriously enter- tained by the Federal government. The purchasers of Confederate securities took the risk which the financiers of revolution always take and, unfortunately for them, the Confederacy was not successful. Most of the financing of the war was done by internal loans. These fell due every six months beginning with 1864 and an effort to keep values up was made by paying them in treasury notes, which did little good as they were themselves depreciated. The only loan which the Confederacy managed to raise at home in full and in specie was the first one in February, 1861, for $15,000,000, and this took practically all the specie of that part of the country. Many treasury notes were issued — a maximum of at least $700,000,000, par value of $100, being in circulation towards the end. Some of these bore interest, some did not, and some were redeemable or convertible into bonds. At first the interest rate was 3.65% but later it became necessary to raise it to 124 THE EFFECT OF WARS ON 7.3% in order to induce people to take them. They depreciated rapidly in value as was to be expected from the large amount issued without any security back of them. Of course all Confederate Government obligations became void in 1865. Table of Confederate Bonds and Treasury Notes, showing some quotations of prices: Treasury Notes 8% Bonds Year High Low High Low 1861 90.0 87.5 81.9 — 1862 82.7 39.5 91.0 39.3 1863 29.0 6.3 32.1 10.8 1864 5.3 3.2 7.3 4.6 1865 1.7 2.2 — The Spanish War, while small in itself, has had far reaching effects on the policy and economics of the United States, bringing as it did a large and, for the first time, colonial increase in territory. A $200,000,000 3% war loan offered at par was subscribed seven times over and went to 106 inside of three months. In 1897, before the war began, the national debt was $986,656,086, and in 1899, when the war was over, it was GOVERNMENT SECURITIES 1 25 $i)i55»32o,235. A steady reduction took place through the years to 1908, and this was accompanied by a great expansion in commerce and trade for which the war was at least partially responsible. The war had brought no perceptible drop in the prices at which the govern- ment securities were selling and in this subsequent period they rose to a max- imum of 139M for the 4%'s and 103 J^ for the new 3%'s issued to finance the Panama Canal. These latter were issued at or above par, which shows the high credit standing of the country. They caused an increase in the national indebtedness and since then there has been no decrease, the 1916 net indebted- ness of the United States standing at $1,132,639,195 and having interest rates of 4%, 3%, 2i^% and 2%. Sixty-six per cent, of the gross debt was non- interest bearing and twenty-four per cent, was bearing interest at 2%, the lowest rate. The high level of prices maintained by United States bonds is partly due to the 126 THE EFFECT OF WARS ON circulation privilege attached to some of them. As this book goes to press the United States is entering the great war. At once the question of finance arises. On the basis of the relation between national indebtedness and wealth at the time of the Civil War, when an obliga- tion was incurred equal to approximately one-ninth of the country's wealth, the present government should be able to float a loan of $25,000,000,000 with every prospect of its forming a safe, sound and thoroughly desirable investment for the individual. It may be objected that no such amount of loose capital exists in this country, but the same objection would have held equally true in 1861-65. An unexpect- edly large quantity is probably at hand, as was proved at that time, in very small amounts, which ought to be available if it can only be reached and interested. On the basis on which Great Britain and France are borrowing, partially, it is true, abroad, the United States, given a GOVERNMENT SECURITIES 1 27 lender, might with comparative safety borrow up to $38,500,000,000. A war loan, such as is now being dis- cussed, of $7,000,000,000, would mean a per capita debt about equal to that at the close of the Civil War, but a far smaller obligation in proportion to the per capita wealth. The United States has proved that it can easily and rapidly pay off a consider- able debt, and it is still a country with magnificent opportunities for develop- ment and the production of new wealth. Comparative Debt of the United States Total Debt Per Capita 1815 $99,803,660 $17.25 1865 2,756,431,571 76.98 I914 1.027,574,697 10.76 I917* 8,173,773,050 79.56 •Including proposed $7,000,000,000 loan. 128 THE EFFECT OF WARS ON U Pi w < o CO H CO Q h ^^^^^^^^ ^ On r* fO t~ o o •* to 00 5|j o M M NO ON r^ to >' n N to \n r~ NO M H NO NO feS O NO N O to r- o t^ to 1« M in t^ M d «~- ■* d d N M M NO H H w M u o W ■* On to On On On P<2 VO t~ o NO 00 N to NO o •5-S. « d M t^ On t^ ON t^ to •S<3 «~ O ^0 t- r»- lO NO to w w « »») t~ O M ON C4 & M M M M NO ■* O N NO O r~ t~. to «^ On no NO to O vr> On On ■<*; « NO 00 ON O « NO M ro NO fD •"1- ON Tt- IH ■* ON :s NO »^ Tj- NO O M t^ to •*s ■* On 00 O M^ O t-^ to NO »o n" oJ t^ i-T to tC t^ tT t^ 00 o\ ■"I- to VO o c< to to o M M « M M M IH o O O 00 O t~- lO o O O M O On t^ ON o o_ O w O M t^ o_ o ■o o~ o" o" o~ oo" i-T no" tH o" •S5 o O O 00 M ON o r^ o 1^ « NO_^ O, t^ »« to o_ o cK lO o' tri oo" rC t^ On o" M NO 00 to NO o oo" t^ o" to NO 00 00 M to W5 W5 O NO H O t^ o t) NO 00 O t^ t~ o 00 o V ,2 ■*• n m t-« to eo N NO to C< to NO r^ On lO o o ^ «j M 1 T T M 1 « H o 4 1 1 00 O I^ o 1 NO p On M ■* r~ 00 o M M M CO 00 M M 00 00 00 M M M ON M On *H o N ,^l m^ .'V 1 1 130 SOME QUOTATIONS ON U. S. A. BONDS Name Due 1868 Due 1865 Due 1874 Due 1881 3-10 Year Notes * 6* 5^ si 6* li Year High Low High Low High Low High Low High Low i860 i^}i 96 t03 92 103M 89 61 100 86 9' 855^ 97 75 95^ *3., 6a 1035^ 85 99 85 97M 78 , 107K 87K 1065^ 97H 63 127 96 lOI 855^ iioJJ 9i5i 108^ 100 64 118 102 122^ ro3 65 112^ los "9 66 "4^ 103^ lo8H 97K 67 "354 loaji 68 118^ 1085J 69 ii6J^ 105 1870 iiaK 112^ 71 "9?^ iioj^ 72 120M "45^ 73 123H "i>^ 74 122^ "7 7S 1265^ 118K 76 124H "Sj| 77 "SJ< 1095s 78 iioK >o5?| 79 I07f6 104^4 1880 107J4 103% 81 io6>^ Name Due 1891 Due 1907 Due 1904 Due 1925 Optional Reg'd 1% « ^}i% 4« S% 4< Year High Low High Low High Low High Low High Low 1876 tiiji 108 77 109 103H 106 lOI 78 io5!i 101% 102^ 99M 79 I07?i 104 104^ 99 j88o 112 106^ 113H 103 81 Jt6% IMj^ 118JI 112^ 82 116M 112% 121^ 117K 83 114K 112^;^ r2sH ilS% 84 114K no "4» iiS% 8S i^3H 112 I24j« 121% 86 ziiH 108 i29ji 123 87 109 1035^ 129?^ I24>^^ 88 losK 101% 129 "3^ 89 107% 104 130 la3?i 1890 112^ ic6J^ I26J^ 122 91 116}^ ill^ 122 116 92 "7K "4 93 "S 108 94 116 112K 1195^ "7K 99M 9S}i 95 "3!^ no ii75< 113 "45^ 118K 97 96% 96 112J4 106 II4H 108 j^ I20j< III^ 96 9' / 97 I'S iii?« "5?^ 113 129K I20J4 98H 98^ 98 "4M "S56 107 "5 , 117^^ 98 99 112 1 1372 iioji I34>i 128 102 99 / 1900 ii8ji 114 116K "354 I12j^ 1385^ 136% 100)^ icoK 01 "55i 112 I075Z 139% 02 113 108K 1098 106K 103% I37>6 136}^ 03 112 103H loij^ 134K 04 108 104V 103J4 134 130?^ 05 ios% 1345^ 06 104% ior% 132K 129}^ 07 lOI^ 100% 130A 117 08 "3jl 120K 09 121 116 1910 115^ "45^ II xi6^ "3?i 12 "4^ "454 "3}< 13 109 14 "4 no ■5 116 112 16 "i>^ 109M SOME QUOTATIONS ON U. S. A. BONDS 131 Name 5-20 Year 10-40 Year Currency Funding % ti 5!« 6* si Year High Low High Low High Low High Low 1860 61 62 63 64 114 lOI I03j^ 94 65 112 98H 102% 89K 66 "5K ioi5i 103K 90 67 "554 103M 104 97K 68 iiSji 104M 109^ IOOj< 69 125H 106 J^ I16K i°S 1870 116^ io65i "•',. 104% "4K I09J4 71 116 107 "3K 107 116^ 110 72 118M 109 J^ "3K io6J^ ii7« III 113M 107K 106^ 73 121% 105M 116H i°3^ ij65i 108 .16K 74 122 IIO^ ii6J^ I09?S 119 114 117 III '1 "5% "4K» "9?i "3K 125K "7% 119 ii3f^ 76 124K 108% 121^ 112 128 I20?4 119 1 10^ 77 117M loS 114}! 1063^ 126 120 II2j^ 105K 78 iiiX .02M sH 103K 122 ^^7% i07jf 103 „'9 104?? ■°iM lOl}^ I25J^ "9% 1075^ IOI?| 1880 134 126 104 lOI 81 13s 129 i°5 99M 82 131 131 I03J^ loiX 83 136}^ 131K io3?i 102 84 I3SK 134^ 85 137K 133 36 136/s 132 87 135 127 86 130 Ji I27?i 89 127/4 1253^ 1890 124K "5 91 118 118 92 116 116 93 "3J^ 108 94 106 106 95 109 108 J^ 96 lOS 103 97 I035i 99M Name Due 1918 Due 1930 Panama Canal Panan a Canal i 3 i 2 ^ i% 3 « Year High Low High Low High Low High Low 1893 94 95 96 97 98 107^ 104 99 .06K 1900 II2j^ 108^ 105 103H 01 IZ2 loSg i09>^ :osX 02 1 10 io5?i io6>i 109^ i°7?< °3 1 10 108M 106 04 108 104K 106K 104K 05 106 102^4 105M I03j< 06 ^OA,% 102^ losK 103 ios!4 i°S^ 07 104 looK 106 jj 104H 08 102 lOI 104H 104 i°3>^ i°3>^ 09 1025^ looM' 103 10054 lOlJ^ 100 1910 103 loiX looji: 100^ looX 100^ IZ 102^ ioi3i lOI^ looj^ ior% loij^ ro3 101% 12 IO3H 1015^ loij^ lOI — — 1025^ loiH ^3 103^ loiJi lorj^ 98^ 100 5^ 96K 103H 99 , 14 102^ lOI 99 963i iorj4 97 , 102 >6 100% 15 102 lOoK 99 97K