HC 57 M48 /^-^C'-. xm Clatnell 3!tntoetsUg Sibcarg St^ta, Nem fork Cornell University Library HC57 .M48 America's opportunit 3 1924 029 932 484 olin Cornell University Library 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/cu31924029932484 AMERICA'S OPPORTUNITY The Mechanics S'MetAlS) RATIONAL bank: y\HE CITY of NEW YORK AMERICA'S OPPORTUNITY AMERICA'S OPPORTUNITY Esubluhed 1810 The Mechanics & Metals National Bank of the city of new york Capital, Surplus and Profits, $25,000,000 HEAD OFFICE: 20 NASSAU STREET Branches throughout Manhattan, Do Copyright, 1920, by The Mechanics & Metals National Bank of the City of New York. FOREWORD To Our Friends: The economic sore spot of the world is Europe. Ever since the armistice efforts have been made to devise means to re-estabhsh nor- mal industrial and trade conditions, but the task has proved a gigantic one, and at times disheartening. Some of the countries abroad that suffered most in the furnace of the war have made progress in their struggle to recover from its effects, but others have improved slowly, and today there is a persistent call upon the United States to render them help. In this book we have sought to picture the various aspects of the situation as it exists at the moment, and to draw certain conclusions therefrom. As in other of our publications in which, in the recent past, we presented our thoughts on the war's economic consequences — particularly The Cost of the War, The World's War Debt, and The World To- morrow — ^we have set down the results of a dihgent study of the facts, and we trust that what appears on the following pages will com- mend itself to your earnest thought. The obligation placed upon the United 3 States today has within it a splendid oppor- tunity. It is a remarkable role that this nation is called upon to play in the new world era — a difficult and delicate one. The United States, among the nations of the world, is facing the most interesting phase of its economic life, and with the eyes of scores of millions upon it, will rise to its obligation and opportunity only as we, its people, gain an intelligent understanding of the problems involved, and seek by sympathetic co-operation to overcome them. The Mechanics & Metals National Bank of the City of New York Augmt, 19Z0 Contents Chapter I Europe's Position Today 7 II The Discounts on Exchange 19 III Europe's Currency Inflation 31 IV America's Foreign Trade 38 V The Question of Credit 48 VI Means for Meeting the Problem 58 VII What Will Determine Progress 73 VIII The Future 80 CHAPTER I Europe's Position Today 'T^HE war left Europe in a weakened con- -*■ dition; reports are made that even now, nearly two years after the signing of the armistice, all the chief nations on the continent are seriously lacking in food, coal, iron, copper, cotton and oil. Unemployment is reported in every country, yet land is uncultivated, mills and factories are idle, land transportation is in a state of inefficiency, and shipping is badly out of order, all because materials are not available for their operation. Europe just now is not producing all that it needs out of its own industries. In face of a compelling necessity there is a lack of balance in its economic relations, and the question forces itself upon the world's consciousness every day. How is Europe's huge mass of humanity going to live and act up to the time when it can resume its full industrial produc- tion and restore its prosperity? Europe is the most densely populated part of the earth's surface. Speaking broadly, its people are shop workers who have reached a high standard of living by contracting for food and raw materials from all parts of the world. America's Opportunity paying for them in return with articles of their own industrial production. Europe's people are not primitive, and are not able to sup- port themselves in a primitive way. Popula- tions are concentrated in towns and cities, and are unable to f oUow the suggestion that is so frequently made, namely, to feed themselves and produce their own raw materials. In western Europe the people are essentially of the manufacturing class, and must have food for their bodies and raw materials for their industries, as in the past, from outside. A more serious problem never confronted the people of Europe; unable to supply their own raw materials and credits, their hope in bridging the emergency lies in the resources and constructive capacity of the people of the earth who were not weakened by the war. Standing over against Europe is the United States. In the past few years we set up an impressive picture of our resources and con- structive capacity. It was the overwhelming power of our resources, and the development of our constructive capacity, that enabled the Allies to go on against Germany before we entered the war, and it was that same com- bination of power and development that brought the war to such a speedy finish, after we had entered. 8 America's Opportunity The United States is the richest and most powerful nation on earth. It possesses, with the virihty and dynamic energy of a youthful nation, a wealth producing capacity that is greater than any other three nations combined, an industrial output practically equivalent to all the rest of the world put together, and re- sources that will permit development such as no other country can hope for. This nation was touched lightly by the war as compared with Europe. The prosperity that came to us in our three years as a neutral more than offset the loss that came in the period of our partici- pation. Having done so much during the war, and having since the armistice supplied the people of Europe with such a lavish hand, accepting notes in return for food, raw materials and manufactured things, the question now has arisen as to whether we shall go further in sup- plying these people, accepting their notes in settlement, or whether we shall sell only as Europe finds other means of payment. The various nations are not in a position to supply gold. Up to the middle of 1914 the leading currencies of the world were solidly on a gold foundation. Gold formed the basis of all international transactions, and America's Opportunity bankers, when the trade balance of any one country tended unduly to depreciate the ex- change, stood ready at all times to settle the depreciation by shipments of gold. Interna- tional exchange then was so delicately adjusted that when at times the pound sterling fluc- tuated in the New York market as much as one-eighth of a cent from its par value of $4.86%, it attracted attention. The rate sel- dom fell as low as $4.83, or rose as high as $4.90, for before those rates were reached gold moved between Great Britain and America. Mere knowledge that gold was available in case of need made actual shipments of the metal only rarely necessary; and so perfectly was the machinery for handling international transactions developed that at almost any time banking facilities were immediately available in the world's financial capitals for substituting credits for gold shipments. That is not so to-day. The formerly bel- ligerent nations in Europe have abandoned the old relationship between their paper currency and their gold supplies. Gold has ceased to be the basis of international finance, except in theory, and credits are substituted for gold shipments with difficulty. 10 America's Opportunity, It is thus that forces bred by the war, and hitherto unknown on such a large scale, have come to dominate international finance. The war threw all the large nations of Europe into confusion; it stopped output, destroyed values and piled debts and currency obliga- tions to previously unknown figures. More than that, it tore apart many of the old rela- tionships of society. The resultant disorder, expressed among European populations in economic and social upheavals, is very largely what foreign exchange quotations now reflect. Every nation of Europe that was engaged in the war has seen its currency decline in the for- eign exchange market, and from the varying discounts in each case it has come to be judged which countries were most seriously weakened, in an economic sense, by the greatest military effort of aU time. The war, however, is behind us, and even more than a measure of the war strain, the for- eign exchange market is coming to be recog- nized as a gauge of the progress of each coun- try back to industrial health and commercial prosperity. It is easy to understand why this should be so. The nations abroad that are no longer at war have sought to resume their ac- customed place in the world's affairs. Deal- 11 America' g Opportunity ing with one another and with the rest of the world as freely as their new relations and the extent of their resources will permit, and ad- justing themselves to the new conditions, they find their actual and relative positions vastly changed from before. Colossal odds are set up against them. Resources are impaired, and in addition to the debts and currency issues that remain as a financial legacy of the war, great quantities of goods necessary for life are in demand. Many industries are still in practical ruin and trade channels destroyed. Man power is weakened; in wide regions poverty and disease have brought despair. The help- ful qualities of the peace treaty to some coun- tries have still to determine themselves, while foi the defeated countries the treaty has im- posed burdens that must be borne for years to come. Peace has broken old ties in nearly every part of Central Europe, brought into ex- istence a variety of new and untried political units, and set up entirely new national obliga- tions. In some countries more than in others, but in every country to some extent, old social relationships have been uprooted, and strange new relationships have sought to take their place. What is going on in every part of the world 12 America's Opportunity today manifests afresh the utter interdepend- ence of mankind. All parts of the world rely on each other more than ever before. No sin- gle part can get on without another. Yet the present situation is described as one that gives a painful feeling of the incapacity and in- effectiveness of the whole social organization. Lack of coordination and unity in society at large has been responsible for most of the world's troubles, and is responsible for the state in which international finance finds itself today. Up to the time of the peace negotiations the attitude of the American public was almost universally in favor of granting the stricken nations abroad as much help as they required and we could supply. The same can hardly be said today. Proposals that have outlined a solution for the support of our export trade — beyond the bread and meat shipments that are necessary to save starving populations — ^have been received in some quarters apathetically, in others unfavorably. "We've done enough; let's quit and watch after ourselves," is a cry that has been raised. As a matter of fact we have done more than any of us ever expected to do, and it is not alone the demoralization that the war brought to 13 America's Opportunity other countries that is responsible for the present attitude. Our financial situation, as a consequence of our share in the war, has a great deal to do with it. What we have done since 1914 has enhanced our strength and in- creased our accumulated wealth, but, finan- cially, we have borne an immense burden dur- ing the past six years. Having bought back between 3 and 4 billions of American securities from abroad before our entrance into the war, and advanced several billions more on loans, we subscribed for 26 billions of our own govern- ment's securities from 1917 on, of which 10 bil- Uons were provided as credits through our Treasury Department to the Allies, and finally advanced approximately 4 billions of credit on foreign trade account, not to mention the financing imdertaken for domestic enterprises. All the load represented by these operations has been cared for through the American money market. It is for the reason that the load has proved very heavy — ^and continues to prove very heavy — ^that the attitude of dis- interest in Europe's affairs has, in so many quarters, succeeded that which led to such lib- eral support previously. There are those who say that to extend fur- ther foreign credits now would be to jeopardize 14 America's Opportunity ourselves; they would rather see efforts di- rected toward drawing in the credits already extended. On this point Henry P. Davison, Chairman of the Red Cross Society, said in an address delivered May 17, in Des Moines, where he advocated charity for the people of eastern and central Europe and credit for the people of western Europe : "I have supreme confidence in the ultimate good judgment of the American people on any problem fairly submitted to them. I believe that the apathy and indifference which prevail today are due alone to the fact that the American people have not grasped the dreadful facts. . . . Hunger, disease and despair are the lot of fellow human beings [in eastern and central Europe] of ours. Powerless to help them- selves, they are slowly perishing before our eyes. . . . But neither Belgium nor France nor Italy nor Eng- land is asking charity of the United States. The people of these countries are as eager to work out their own destiny as we are to work out ours. In the face of an almost overwhelming catastrophe, they seek only the opportunity to regain their own econo- mic strength." From both a humanitarian and business standpoint, we cannot turn our backs on Europe at this time. An English economist, Sisley Huddleston, in a recent number of the British Review of Reviews, wrote: "We are all in this business and cannot detach our- selves and pass with a shrug of the shoulders on the 15 America's Opportunity other side. Not even America can behave hke the Levite. She is deeply interested in the financial fate of Europe. Europe is a valuable market. If the market dries up, . . . then America will begin to pull a wry face, and find its businesses, rich as they believe themselves to be, rocking uneasily. The prosperity of America is built partly upon Europe, and if only one side of the foundation sinks, then the superstruc- ture will become askew." There are many Leaning Towers of Pisa today, wrote this same observer; we cannot hope that they will forever defy the laws of gravity or the still more rigid laws of finance. This holds true especially of the small states that have been newly established under the terms of the peace treaty, where poverty and disease are now sufficiently menacing to lead Mr. Davison to call for the help of American charity, and the stability of whose governments has still to be determined. It holds true, again, especially of Russia. It holds true especially of the nations of Central Europe which are under the compulsion of indem- nity payments and which are absolutely controlled, in their affairs, by the economic consequences of the peace treaty. But it holds true as well, although in less degree, of the more soundly established nations that were victorious in the war. 16 America's Opportunity Those who have studied conditions abroad closely, and who most insistently call upon us to extend financial help, at times urge us to haste. "Something must be done," urged one voice from England recently, "and that quickly, unless we are to pitch headlong into ultimate and universal disaster." This is an alarmist statement and is to be considered ac- cordingly, still it shows one trend of business thought today. "Our financial and economic stake in Europe's affairs is so great that disaster there could only mean disaster here," said R. C. Lef- fingwell, formerly Assistant Secretary of the Treasury at Washington, in an address before the Academy of Political Science in New York on May 1. On the same occasion Paul M. Warburg, a former member of the Federal Reserve Board said: "Over here we have a shortage of labor and an over- supply of raw materials. Over there, Europe has an excess of labor and a shortage of raw materials. We have high wages ; Europe has low wages. We have too much food ; Europe starves. We are the world's creditor ; Europe is in our debt and has not the means with which to settle. ... It is quite evident that such glaring disparities as at present exist between our own prosperity and the acute suffering in some parts of Europe in the long run will not be permitted to prevail. Unless we indulge in the impossible assump- 17 America's Opportunity tion that peoples can be caged up, so that they may perish of disease or starvation without disturbing their neighbors, we must expect that by sheer force of necessity these hungry and desperate hordes will come over here in order to share with us our own plenty and opportunities. Some twenty or forty millions of additional immigrants, to be fed and clothed by us, would quickly solve a substantial part of our problem of placing our excess production. Would so extreme a development, however, be the most economical, the most humane and, for us, the most desirable solution ; and, if it is not, what is the alternative?" Whatever succor we render Europe, then, will be no act of charity, but will be a plain matter of self-interest. Moreover, it will be a matter of self-defense against the spread of disease that is taking an appalling toll abroad at this time, and against a spread of the social unrest that at present bears so close a relationship in Europe to hunger and idleness. A state of anarchy abroad would not contri- bute to our well-being here. Moral forces are being counted upon very strongly to oppose the wave of radicalism that has swept over large areas of the Continent i|ince the armis- tice was signed, but we may be sure that eco- nomic forces, properly set in motion, would serve more quickly than anything else to over- come the ominous drags that are now operat- ing against those moral forces. 18 CHAPTER II The Discounts on Exchange 'T^ O gain, from a business standpoint, a clear conception of our present relations with Europe, it is important that we be familiar with the forces that are responsible for the mal- adjustment of those relations. Dissociated from the gold standard, a value is given today to the pound sterling, the franc, the mark and the other European currencies in precisely the degree in which the foreign exchange market weighs the factors operating against the progress of each country, and sets those factors against the ability of each country to rise above them. It has been left with the foreign exchange market, so to speak, to weigh, one upon the other, all the factors upon which the future of Europe so vitally depends, proclaiming the re- sult by placing a valuation on the currencies of each of the countries affected, according as it appraises the power of each of them to over- come the evil and benefit from the good. As a gauge, then, of the era of reconstruction upon which we are embarked, a study of the foreign 19 America's Opportunity exchange market is intensely interesting at this time, and the movements in quoted rates are to be regarded as having extraordinary im- portance. Of course, fluctuations in rates up to this time have responded to the immediate move- ments of export and import trade. The mechanism of exchange is simple, and an understanding of why rates rise and fall according to the relative volume of imports and exports should not be difficult. Whenever a m.erchant here ships goods abroad, he wants payment for them, and the same is true of a foreign merchant sending goods here. As foreign money is of no use to us, and American money of no use to foreigners, the transactions are carried out by what are known as "bills of exchange." Whenever an American sends goods to London, he draws on his customer for payment. The customer sends him say, a sterling bill of exchange, which entitles the American exporter to a credit for the amount of the bill in a London bank. The American has no use for a credit in a London bank, but he can go to his own New York bank, and the New York bank (under normal conditions) will buy his credit for its equivalent in dollars, gold weight for gold weight against the 20 America's Opportunity pounds sterling. In this way the American exporter gets his money. The American bank buys this London credit because it can use it. It knows that Americans who have bought goods in England will want to make payment in London, and that there- fore they will come to the bank to buy London credits, and the bank will have London credits to sell them. Bills of exchange are drawn not alone against imports and exports, but against all international transactions, against securi- ties, against the payment of interest and divi- dends, against the extension of temporary loans, against the expenditures of travellers and the remittances of aliens, and against the remittance of ocean freights and the payments of insurance premiums. Normally the total of what we buy from the outside world equals the total of what we sell. We can see that in the absence of credit exten- sions this must be so, for we cannot take pay- ment in foreign money, we take our payment in foreign goods and services. But for certain periods, and notably now, the sales of one nation to others far oflFset its purchases. In this case the people of outside nations will all be demanding credits in New York banks, that is, "dollar credits," while comparatively few 21 America's Opportunit-y Americans will be demanding credits in for- eign banks, say sterling credits in London or franc credits in Paris, because few Americans are buying goods from there, and hence have little demand to make payment there. The result is that American banks are called upon to buy credits in London, Paris, etc., which they do not want, because they have so little demand to sell them, therefore they wiU take them only below their ordinary exchange value, that is, at a "discouiat." This is the meaning of the discount on the exchanges. On the other side of the water, the London and Paris banks will be asked by the customers of their own countries for credits in New York, and as credits held in New York by these banks are so scarce (owing to the fact that not enough Englishmen or Frenchmen have sent goods here to build up such credits) the for- eign banks will charge more than the ordinary exchange value for credits in New York; hence the "premium on dollars" which exists in foreign countries. Still, the extraordinary discoimts that have been named are recognized to be a consequence of far greater forces than any of these, and a great deal of discussion has concerned itself over the question as to just what extent low America's Opportunity exchange rates have been due to physical ef- fects of the war, and to what extent they have been due to Europe's currency depreciation. Consider, in the first place, the significance of Europe's trade relations. From the time the war began, in 1914, up to the present time, all the countries abroad that were engaged in the war have bought more goods than they could readily pay for. From the United States they have bought more in these six years, meas- vu-ed by value, than they bought in the twenty- five years preceding 1914. To the United States, in consequence, Europe is heavily in debt. A single comparison will serve to impress the evidence upon our minds. From August 1, 1914, to August 1, 1920, a period of six years, the value of Europe's imports of food, manufactured materials and raw products from the United States can be placed at approximately $34,- 000,000,000, and the excess of these imports over the shipments from Europe to the United States can be placed at $16,900,000,000. In the corresponding number of years preceding August 1, 1914 — years of world peace — ^the imports of Europe from the United States were $12,490,000,000, while the excess of those 2S America's Opportunity imports over the goods sent hither by Europe was $2,520,000,000. Nothing like such a comparison had ever be- fore been registered by any coimtry on the globe, or group of countries. It is a conse- quence of the tremendous increase in the value of Europe's imports from the United States that, financially speaking, the United States today occupies a dominating place among the nations of the world, and it is as a consequence of this, with the credit and paper money infla- tion abroad, that currencies of other nations are at an unprecedented discount as compared with our own. Formerly Europe controlled the finances of the world by its large investments outside. The United States now exercises Europe's former control. The causes of the present situation did not come in a day, nor will they, we may be sure, be corrected in a day. We are, therefore, thrown back upon the causes of the situation, and the problem is seen to be wholly in finding a means for overcoming the evil effects of those causes. To gain a comprehension of the magnitude of the problem, it is important to rehearse briefly the series of incidents that led up to it. Financial strength, like military strength, 24 America's Opportunitjt had to be rapidly mobilized in 1914, and for- eign bankers then, alive to the imperative need of gathering in their resources, relentlessly drew in their liquid credits. At the outbreak of the war large amounts of money were owing to Europe from the United States on short-time accounts. Great Britain, the world's premier creditor nation, had the largest credits outstanding. As these were hurried for payment, in re- sponse to the imperative call from abroad, the sterling exchange rate in the New York mar- ket rose swiftly to $5, to $5.50, and finally, on the day of the British ultimatum to Germany, to $7 for the pound. Such was the situation that even the hazards of gold shipments were not enough, for a time, to overcome the insis- tence of the demands to remit, and in the last week of July, 1914, $42,000,000 gold was withdrawn from New York for Europe. With a moratorium of debts proclaimed by the British Government, and a series of banking arrangements hastily entered into, various ways were developed for adjusting interna- tional accounts, and gold shipments from New York soon ceased. Then, after all, it was found that this country, from which Europe 25 America's Opportunity had SO eagerly withdrawn its credits, was the very place it desired them the most. That was because, early in the war, the United States, of all the coimtries of the world, was alone able to supply what the warring na- tions most needed, in the quantities that were most needed, — guns, shells, foodstuffs and raw materials. Conditions abroad became so des- perate that Great Britain and France were impelled to place orders for prodigious amounts of goods in this country, and then sought means with which to make payment. Having drawn in their banking credits, and not having enough goods to send in exchange for what was bought, these countries were for a time under the compulsion to send what alone was readily available for payment, and in a single twelvemonth a billion dollars in gold came to New York from abroad. No gold shipments ever paralleled those of 1915, yet they were entirely inadequate for the desired purpose, and hundreds of millions of dollars of American investment securities, bought in earlier years, were returned from Great Britain and France, and, in addition, hun- dreds of millions of dollars were borrowed on short loans. The Anglo-French Loan of $300,000,000 was floated in September, 1915. 26 America's Opportunity In spite of all these measures, the balance on war purchases in the United States was not even then fully settled, and as a final resort, the private strong-boxes of British investors, untouched for many years, were invaded. Stocks and bonds of American railroads and industrial corporations, purchased by genera- tions of investors, were mobilized, the British Treasury calling upon their holders to turn these into a common pool, for sale to America ; pressure was used upon those who were un- willing to turn them in for such use. Ameri- can stocks and bonds returned and resold in the United States during the early part of the war period are estimated to have had a value between three and four billion dollars. In all the period during which the emer- gency devices recorded above were being re- sorted to, exchange fell sharply from the ex- traordinary level of the first days of the war. At one time, in September, 1915, the rate for sterling drafts in New York touched $4.48, a discount of 8 per cent. That was the low point of the war; thereafter the British Treasury found itself able to gather sufficient resources to stabilize exchange in this market, although no attempt was made to establish the rate at par. A discount of about 2 per cent, was fixed 27 America's Opportunity upon, and in January, 1916, the banking firm of J. P. Morgan & Company, acting as agent for the British Government, was authorized to purchase at a rate of $4.76 7/16 any sterling bills offered in New York. The rate remained thus "pegged" for more than three years. Sellers of sterling could ob- tain $4.76 7/16 at will, with the British Gov- ernment agent standing ready always to pur- chase drafts on London in any amount. The Balance of trade, running strongly against England, would not allow the rate to go higher. For France the franc was not actually pegged, but was fixed artificially at various times at different rates, approximating 5.43 to 5.46 francs to the dollar. At parity the rate was 5.18. Shortly after the armistice with Germany was signed, in November, 1918, the credits authorized by the United States Treasury for the benefit of foreign governments came prac- tically to an end. But the demand abroad for American products did not come to an end ; on the contrary, with food supplies seriously re- duced and industries disorganized over the whole broad belt that had been ravaged by war, the countries of Europe sought large quantities of materials that they could get nowhere but of 28 America's Opportunity US. They kept on buying and when, in March, 1919, the artificial support of exchange was withdrawn, their rates of exchange very rap- idly declined. From 4.76 7/16 in March, 1919, the pound sterling at New York fell within a few weeks to $4.56. It moved below its war-time low level of $4.48 in May, 1919, reached $4.25 in August, 1919 (a rate that, when predicted four months before, was dis- missed as "sensational"), moved to $3.65 in December, 1919, and reached its lowest level of history, $3.18, in February, 1920. The other exchanges fell even more sharply, and thus the dislocation very rapidly ap- proached a crisis. The lower the exchanges moved the greater became the premium on the American dollar abroad, and the greater be- came the cost to foreign buyers who had to buy here. Everything that has gone forward from this country to Europe since early last year, when the exchange peg was removed, has en- tailed an expense to foreign importers over the quoted price in dollars. The British importer, when he figured the most extreme recent dis- count on sterling in this market as a premium on the dollar in London, found that it added more than 50 per cent, to the quoted price of what he wanted to buy. As for the importer 29 America's Opportunity in France or Italy, the situation was even worse. The premium on the dollar in each country has been more than 200 per cent., so that in addition to the high prices quoted here, the French and Italian people have had to add the premium upon New York exchange, and pay the abnormal ocean transportation charges besides. As for the people of Germany, if they tried to buy materials and supplies in the United States at the recent market value of their currency, they would have had to pay twenty times as many marks to the dollar as before the war, while the people of Poland, Rumania, Austria and Czecho- Slovakia would have had to pay from thirty to fifty times more. CHAPTER 111 Europe's Cuerency Inflation JUST how far it is the amount which each country of Europe owes the United States on account of trade balances that is responsible for the low rates of foreign exchange in this country, and how far it is the debasement of Em-ope's currency, none of us can possibly say. In the case of some of the countries there is no mistaking that unbalanced trade is largely re- sponsible; the briefest exhibit of their exports and imports reveals this. In 1919 we sold to the United Kingdom $2,279,000,000 of goods and bought only $309,000,000 in return. In the same time we sold $893,000,000 of goods to France and bought $123,000,000 in return. We sold $442,000,000 of goods to Italy and bought $59,000,000 in return. As for other parts of Europe, there is no mistaking that currency inflation and an in- ordinate bank credit expansion have been chiefly responsible for the low rates quoted on their exchange. During the war we had no trade with Central Europe at all, and last year we sold to Germany and Austria-Hungary $134,000,000 of goods and received $18,000,- 31 America's Opportunity 000 in return. These amounts were not enough to violently affect international finance. What holds true for Germany and Austria undoubtedly holds true for other countries of the continent. Inflation of the circulating me- dium has come about in those countries as a direct consequence of the output of hundreds of millions of paper money — so many hundreds of millions that the present supply has de- stroyed all ideas of monetary values. Failure to meet the expenses of the war out of current savings led in 1914 to the printing of paper money to meet those expenses, and in some countries the presses have not stopped yet. The paper currency of thirty principal countries of the world at the beginning of the war aggregated a little over 7 billion dollars; at the end of the war, November, 1918, the amount was about 40 billion dollars, and in December, 1919, it was 51 billions. These fig- ures are of course in very round terms, and exclusive of the currency issued by the Bol- sheviki Government of Russia, which alone was estimated at the end of 1919 at 34 billion dollars. An English economist a short time ago, in commenting on the manner in which big figures 32 America's Opportunity have come to be used in current daily discus- sions said : "That is one effect of the war; to play with mil- lions and billions, whether for the common man or the superstatesman, is to lose all practical sense of money. We have grown accustomed to naughts. They con- vey nothing to us. There is a limit to the human imagination ; if we have not the mathematical mind we are no more impressed by nine or twelve naughts than we are by six ; if we have the mathematical mind we regard the figures as figures with which certain juggling feats can be performed on paper, and not as representing realities. They are symbols which are accepted for themselves and not for what they stand for." However, figures of the three leading coun- tries with which we were associated in the war will at least serve to signify for Europe as a whole the manner in which paper money sup- phes have increased there. A statement pre- pared by the Chamber of Commerce of the United States shows that paper money circu- lating in Great Britain increased between June 30, 1914, and March 17, 1920, from £179,926,- 000 to £502,369,000, while in France the in- crease from June 30, 1914, to April 8, 1920, was from 5,852,300,000 francs to 37,507,306,- 000 francs. The increase in Italy from June 30, 1914, to December 29, 1919, was from 2,698,000,000 lire to 17,840,000,000 lire. 33 America's Opportunity Here was an increase of 180 per cent, re- corded for Great Britain over a period of less than six years, an increase of 540 per cent, for France, and an increase of 560 per cent, for Italy. These simple comparisons indicate into what new orbits the currency of Europe's largest and most soundly established nations has swung; they suggest, moreover, in con- junction with figures showing the manner in which gold supplies have failed to increase in proportion, the backward distance that must be travelled before the resumption of a gold basis for that currency is possible. As for Russia, so much paper money has been issued, not only by the Bolsheviki, but by other factions, that a fair guess on the out- standing volume would be hopeless. News dis- patches recently stated that large quantities of bank notes issued by General Yudenich had so far become worthless as money that they were being ground up for paper pulp. Austria is in only a little less unenviable position than Russia. A foreign commentator wrote re- cently : "You could tie up great bundles of Austrian paper money, put them on your back, and stagger away; and instead of having a fortune, as you might imagine, you-would be carrying away little more than 84, America's Opportunity bundles of paper which a fish-mongei- might buy in which to wrap his fish." Inability of the European governments to redeem or exchange circulating notes for their face value in gold has made it necessary for the exchanges to be quoted in the terms of those notes, instead of gold. Formerly credits gained by the shipment of American goods to foreign countries were gold credits; that is, they entitled the shipper to a certain amount of gold, and if a shipper could not sell his bills against the credit, except at a decline, he could, through his banker, import the gold from abroad. The decline in exchange that made gold importations profitable had to exceed the cost of shipping and insuring the gold in transit, which, between London and New York, was about three cents on the pound sterling. Thus, when the pound declined from its parity of $4.86% to a price around $4.83, or even not so low, gold would flow here. But lately the pound sterling fell not three cents, but fifty times that amount, and still no gold has come from abroad on trade account. The reason, as we have seen, is that for com- mercial purposes Great Britain has felt itself unable to release the metal. The British Gov- ernment has for its own account shipped gold 35 America's Opportunity to the United States to meet the Anglo- French Loan maturity. Also it has allowed new supplies of the metal that it gets from South Africa to be re-ex- ported. So far as this new gold is concerned, however, bankers, when they have wanted it, have had to bid for it. Great Britain has an open gold market, similar to that which existed in our own country in the days of the green- backs following the Civil War, but in that open market gold is now quoted at a premium in British paper money, and the premium has usually more than offset the discount on ster- ling, so that it has not paid Americans to buy it and bring it here in large quantities. Six years ago an American could have ob- tained, for $1,000, a credit in London for £206. At the lowest rate of exchange this year he could have obtained for a similar amount of American money a credit for £314. But the £206 quotation of 1914 meant £206 in gold, whereas the £314 of 1920 meant £314 paper, and the depreciation of this paper, as compared with gold, was so great that the American banker could not have obtained as much as $1,000 in gold weight for it. Unlike the currency of Europe, that of the United States is not depreciated today in 36 America's Opportunity terms of gold in the slightest degree. Inflation has occurred in this country, and people talk a great deal of the "50-cent dollar." It is true that the purchasing power of our dollar is one- half of what it was in 1914, but we still are on a gold standard, and our prices still are gold prices, not paper prices. Our money has declined in terms of goods, not in terms of gold. It is the gold itself that buys less than before, because shortage exists in nearly every line of goods for which gold exchanges. 37 CHAPTER IV America's Foeeign Tkade nnO return now to the trade relations; to what conclusion does our consideration of the subject of Europe's difficulties lead us? In the light of events only one present answer is possible to this question : The United States is called upon to supply materials for Europe's reconstruction, and is called upon as well to supply credit out of which payment for these materials is to be made. We are thinking now in business terms, not in terms of charity. There are two ways of viewing the present relations of the United States and Europe. One is in the light of Europe's dependence upon us. The other is in the light of our de- pendence upon Europe. It must be remembered that unbalanced trade on the part of any country, in the absence of some form of credit extensions, could not go on indefinitely; sooner or later it would have to come to an end, because customers Avho were constantly buying more than they sold ulti- mately would not have the means of payment. It is that kind of a position that is faced today. Formerly foreign trade was a thing 88 America's Opportunity remote to the average business man of the United States, because, independent of for- eign markets, he had not begun to take part in the economic life of the world at large. With a profitable domestic trade he was more or less self-sufficient. But the war came and lifted him bodily out of his isolation, and now he is faced with a double obligation. As a member of the richest and most powerful nation in the world, his first obligation is to do his part to reestabUsh industry and order in Europe. As a business man, his second obligation is to have regard for the needs of his own prosperity. Prosperity consists in producing a surplus over what is consumed, and in cultivating and broadening profitable markets for that surplus. The United States prospered amazingly dur- ing the last six years, and our industrial or- ganization is now built up to sell foreign mar- kets an enormous supply of goods. In 1919 our output was so great that the trade balance in our favor reached the stupendous sum of over 4 billion dollars. It is to keep this indus- trial organization together, and fully occu- pied, that an outlet for our goods is required. All that is said in advocacy of supporting our export trade to Europe does not, of course, ignore the objection that is made on the gen- 39 America's Opportunity eral ground that a large export trade serves to drain us of goods, and so contributes to main- tain the high cost of living. There is some- thing to say for this objection; still, we must remember, when we talk of the effects of large exports upon prices, that what we pay in high prices as consumers we shall more than com- pensate by increased prosperity as producers. The result of arbitrarily abolishing or re- ducing exports henceforward, by refusing to enable Europe to secure necessary credits, would indeed be to reduce the cost of living in this country. But only for a short time. American manufacturers and farmers, de- prived of an outlet for their goods, and con- fronted with falling prices, would be under the immediate compulsion' to reduce their out- put. Ultimately they would curtail their supply to correspond with the curtailment in demand, and if, meanwhile, other factors deter- mining prices remained unaltered, the cost to the American consumers, when supplies were finally adjusted to the reduced demand, would be as high as before. Until the adjustment was made there would be widespread business de- pression and employment, accompanied by a period of failures. We hear it frequently asserted that under 40 America's Opportunity present conditions we do not need to concern ourselves about our foreign trade, because domestic trade is great enough to take care of all that we can produce for some time ahead. Such a view betrays a misconception of the part that export trade plays in our industrial life. Our war-time prosperity began in 1915, and originated in the expansion in our foreign trade at that time ; it started in one section and line of enterprise, and from there spread out- ward in waves. After the beginning of the war the export demand in the United States showed itself first in the munition industry, then spread to the farms, the steel trade and the copper trade, and afterward to all the in- dustries that produced what Europe needed. Labor that previously had been idle was given employment when the first war orders were received ; soon, as the export demand increased, the competition for labor increased, raising wages not only in the lines directly affected, but all over the country, because other lines had to meet competition in order to hold their labor. In the end, the increased purchasing power of war contractors and workers led to an in- creased demand for the products of nearly all other industry. Depression works in quite the same infec- 4,1 America's Opportunity tious way as prosperity. Present production in the United States is based on the expecta- tion of continued large export trade. If cer- tain lines are to find this outlet cut off, a set- back would surely follow in those lines, labor would be thrown out of employment and wages would be reduced. With purchasing power thus taken away, other industries would find domestic triade falling as the foreign demand fell. There is a way of conceiving foreign trade that has not been given the emphasis to which it is entitled. When, the export trade of a country exceeds its import trade, the amount of the difference, leaving out of account other items of international balance, represents sav- ings of the country. We sent to the world $7,900,000,000 of goods last year, and received $3,900,000,000 in return. The difference, $4,000,000,000, represented the national sav- ings for the American people. Our surplus of exports represented what we produced and re- frained from consuming ourselves. The world now owes us for this surplus; we can either allow it to pay us back in goods at a later time, or we can keep these credits as a reserve to draw upon in times of emergency. The im- mense advantage to a nation of having such a 42 America's Opportunity reserve was never better illustrated than by the experience of Great Britain in financing her foreign purchases during the war. The fact that we are so large a creditor nation entitles us to receive annually large amounts of goods or gold from abroad. In- stead of our asking for these, however, a fur- ther enlargement of the principle of our for- eign loans, and the reinvestment of the in- terest, is advocated, until such time as Europe is again solidly on its feet, industrially and financially, and is ready to pay. Our reserve is already large, and ultimately, with the profit from the expansion of our for- eign investments, will come back to us in the form of commodities that our debtors produce and that we desire. Our position in this re- spect is an enviable one; our debts to foreign countries are paid, and those countries are now obligated to us to the extent of billions of dol- lars. Instead of our meeting interest charges to Europe, making payment in the form of foodstuffs and manufactured articles, and oc- casionally gold, Europe owes us $500,000,000 a year on interest account. Those who advocate loans in the present emergency do not imply a continuing and in- definite balancing of our trade out of the pro- 43 • America's Opportunity ceeds of securities. There is no such thing as a permanently one-sided trade. Our people have until now conceived foreign trade wholly in terms of merchandise exports, but no coun- try could indefinitely go on adding to its hold- ings of foreign securities and maintain an export balance. The accumulated interest and dividends on those securities, and the payment of the principal, will play an important part in years to come. Our present abnormal export balance will fall off gradually in any case, and ultimately an actual import balance in our trade relations is a strong possibility. Europe's urgent needs^ the result of years of war, must eventually de- cline, not only as they are filled by goods from us, but as idle people return to production. As industry gets on its feet again, Europe will be in much less imperative need of merchandise from the United States, and will be able to increase its exports to the rest of the world. Moreover, when interest payments begin on our government's loans to allied governments, amounting, with sinking fund, to more than $500,000,000 a year, these alone will be a com- pelling force in enlarging Europe's export trade and swinging the trade balance against 4,4, America's Opportunity US. Until 1923, the interest on our foreign government loans M'ill be funded, but there- after, according to present expectations, regu- lar remittances will be made, and the interest accruing periodically will have a tremendous importance in governing the direction of for- eign trade. Europe will endeavor to ship suffi- cient goods to the United States to pay the charges accruing against it, and, unless these goods exceed in amount and value those sent from the United States to Europe, Europe will sink deeper into our debt. The situation is exactly reversed from what it was prior to the war, when it was necessary for us to have an export trade balance of approximately $500,000,000 a year in order to pay the charges accruing against us abroad. It is in the inter- est of both sides that the debtor countries of Europe shall ultimately have a favorable trade balance, for that is the only condition under which they can meet their obligations. We vdll gain trade permanently as other nations gain in purchasing power, and not by supplanting rivals. It is idle to talk about absorbing all the trade of the industrial and maritime countries of Europe which for dec- ades and generations built up their industries with "export" their by-word. Necessity is the 45 America's Opportunity mother of progress, and we must remember that Europe's present necessity is a sharp spur to commercial activity. Eventually, the greater the production of every country the greater the purchases will be, and the greater the trade of the world will be. In studying the present situation, there- fore, the task should be approached soberly, because a mistaken conception of the real sit- uation will lead us into errors that may be dis- astrous, for creditor and debtor nations alike. In advocating credits today, the farseeing banker looks forward to the time when our imports will increase as Europe's recovery pro- gresses, and when credits will begin to be paid off. How soon that will be depends upon the rapidity of Europe's recovery and its conse- quent ability to ship goods to foreign markets for a profit. The rapidity of its recovery, in turn, depends in very large measure upon the United States. The real question before the American people, then, is whether the change that is to come shall be gradual, so that our industry shall have time to become adjusted to it, or whether it shall be sudden, with hardship re- sulting abroad, and with a backing up of goods, manufactured here for export, and 46 America's Opportunity possible disorganization, resulting in this country. There is of course the matter of the moral obligation to assist in restoring industrial or- der in the devastated countries, putting idle people back into workshops and supplying them with the means of becoming self-support- ing and prosperous again. But we can forego talk of our moral obligation and take the nar- rowest possible selfish view, and the fact re- mains that a cessation of credit would mean a definite check to Europe's recovery, and a shrinkage of our export trade. However much in theory people may differ as to the im- portance of a great export trade on prosperity, they cannot avoid the facts of the present situa- tion, which are that our agricultural and indus- trial output are proportioned to and based upon an unparalleled export trade, and that any sudden dimunition in that trade would cause trouble throughout our industry. 47 CHAPTER V The Question of Credit TN considering the extension of credits to ■*■ Europe in the present emergency, it is not to be imphed that they are advocated as a sub- stitute for individual ingenuity and effort abroad. Indeed,, there are careful observers, both at home and abroad, who have issued warnings that, in the present social and politi- cal state of affairs on the continent, credits be very carefully placed lest real progress be stunted instead of helped. Credit to support idle people is one thing. Credit to restore industry is another. On a business basis, credit is warranted for useful purposes only, and countries and industries that require it must justify it by internal reform. Unless, then, integrity of purpose on the part of govern- ments were plainly evidenced, and unless peo- ple abroad were to match with taxes their na- tional budgets, credit would neither serv-e the purpose for which it is now urged, nor be safe. Discussing this matter in a recent num- ber of its monthly review, Barclay's Bank, London, said: "It is evident that no good can result from assist- 48 America's Opportunity ing countries that are not endeavoring by every means in their power to institute and carry into effect in- ternal reforais. Such assistance is wasted — it is like pouring water into a sieve to give credit in such in- stances. Too much credit has been created already, and further additions should only be made when there is a reasonable chance of permanent benefits result- ing. If the nations of the world will heartily co- operate in the reconstruction of Europe, then there is every possibility of a happy solution. But if Europe will not try to help herself, or if those nations capable of rendering assistance withhold it, then the outlook is dark indeed." It bears to be repeated that in all our con- siderations of the phase of Europe's difficulties that have to do with economic recovery we have to allow for the great interplay of social and political forces stirred into action by the war, as well as economic forces. Socially, Europe has not composed itself since the armistice; politically and economically its unrest is mani- fested daily. "God won the war; the devil won the peace" is a bitter but expressive remark that has been made. Industrial disturbances have occurred in every country abroad, and at the moment, in certain of the countries of western Europe, a willingness to work, where tools are available, seems to be matched by idleness, strikes, lock-outs and interruptions of work of all kinds. Cables from France lately 49 America's Opportunity brought a statement that the boon of the 8-hour day to the workers had resulted in such a reduction of output, by various percentages from 20 to 50 per cent., that it was not pos- sible to employ enough more men to maintain production. A London message to the New York Times recently declared that there were pending in England demands for increases of wages totalling nearly half a billion dollars at the normal rate of exchange, and this led the newspaper to ask, editorially, "How can the strikers hope to extract this sum from industry from which they have taken 34,000,000 work days, or three times as many as in 1913, and when the output per man who worked is demonstrably below earning capacity?" Unsound financial methods, and failure to raise sufficient revenue by taxation to meet governmental expenditures had so large a part in bringing inflation to Europe that the urging of a correction of these faults would not now seem to be necessary. But they are necessary, for taxation abroad is still not being applied as it might be, and banking contraction alone can- not effectually be brought to bear unless the increase of government indebtedness is arrested and national budgets are balanced by increas- ing taxes and reducing expenditures. It is of 50 America's Opportunity the utmost importance that people abroad come to realize the fundamental part played by their governments in causing inflation, inasmuch as countries that go on covering current budget deficits by pihng up additional indebtedness cannot be expected to arrest the fall of their exchanges simply by incurring new foreign loans. It would of course be of no advantage to us or to foreign people to create credits at this time that would increase Europe's purchasing power without compelling a corresponding in- crease in the ability of those people to meet the credits. We may expect that, collectively as well as individually, careful business men abroad will not borrow on business terms just because credit is oflPered. They know that the credit must be paid off, and that interest must be paid upon it so long as it runs. Unless they expect that the borrowing will increase their output, and consequently their earnings, by an amount large enough to more than offset the interest requirements, they will not borrow. In considering the prospect, particularly from the point of view of measuring the political and moral risks involved in loans that we may extend to Europe, a distinction is to be drawn between the larger and more soundly 51 America's Opportunity established nations, and the more numerous group of small nations, including those newly established under the terms of the peace treaty. In the large countries political tradi- tions have been established and the population has acquired a large measure of skill, education and training in industry and thrift, which pro- vide an important element for credit exten- sions. In the small states a degree of political risk is involved, and credit for them will be determined accordingly. There are four sources of export credit: (1) The exporters themselves. (2) The commercial hanks. (3) The United States Treasury. (4) The investing public. The burden of supporting our export trade during the war fell chiefly upon the United States Treasury. After the armistice it fell chiefly upon our commercial banks and those actually exporting. The Treasury Depart- ment ceased bearing the war-time burden when the $10,000,000,000 credit advanced to the Allies was used up; the exporters themselves reached the limit of their ability to bear the burden very quickly. As for the banks, the excess of exports that has accumulated since early in 1919 has been financed mainly by 52 America's Opportunity them, and taken the form of short-time credits that imposed such a weight that they are one of the chief factors in the strain on our bank- ing resources. It is important, in connection with the finan- cing of our export trade, that the position of the banks, in taking a stand against further ex^ traordinary export credits on open account, should be clearly understood, for so many peo- ple today, feeling no responsibility themselves, have an impression that banks are like Alad- din's Lamp, and that all that is necessary is to rub them in order to gain any imaginable amount of credit, for any imaginable purpose. The country's commercial banks are what their title signifies, commercial, and they must limit their operations accordingly. Their proper function in trade is to act as interme- diaries between exporters and importers, and to arrange liquid credits to facilitate their oper- ations. Because their Labilities are of a de- mand nature, bank -annot lend for long- periods and at the - ^ time keep their assets liquid. After all, t. , banks are the biggest debtors in the world. The deposits of The Mechanics & Metals National Bank are not the money that this bank possesses, but the debt that it owes, and the same is true of the deposits 53 America's Opportunity of any other bank. Most of this bank's debt is payable on demand any day that the de- positors may choose to ask for it. Conse- quently it would not be good banking practice to extend widely in investment propositions, making loans that run beyond the period of consumption of the goods against which the credit is granted, or to finance relatively per- manent differences between imports and exports. Next to the banks, the United States Treas- ury is spoken of most frequently as a source of further export credits. The United States Treasury, however, is on record against fur- ther credits at its hand. For some while it had been urged in responsible quarters that, as it would require considerable time to educate the American people to popular support of foreign investments, and as the need was urgent, our Government should bridge the interval. This suggestion was abandoned, however, following a letter written on January 29, 1920, by Carter Glass, then Secretary of the Treasury, to the president of the Chamber of Commerce of the United States, giving the administration's views on the proposed international financial conference. The Secretary wrote: "The Governments of the world must now get out 54. America's Opportunity of banking and trade. Loans of Government to Gov- ernment not only involve additional taxes or borrow- ing by the lending Government, with the inflation attendant thereon, but also a continuance by the bor- rowing Government of control over private activities, which only postpones sound solutions of the problem. The Treasury ... is convinced that the restoration and revival of trade must be supplied through pri- vate channels. . . . The United States could not, if it would, assume the burdens of all the earth. It cannot undertake to finance the requirements of Europe, because it cannot shape the fiscal policies of the Governments of Europe." There remains to be considered as a source of export credit the large investing public. The objections here have already been alluded to. B)-iefly, they sum up thus: The investing public, prompted by the reports of conditions prevailing abroad, is unfavorably inclined to large popular loans; the investing public, moreover, has not the means to invest ex- tensively. The spirit and the ability of our investors ahke play a dominating part in the current situation. We like to call ourselves a nation of investors, and during the war we were such a nation on a scale never before approached any- where. But we are also a nation of spenders : the very nature of our economic life, in which wealth has been accumulated so easily, has 55 America's Opportunity made us that, and since the close of the war we have been greater spenders than ever. Having lifted our standard of living to a point where we are not saving as we should, we also have limited our productive energies; shorter hours of work have become a religion with so many of us that capital is being pro- duced in the United States in too small an amount for our own and world's needs. As a consequence, our supply of liquid capi- tal is now definitely limited, and competition has become sufficiently keen to make it impos- sible for certain American enterprises imme- diately to secure the funds they urgently need. To attract buyers for new bonds issued recent- ly, the Pennsylvania Railroad, Louisville & Nashville, and Atlantic Coast Line, corpora- tions with high credit, were compelled to offer 7 per cent, securities and sell them at or below par. Our manufacturing industries, construc- tion enterprises, development projects and and railroads are calling for hundreds of mil- lions of dollars of capital, while the future needs of our agriculture, public utilities and merchant marine can only be guessed at. Then, again, excessive taxes have cut severe- ly into the income of large investors that would otherwise have been available for fresh invest- 56 America's Opportunity ment. In a report prepared in April by the Chamber of Commerce of the United States, the following paragraphs occurred. They have a very decided bearing on the point that is under discussion: "This country is in a position to extend further credit to foreign nations solely by curtailment of its own expenditures and by increase in its own produc- tion. . . . The large investor is unavailable because of the present situation with respect to taxation ; he has been substantially legislated out of the invest- ment market as such. With the present high rate of surtaxes it cannot be expected of those having to pay such rates that they will purchase European SLcurities. It is far more remunerative for those so situated to purchase American securities exempt from taxation. High excess profits taxes militate against the export of American goods by adding to their cost. . . . The small investor is not saving money. He has been influenced by the tendencies toward extrava- gance that have swept over the entire civilized world since the armistice. Closely related to this is the speculative tendency of the time, which affords no encouragement for the sale of investment securities among smaller investors. "It is a national misfortune that the American peo- ple are not producing more and saving more, so as to be in a position to be of greater aid to Europe in her hour of need. But the fact is that they are not saving." 57 CHAPTER VI Means for Meeting the Problem /^BVIOUSLY, in view of what has gone ^-^ before, whatever European financing is done henceforward in the United States, it must come into competition with domestic financing and must pay a price dictated by that competition. Also, it must meet competition from new parts of the world. Our capital is being invited to places like South America, Central America and the West Indies, where it can command high returns. For our own advantage, then, and in order that increased competition for our funds at home and abroad will not drive interest rates to a level that will prohibit the expansion of our domestic enterprises, a method of liv- ing in the United States that will permit an increase in liquid capital, and a system of taxa- tion that will enable the employment of that liquid capital, are prime essentials now. Only as our relatively permanent trade bal- ance is financed out of savings will it be prop- erly and safely financed; the effect, hencefor- ward, of having American investors buy for- 58 America's Opportunity eign long-term bonds out of their savings would be to fund the existing mass of short- term credit, and reduce inflation. If, then, we strive to make ourselves a nation of investors, as well as a source of supply of raw materials and manufactured goods, we shall establish ourselves securely in a place of leadership. Every dollar that is saved in the United States henceforward, and made available for capital and credit requirements, will contribute to assist our international position and avoid inflation. In a report made to the Executive Council of the American Bankers Association, on April 30, 1920, John McIIugh, Chairman of of the Commerce and Marine Committee of that Association, said: "We believe that the bankers of the country with the co-operation of others, if that co-operation can be had, and, if not, without it, have a wonderful opportunity not alone to contribute to the financing of our foreign trade, but through the educational means which would necessarily be employed, to pro- mote production and economy which would have untold beneficial influence upon the social and moral as well as the material future condition of the people of this country." A real problem before us, then, is one of rigorous educational and constructive sales- 59 America's. Opportunity manship. The market for the credits that are needed is in the collective mind of America; the capacity of that market is shown in what was accomplished during the war. If annual income is the measure of our national purchas- ing power, it is $70,000,000,000 ; if our aggre- gate wealth is the measure, it is more than $300,000,000,000. Being in the minds of the people, the mar- ket for foreign credits must be informed and enlightened, just as it was during the Liberty loans, and a powerful campaign of education, emphasizing how big a stake we have in the prosperity of Europe, should bring this about. But in the meantime, what of emergency credits? Must we, in contemplating the fu- ture, await the progress of events without being able to direct them, or is there a likelihood that events will be hastened in a manner to deter- mine our action in spite of ourselves? It would seem, in spite of the present state of American public opinion, that circumstances so powerful in their influence that they will be irresistible will hasten the progress of events. Paul M. AVarburg, in a New York ad- dress recently, outlined the situation in the fol- lowing language : 60 America's Opportunity "We must furnish Europe with the materials re- quired to rehabilitate her industries. So far as this involves the granting of further credits it should be our determined purpose to provide them from our savings. If we are incapable or too irresponsible to accomplish this, we must submit to paying for the unsaved balance by inflation. That would prove, as vre have seen, a wasteful and highly regrettable alter- native, but it is easier for us to bear the sacrifice than for Europe. "It must be our first concern to get the world back upon a basis of normal production. When an engine reaches the dead point we often have to reverse it in order to get the train started in the right direction. In other words, we must arrest planless inflation, caused by hysterical competition and crazed specula- tion and extravagance, and husband our resources so that we may use them courageously when we are cer- tain that expansion is devoted to purposes that will ultimately bring a cure; when we know that it is a definite means toward a definite essential and con- structive end. "Further inflation, carefully measured and applied, may become a painful, but an unavoidable remedy. Obviously, we must not permit the dose to be made one single grain heavier than the most conscientious study, and our most determined efforts to avoid it entirely, may warrant. This duty of carefully re- stricting to a minimum this measure of our support is even a graver one with regard to its recipients than with respect to its givers. For European countries of today are staggering under the load of their debts ; any new obligation adds further to their burden, and increases the difficulties of their ultimate recovery. Support must, therefore, be restricted to the minimum 61 America's Opportunity that would remain as' an imperative and irreducible re- quirement after a country has abandoned its vicious war habit of printing notes and obligations in order to cover current deficiencies, and after it has arrested the flow of easy money and credit that encourage ex- travagance. For no good purpose could be served by pouring water into barrels without a bottom." The question places a serious responsibility on the Federal Reserve Board. Credit and currency inflation has been carried so far in this country that the Federal Reserve Banks have come within view of the end of their nor- mal rediscounting powers. Those powers can only be increased by extraordinary action on the part of the Board; action that has not been taken at any time since the Federal Reserve system was instituted. It would mark a dis- tinct epoch in our banking history to en- able the commercial banks of the country to ex- tend their credit facilities beyond present lim- its, and provide their borrowers with funds on special terms that are provided by the Federal Reserve Act. It is no idle phrase to say that we re- quire vision and courage to do what we are being called upon to do, namely, to push Amer- ican finance around the world. Before the war England was largely responsible for preserv- ing the financial equilibrium of the world. 62 America's Opportunity England no longer has the resources freely at its command to continue this responsibility. Its resources were impaired during the war while the responsibility grew, so that, for the present at least, with the place of financial leadership occupied by ourselves, we have to contend with problems on a scale that never confronted England. When that country was largely responsible for preserving the financial equilibrium of the world it recognized the obligations imposed by its rank. We can do the same, even though the place of leadership in which we find our- selves is new to us, and comes upon us at a time when a multitude of extraordinary prob- lems is arrayed before the world. No longer a debtor nation, however, and relieved of remitting enormous sums abroad each year in interest and dividends, we should be able to assimie the responsibility. So far as they have been able, the banks have already given an example in assuming their share of the responsibility, and from what they have done up to this time this much is sure: the banks of the United States are now interna- tional in their vision, and will lend their efforts in every possible way to help the situation. Formerly the bankers in foreign countries were America's Opportunity alone thoroughly trained in international bank- ing. The war years gave us a wide experience in international dealings and organized our banking machinery on new lines. They also gave us a new vision of our capabilities. The Federal Reserve Act, the Webb- Pomerene Act and the Edge Act are import- ant pieces of legislation in the United States that have contributed to the importance of our banking system in foreign trade. The Federal Reserve Act authorizes riational banks to ac- cept drafts drawn against them in transactions arising from the importation and exportation of goods and permits the Federal Reserve Banks to discount acceptances based on for- eign trade transactions. The Webb-Pomerene Act permits competing concerns to combine for the purpose of export trade. The Edge Act authorizes banks to organize export finance corporations to buy foreign securities and accept collateral on long-term loans against which they may issue bonds and debentures to the American public, thus converting credit into cash to pay the American producer and exporter who sells abroad. Many radical changes in the mechanism of international finance have taken place in the past few years. Not the least important of 64 America's Opporiuntly these changes has been the establishment of an American discount market which, based on the systems of the leading European countries, has contributed greatly to meet the require- ments of trade. By giving the acceptance a position of pre-eminence as a controlling at- traction for liquid capital — a position in the money market to which that form of credit is rightly entitled — ^it has constituted a long step in the. upbuilding of commercial banking, and established the American banks more firmly than before in the financing of foreign trade. Under the Edge Act a way is provided by which the money of the American investing public can support our trade, corporations being authorized that will operate on the prin- ciple of the "investment trusts" which have existed in England and on the Continent for the past sixty years. Investment trusts abroad operate on the plan of piu-chasing a large number of well di- versified securities. Some companies in Great Britain own the securities of more than three hundred different enterprises. Eggs divided among many baskets run less risk than the same eggs in a single basket. So with these se- curities. A certain percentage of them might result in actual loss, but the profits derived 65 America's Opportunity from the whole greatly oif set any loss entailed from a part. Risks are divided, in the case of an investment trust, not only among corpora- tions engaged in the same industry, but among different industries and among different na- tions. Investment trusts abroad have been handled in the past with such financial skill that the most successful have operated for many years at profits which have enabled them to pay common stock dividends ranging all the way from four to thirty per cent, with an average of about twelve per cent. It is widely felt that the most effective way of taking advantage of the Edge Act would be the establishment not of a large number of comparatively small corporations, but of a single corporation of national scope. Such a corporation would have facilities for European credit investigation that small concerns could not possibly have. It could employ the most expert services in selecting investments and in extending loans. It would be widely enough known to command the utmost confidence. As Chairman of the Committee on Com- merce and Marine of the American Bankers Association, John McHugh has proposed a tentative practical plan for carrying this into effect. He has suggested a corporation capi- 66 America's Opportunity talized at least for $100,000,000, the personnel and management of which shall be one in which the confidence of the American investing public can be reposed without any question whatever. Mr. McHugh has pointed out that while under the terms of the Edge Act the national banks of the country are permitted to subscribe five per cent, of their capital and surplus to the capital stock of such an organization, subscrip- tions need not necessarily be confined to na- tional banks, but may include any bank, cor- poration, partnership or individual. He has suggested that such an organization could be brought into existence through the combined efforts of active committees, already in exist- ence, of the American Bankers Association, the Chamber of Commerce of the United States, the Chamber of Commerce of the State of New York, the Investment Bankers' Asso- ciation, the Merchants' Association of New York, the American Manufacturers' Export Association, the American Exporters and Im- porters Association, the Council on Foreign Relations, the National Foreign Trade Council and the various State Bankers Associations throughout the country. It is Mr. McHugh's belief that "the corporation's energies should be devoted to help- 67 America's Opportunity ing foreign peoples help themselves. It should assist them in financing the purchase chiefly of raw ma- terials and equipment with which to put their peo- ple to work so that in proper time when those for- eigners had converted the raw materials into finished articles we, in common with others, could become the purchasers of them, which would immediately com- mence to regulate our prices here at home and enable us gradually to work back to a pre-war normal condition." A draft of the proposed plan, sent to banks throughout the United States, elicited a large number of replies, eighty-five per cent, of which were favorable to the plan. A very large percentage of those favoring it in- dicated a disposition to recommend investment by their banks in the stock of a corporation or- ganized for the purposes outlined in the plan, and in very few of the replies were any alter- native proposals offered, although numerous replies offered constructive suggestions prac- tically helpful in working out details of the plan as outlined. In his report to the Execu- tive Council of the American Bankers Asso- ciation, Mr. McHugh, as Chairman of the Committee, said: "These replies may be regarded as significant and as an index to banking sentiment, and from them the conclusion may be drawn that once such a corporation is organized on proper lines, under able leadership 68 America's Opportunity h and with a board of directors representative of the various sections of the country, with assurances of co-operative support, it would have distinct elements of success. Its personnel would be all-important, but with experienced men of sound judgment and fore- sight at its head it should fill a highly important place in the affairs of this country and the world." With respect to the factors operating on the situation, as it affects the prospects of the proposed corporation, Mr. McHugh said: "This Committee fully realizes that the past five years have been years of destruction instead of pro- duction throughout the civilized world ; that the debts of Governments have mounted up to almost incompre- hensible figures, with corresponding inflation of the circulating medium of every country ; that the fiscal policies of many of the countries are not such as to invite undertakings to finance their Government re- quirements with confidence. The Committee, however, also believes that there are innumerable industrial enterprises in the countries of Europe which can fur- nish adequate security for needed financial assistance. This assistance if extended should result to the mutual advantage of those furnishing and those receiving it. "The Committee also realizes that we are passing through a period when labor fails to recognize its responsibility to society of which it is a part, and when its demands for ever increasing compensation are, with constantly decreasing production, bringing civilization closer to chaotic conditions which if per- sisted in can only result eventually in disorganiza- tion, unemployment and poverty. The Committee is reluctant to share the belief that nothing effective can be undertaken to change this countrywide tendency. 69 America's Opportunity It believes that at least no effort should be spared to arrest and cure it and that an organization such as outlined in the plan submitted by the Committee, having the uniform support of the bankers and others of this country, would be a most influential factor not alone in extending proper credits where they would accomplish great good, but in educating the people of this country to a full recognition of their responsi- bilities to themselves. We believe that by the proper management of such an organization, by uniform effort reaching down into the smallest community, a great saving of the production of wealth could be accomplished and the investment of that wealth could be made with the double purpose in view of helping our foreign friends in a businesslike way and at the same time keeping the markets of the world open for ourselves "Despite the difficulties in developing a safe, con- sistent, practical policy relative to foreign trade financing, there is every reason for the formulation of such a policy. Indeed, the difficulties help to show the necessity. To only drift would be merely adopting a neglectful attitude and shirking a responsibility that as world bankers we are called upon to assume. That would not be the way to meet an emergency or make an opportunity out of an emergency." It is necessary in all that we do to consider the political and moral risks involved in ex- tending credit abroad, and many American people, observing the disturbed condition of Europe and the many political considerations involved in any comprehensive plan of finan- cing, naturally feel that before they venture in- 70 America's Opportunity to new foreign investments they should know that their undertakings are carried through with the approval and cooperation of the Gov- ernment. The United States Treasury has in- vested upward of ten billion dollars abroad on behalf of the American people, and has closely and intimately bound us up with their financial and business operations. Some coordinating body that will be invested with the responsibility of insuring the stability of our foreign credit operations is regarded as essential. The bulk of these operations will have to be carried on primarily by the initiative of the people, but the feeling is general that the Government — in spite of its announced pur- pose to the contrary — ^will have to be a party to the councils of bankers and business men when the policies of foreign financing are finally shaped. Touching on this point a report pre- pared in April by the Chamber of Commerce of the United States said : "The present situation involves more than purely hnsiness considerations, and its numerous political and social ramifications are of deep significance to our people and the whole world. In a matter of such tremendous scope it does not appear sound policy to proceed until definite governmental sanction and co- operation are assured." Beyond what has already been mentioned, 71 America's Opportunity there is a further essential to any comprehen- sive plan of foreign financing; namely, the establishment of an international security mar- ket here, that wiU give the American investor a knowledge of foreign securities and their values, and afford a place to buy and sell as his education expands. The suggestion has been made that if foreign securities were listed on the New York Stock Exchange they might well take an increasingly important place in the attention of the invest- ing public throughout the country. Trading in securities of enterprises located in all parts of the world long ago gave England a position of leadership in the financial affairs of the world and made it the center of civilization's whole economic organization, to which tribute was regularly paid. 72 CHAPTER VII What Will Determine Progress TN looking to the future, it is clear that the course of Europe's progress will be gov- erned henceforward by two things; its success or failure in regaining its old footing in trade, and its handling of its currency problem. The contraction of its currency must precede the restoration of the gold standard in every European country that was engaged in the war. Yet the methods proposed to bring this about are of such complexity that nobody in considering them dares to make any kind of positive prediction regarding their outcome. They are bound up inextricably with the ques- tion of economic recuperation, the resumption of normal social relations, and the power of the people to support loans and taxes. On March 9 the Supreme Council of Allied Premiers issued a statement in which this para- graph occurred: "It is essential that early steps be taken to secure the deflation of credit and currency (first) by the reduction of recurrent Government expenditures within the limits of revenue; (second) by the imposi- tion of such additional taxation as is necessary to secure this result; (third) by the funding of short 78 America's Opportunity term obligations by means of lo^ns subscribed out of the peoples' savings; (fourth) by the immediate limi- tation and gradual curtailment of note circulation." Taking the world at large, we may be sure that whatever methods are followed to bring about credit and currency contraction, the problem will not be settled quickly or easily, because by itself it is one of the most difficult, financially, that has ever been presented in all history. After England's wars with Napoleon, and after our own Civil War, currency prob- lems were such that it was seven years after the Battle of Waterloo, in 1815, before England resumed sjjecie payments, and fourteen years after the close of the Civil War, in 1865, before the United States did the same. Yet the prob- lems faced on those earlier occasions were far less imposing than those of today. The world has not yet got back to normal production, and with people intent to buy more goods than are in existence, seeking in the meantime to make payments with banking credit instead of with the proceeds of their sav- ings, the accumulated pressure on the world's banks is more severe at the moment than at any time before. In an attempt to check the demands for credit and bring about a stricter control over 74 America's Opportunity loans, recurring advances have been made re- cently in the official rates of discount of the world's leading banks, yet so long as these de- mands continue, and so long as they are ob- tained in order that goods of every kind may be purchased in excess of the supply, just so long will the process of inflation that was carried on during the war serve to delay the world's re- covery. One overshadowing difficulty that confronts all the nations is the opposition that is bound to be met, on the part of the rank and file of the people, against any drastic measures that are taken to force deflation. Deflation is bound to hurt, and the more effective it is made, the more it will hurt. Inflation, on the other hand is seemingly so helpful; like war itself it is a great illusion. That nations should grow rich directly out of waging war, is of course im- possible. Yet there are people today who think that, somehow, nations have grown rich out of the Great War itself. They visualize the coin- cident issues of paper money and the rise in prices and wages, and think that because there are more dollars circulating the world has grown richer. They do not comprehend that the process of printing paper money, seemingly so helpful, has created a huge bubble that is 75 America's Opportunity only a semblance of increasing wealth and great profits. As already shown, there is more than fifty billion dollars of paper currency now in circu- lation in the countries of Europe, west of Russia, which were engaged in the war, as com- pared with seven billions in 1914. These coun- tries are not richer than they were in 1914; they are poorer. Wealth has been destroyed, the flower of their manhood is dead, their in- dustrial machinery is disorganized. Instead of enriching, currency inflation for some of them long ago reached such a critical point that in- telligent inquirers, with their minds directed to the future, were compelled to ask, in be- wilderment, how far the process of destroying wealth and coincidently printing money might continue to go without bringing about an utterly impossible situation. History supplies the story of two notable occasions when inflation went so far that an impossible situation was reached. Both the Continental currency and French assignats were virtually repudiated. The first issues of paper money by our Continental Congress were in 1775, to the amount of $10,000,000. Before the time of the Declaration of Inde- pendence $15,000,000 had been issued. With- 76 America's Opportunity in four years the volume of inconvertible paper rose to more than $240,000,000, and its value fell so rapidly that by 1781 it was worthless. The only further notice taken by Congress was an act approved August 4, 1790, in which au- thority was granted for the funding of the bills into 6 per cent, bonds at the rate of $100 in the bills for one dollar in specie. Only $7,000,000 turned up to take advantage of this provision. The currency "went to sleep in the arms of its last holder." The French assignats began with an issue of 400,000,000 francs in 1789. By 1796 the issues had reached 45,500,000,000 francs, and though, by various payments into the treasury, the total number had been reduced to about 24,000,000,000 francs, their face value was about 30 to 1 of coin. At this value they were converted into 800,000,000 francs of land-war- rants, or mandats territoriaux, which were to constitute a mortgage on all the lands of the republic. These mandats were no more success- ful than the assignats, and even on the day of their issue were at a discount of 82 per cent. They had an existence of six months, and were finally received back by the state at about the seventieth part of their face value in coin. 77 America's Opportunity How the different nations of Europe will bring about a resumption of the gold basis for their currencies is something that cannot be outlined now. The prices at which the paper money of some of the countries of central and eastern Europe has sold in the exchange mar- ket do not indicate a belief in financial circles of their ultimate full redemption, but for the countries of eastern Europe the case is differ- ent. In a recent address delivered before the Economic Club in New York City, Alexander Dana Noyes said : "In England and France the problem is bound up with the problem of general financial and commercial recovery. In that regard . . . the capacity of the French people for quick industrial and financial re- cuperation after a disastrous war has been proved re- peatedly by the most exacting tests, and is one of the most remarkable facts in economic history. To what extent the German indemnity will make possible a re- duction of the French paper currency is a problem as uncertain as are most of the results of the Paris conference. But all the precedent of French history warrants the expectation that the recovery and re- construction of France will be one of the surprises of the next generation in economic history. "In a different way, this may be true of England also. The question with England is not a question of ruined property, or even primarily of loss in man- power. The test in her case will be the power of her manufacturing industry and foreign trade to recover the footing of the years before the war. . . . 78 America's Opportunity "The English people, alone of all the European belligerents, are already addressing themselves to everj aspect of the problem. They are not resting their efforts wholly on the recapture of the export trade, and they are not asking us to lend the money to regulate sterling exchange. They have as yet not undertaken any systematic plan for reducing in vol- ume that part of the paper currency which is un- secured by gold. But they have at least required that new issues of the so-called "currency-notes" shall be secured by gold deposited in the Bank of England." 7i» CHAPTER VIII. The Future TTLTIMATELY, the cures for the most ^^ comphcated national problems and the cures for international ills are. the same as the cures for nine-tenths of our domestic ills. They are increased work and increased savings; greater production, a smaller current consump- tion. These cures are simple; even to state them seems trite. But properly followed they will ultimately settle the balance of trade, re- store the nations of Europe, and return ex- change to parity. It is true that the process of recovery in Europe must necessarily be a slow one, which cannot be expedited by short cuts of any description. It is further true that its recovery cannot be brought about by any single, all- inclusive formula. To state such a formula is easy enough. We can say that Europe will recover if it will restore production, practice thrift and reduce its floating debts. But how is it to go about following this formula, and how will it overcome the obstacles set in its path? We say that Europe should go to work, but it is slow getting to work without tools, 80 A merica's Opportuniti/ materials or credits. With its loss of man- power, with its inevitable relaxation from the prolonged tension of the war period, and with its poverty, sickness and shortage of food and raw materials, Europe cannot now be so pro- ductive as formerly. An incentive and willingness to work, and a sufficiency of capital resulting from sav- ing, are vital conditions of progress, and be- fore Europe can estabhsh itself again on a healthy basis, these must be restored. And so we come to the question of Europe's ability to rise out of the economic bog into which the war drove it, and, in comjnon parlance, "come back." Can Europe come back? Can it lift itself out of the aftermath of war misery ? Are its inhabitants worn out, or have they retained their energy sufficiently to rebuild their indus- try, restore production, reestablish their pros- perity, return their currency to a gold basis, pay their debts? The task is a formidable one, but it is not one to paralyze help from the United States be- cause of the fear of failure. Someone has said that just as the human body in sickness uncon- sciously produces microbes to counterbalance the fever and eventually restore complete health, so the abnormal conditions of Europe 81 America's Opportunity are themselves contributing to restore normal conditions. This country after the Civil War, Great Britain and France after the Napo- leonic wars, Germany after the Thirty Years' War, all gave evidence of the ability of man- kind to recover from the blight of war. The greater allied nations are making heroic efforts to get back to work. Henry P. Davison testifies that: "England is meeting the problems of reconstruc- tion just as those who know her past should have expected her to meet them. With head erect, a quiet courage and a sturdy common sense she is doing her own day's work and at the same time rendering all the assistance that her resources will permit to the countries on the Continent." England is indisputably in the best posi- tion. Belgium and Italy have shown distinct and surprising evidences of improvement, while in France there has been a steady rise in tfae curve of production as the recuperative spirit of the people has asserted itself. The war woimds of France were very deep and will not be easy to heal. France not only suffered from its own staggering war cost and the blight of an invasion, but from its inability to finance the war as successfully as did some other coun- tries engaged with it in the war. Still, there is the expectation that the German indemnity 82 America's Opportunity will help in that direction. As for Germany, the prospect of recovery there is affected by so many elements that we can only wait to learn the outcome. Germany was not invaded, but the peace treaty stripped it of productive prop- erty and land and sea transportation equip- ment, and weighed it down veith an indemnity. Yet the testimony is given from abroad that Germany is attacking its task with tradi- tional thoroughness and dogged resistance, and has already made visible progress. We have got to have faith in the resources of humanity to overcome human difficulties. England's prostration after the Napoleonic wars appalled the people who had to bear it, but soon the development of steam-power, the improvements of industries, and the energy of the people so increased England's productive power that, as history records, capital was soon flowing out from England to open up and de- velop other lands, with the result that greater markets outside presently were contributing to the greatest era of British prosperity ever known. There are many respects in which the present period does not resemble the periods after other wars, and does not appear to possess the same opportunity for rapid economic recovery on an 88 America's Opportunity enlarging scale. But, then, no period ever does resemble another, and the course of economic events after a great war is always a surprise. On the whole, Europe, as a basis of future credit, has adequate security to offer in its soil, natural resources, factories, railways, water power developments and other produc- tive properties, and most of all in the spirit and ability of its people. True, that part of its wealth that might be shipped here is limited just now, but the productive power and thrift of millions of industrious people will stand be- hind the obligations that are assumed for their benefit, and transportable wealth will be avail- able in due course. America pledged her might and her treasure and sacrificed the lives of tens of thousands of her sons that the menace of German militarism might be forever effaced. If we withdraw now into isolation, we withdraw with our task half done. We fought by the side of the great democracies of France, Belgium, England and Italy, who gave of their blood and treasure with us. German militarism overthrown, we retired with our strength intact. But the dis- aster which fell upon Europe could not pass away in a day. The people of Europe have turned to America in her strength and com- 84 America's Opportunity parative plenty, for sympathy and aid in helping them to help themselves. They are not asking for charity. They are asking only that America extend them credit so that they may buy from her the goods and the raw materials to restore themselves to health, and vigor, and peace. They are asking that America maintain the great promise with which, with the spirit of ancient crusaders, we entered the war. They are asking that we keep the faith. This, then, is the day of America's oppor- tunity. It is a selfish opportunity, an oppor- tunity to find an outlet for our goods, to maintain our material prosperity, and to establish a firm place in the world's trade. But it is more than that. It is an opportunity for service, an opportunity to realize the ideals that are in us, an opportunity to earn the last- ing gratitude and admiration of the world. 85 Established 1810 The Mechanics & Metals National Bank OF THE CITY OF NEW YORK Capital, Surplus and Profits $25,000,000 20 Nassau Street, New York Officers GATES W. McGARRAH, President Vke-Presidenls JOHN McHUGH HARRY H. POND FRANK O. ROE SAMUEL S. CAMPBELL WALTER F. ALBERTSEN NORTH McLEAN JOSEPH S. HOUSE, Cashier Assistant Cashiers JOHN ROBINSON ARTHUR M. AIKEN ERNEST W. DAVENPORT WILLIAM E. LAKE ARTHUR W. McKAY ALEXANDER F. BRYAN, Auditor TRUST SERVICE BOND SERVICE FOREIGN EXCHANGE Directors DANIEL BARNES President Seameu's Bank for Savings JAMES M.BECK Former Asaistant U. S. Attorney General JOHN K BERWIND Vice - President Berwind - White Coal Mining Co. WILUAM H. CHILDS President The Barrett Company WILUAM E. COREY Chairman of the Board of Direc- tors Midvale Steel & Ordnance Company W. R. CRAIG W. R. Craig & Company WILUAM E. S. GRISWOLD New York HENRY O. HAVEMEYER President Brooklyn Eastern Dis- trict Terminal WALTER C. HUBBARD Hubbard Bros. & Company GATES W. McGARRAH President JOHN MoHUGH Vice-President V. EVERIT MACY New York T. FRANK MANVILLE President H. W. Johns-Manville Co. CHARLES M. PRATT New York ROBERT C. PRUYN President National Commercial Bank & Trust Company, Al- bany, N. Y. SAMUEL F. PRYOR First Vice-President The Rem- ington Arms, Union Metallic Cartridge Co., Inc. FERDINAND W. ROEBLING, Jr. Treasurer J. A. Roebliag's Sons Co. HENRY H. ROGERS Director Anaconda Copper Min- ing Co. WILUAM A. JAMISON Arbuckle Bros. L. F. LOREE President The Delaware & Hud- son Company JOHN D. RYAN Chairman of the Board of Direc- tors Anaconda Copper Mining Company AMBROSE G. TODD Reeves & Todd Established 1810 The Mechanics & Metals National Bank OF THE CITY OF NEW YORK 20 Nassau Street, New York Branch OflSces PRODUCE EXCHANGE BRANCH 10 Broadway COLUMBUS AVENUE BRANCH Columbus Avenue & 93rd Street MADISON AVENUE BRANCH Madison Avenue & 60th Street CENTRAL PARK BRANCH Seventh Avenue & 58th Street HARLEM BRANCH Third Avenue & 116th Street HARLEM MARKET BRANCH First Avenue & 103rd Street BROADWAY BRANCH Broadway & 86th Street MANHATTANVILLE BRANCH Amsterdam Avenue & Manhattan Street STUYVESANT SQUARE BRANCH Second Avenue & 14th Street