lateral. Given such securities a foreign loan will be readily taken by the American investing public and will stand as a straight commercial transaction beyond cavil from any source.-Sept. 16, 1915.

FINANCIAL EXHAUSTION,

THEN PEACE

The Bankers' Association of England has urged the British public to thrift and economy. In the last analysis the present struggle is to be decided by silver bullets. The vast resources of the allies are finally being brought into motion and must, according to this reasoning, win the day if the financial strength is available to keep them in being.

Already the war has altered all conceptions of what is possible in finance. The volume of money needed has been so enormous that the biggest previous operations in private banking dwindle into insignificance by comparison. The collective power of a nation stirred by patriotism has produced billions instead of tens of millions of dollars, and demonstrated how much stronger the nation is as a whole than any restricted corporation or group.

It

War consumes shells, guns, iron, steel, clothing and foodstuffs. wears down railroad facilities, roads and motor trucks, and it kills and maims men. To produce shells, guns and cannon requires the most effective factory capacity, and a high degree of industrial organization. New conditions arise in warfare for which there must be quick adaptation; the sciences must produce new devices. The nation that has the best factory system, and is quickest

and most skillful in applying scientific discoveries, proves its strength.

Habits of thrift, willingness to work long hours for the national cause, and to dispense with everything but the barest necessities; the vitality and breeding capacity to produce an excess of children to make up for human wastage, these, taken together, are far more important than accumulated capital, for these are the living dynamic factors, while capital is the static advantage which, if once expended in non-productive purchases, ceases to exist. European securities sent to this country in payment of ammunition and other war supplies deplete permanently the capital resources of the nation which has sent them.

An estimate of $9,000,000,000 as the cost of the war for the coming year for England foreshadows a minimum national debt of over $17,000,000,000. This means $935,000,000 annually in interest charges. Before England could wage another war she must amortize this debt, which will require at least $250,000,000 annually. Soldiers' and sailors' pensions will aggregate another $225,000,000; in all $1,410,000,000 of fixed charges.

Her normal budget for the last three years has been approximately $900,000,000. In order to maintain her position in the future as a dominating empire England must keep a larger army, which will mean additional expense. She must broaden her system of social insurance and old age pensions, which will add to her financial burdens. The above items create an after-the-war budget of over $2,310,000,000 yearly.

a

Can England, with 45,000,000 of population, permanently carry budget of approximately two and a

half times the budget of the United States government, with a population of 100,000,000 people-a per capita charge six and a half times greater than that borne by the citizen of this country? If so, how much further can the burden be increased?

England's success in paying off the heavy debt after the Napoleonic wars has been pointed to as a precedent for the present situation, but the comparison does not hold. The end of the Napoleonic wars left England in practical control of the world's shipping, and international commerce at that time carried a margin of profit of from 50 to 100 per cent. instead of the mere handling charge that exists to-day. England led the world in introducing and utilizing the steam engine and the factory system of production.

Mechanical energy on a wholesale scale was, in England, brought to the aid of the human hand, and for almost two generations England alone was the workshop of the world. These peculiar circumstances created profits and opportunities which probably will never again come to any nation. The advantages that will arise from this war will come through the "super-organization" on a national scale of a nation's industrial energies, for it is becoming increasingly evident that modern industrial machinery is most productive when organized on a national scale. Recognition of this fact is the secret of the power of the German state and of German industry. After the war, with man-power impaired and industrial machinery deranged, a tremendous rivalry for commercial power will break out; and the times of fierce competition are not times of great profit, out of

which to pay debts measured by billions.

From the foregoing considerations it seems that the nations have reached the limit of their financial power because the burden already assumed equals, if it does not exceed, the taxing power of the state. This is true in a varying measure of all the nations involved. It foreshadows an early end to the war.-Dec. 28, 1915.

FINANCIAL GRATITUDE Sir Edward Holden, the great English financier, tells us that "the government and people of the United Kingdom have been placed under a great obligation to American bankers for the magnificent spirit which they showed in buying straight out a loan of such magnitude." He is speaking of the Anglo-French loan of $500,000,000 floated here.

Perhaps Sir Edward's sense of gratitude is enhanced by recollection of how differently England treated us in our hour of need. During the Civil War, R. J. Walker, who had been secretary of treasury under Polk, was sent abroad as special revenue agent in Europe to try to negotiate a loan. So bitter was the hostility of Lord Palmerston and Louis Napoleon that Walker had no success. But he found the confederate loan quoted on the London and Paris exchanges at par in gold.

That was in the days when British-built confederate privateers were destroying our merchant marine or driving it into British registry.

Well may Sir Edward Holden feel gratitude.

The most astute diplomacy of the war was that exhibited by the Brit

ish and French commissioners who induced our bankers to advance to the allies $500,000,000, protected by no deposit of American securities. At the time that our government was involved in grave diplomatic issues with both groups of belligerents, our bankers made a pledge of $500,000,000 in American money that we would take no measures against one group, the allies.

No military success of the Germans and no diplomatic success in the Balkans is to be compared with the success of Anglo-French commissioners who, after staging on the west front an attack that gained nothing and lost 60,000 men, sailed away from our shores with $500,000,000 of the money of Americans as hostages for our good behavior.

The king is impressed by the tales of unrest. The loyalty of his subjects is more important to him than the payment of his debts. So he repudiates them. He turns to Wolsey:

To every county

Where this is question'd, send our letters, with

Free pardon to each man that has denied

The force of this commission.

It is all so modern that one cannot but have a kindly feeling for the wag who, after Sir Herbert Tree had been called to the curtain, continued to applaud and cried "Author!"-April 7, 1916.

BRITISH AND GERMAN
FINANCE PROBLEMS

The British government on Monday is to impose a special tax of 10 per cent. on income from American securities held by British investors. The effect of this will be to expropriate one-tenth of the value of these securities. It is expected that, to avoid such expropriation, British investors, who have thus far refused to give up their American securities in exchange for British war bonds, will now dig up their Americans.

The threatened expropriation is an interesting commentary on the difficulty of Great Britain to finance her vast purchases here. After these securities are mobilized and sold on the American market, what then?

The Germans cannot buy abroad. They are like a man in a closed room. He throws his money into a corner and then walks over and picks it up again. There is appar

ently no limit to the number of transactions that he can make with himself. The door is closed and none of the money can blow out.May 27, 1916.

ARMS AND CREDIT

It is interesting to observe the very close connection between military success and finance. We hear that wars to-day are financial, that bankers can and do hold in their hands the power to stop war. It is not true as to the war finances of countries which finance themselves. Bankers cannot refuse the last extremity of aid to their own government. Patriotism, public opinion and-in the end-financial conscription, all force them to render this support.

But bankers will support a foreign government only when its prospects for solvency are good, and military success is the best measure of this solvency. It happens that the allies are the ones who need foreign financing. They need American credit to pay for their huge purchases here. They do not attempt American credit except in connection with great military drives against the Germans. So with the British-French offensive last fall, which was followed by the half billion Anglo-French loan. And in connection with the Russian drive to-day we read that fifty million dollars has been loaned by our bankers to the Russian government. The pending French credit in New York awaits a triumphal repulse of the Germans at Verdun.

War is quite a military phenomenon, after all.-June 16, 1916.

A WISE CHILD

The new French loan has had a phenomenally easy and rapid road to travel. It was "out" Wednesday. On Thursday (yesterday) it was listed on the Stock Exchange before the subscription books had been closed.

Some children are born with silver spoons in their mouths. Some have to worry along with tin spoons, or no spoons at all, the best they can. Some loans have to welter about for months and years before they can be put through. Others are listed in a day.

It is all a matter of the judicious selection of parentage. Children cannot select their parents. Loans can make the choice, sometimes. And the French loan has proved an exceedingly wise child. It has selected its parentage with consummate skill. July 21, 1916.

INTERNATIONAL FINANCE

A great difficulty against which Washington runs when it makes any attempt to keep this country on an even keel of neutral conduct toward both belligerents is the fact that nearly our entire financial system is a stockholder in the enterprise of the allies.

The wide dispersal of the AngloFrench $500,000,000 loan, the French $100,000,000 loan, the $50,000,000 of Russian notes, has permeated the banks and the moneyed classes of this country. Where your treasure is, there will your heart be also.

Whoever holds the securities of an enterprise is vitally concerned in its success, especially when, as in this case, success means solvency.