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thought of asking for the payment of those bonds. All they were concerned with was the prompt payment of the interest, and people generally who were supposed to be well off or rich were envied by their friends if it was known that they had their fortunes invested in government bonds.

Today, however, we find any number of people looking askance at government bonds and asking if they will be paid. Many of them will never be paid. On many of them the interest may not be paid unless we revise our views and realize that we must do something in the way of commercial credits for the rehabilitation of Europe. We must give our old world debtors time in which to pay for the raw materials we would export to them and of which they are sorely in need. We must give them time to manufacture these raw materials into the finished product and sell it, before we demand payment of them.

To maintain American business on an even keel, and to prevent as far as possible in this country these alternating periods of feverish business activity and acute depression, something must be done to promote and make possible a reasonable continuance of our foreign trade. To assist in bringing about this condition we must be prepared to play a generous part in the matter of loans. We must be prepared to extend credit to deserving buyers of raw material.

Credits for the sale of our surplus products are in a different category from credits for the prosecution of a destructive and disastrous war and should not be regarded as having any relation, for one is a credit for the purpose of construction and the other is a credit for the purpose of destruction.

The principal nations of Europe, bear in mind, have actually more gold on hand today than they had in 1913—not more gold, by any means, in proportion to their liabilities; not more gold in proportion to their paper issues; but more gold actually in hand than they had in 1913. The high premium on the American dollar in most foreign countries is seriously injuring our export trade.

I have spoken to you chiefly of export trade. Import trade is as essential to us, to our welfare and to our happiness as the export trade. Everybody in this country, however, when he talks about foreign trade usually talks and thinks of export trade. Now it is axiomatic that to buy we must sell, and to sell we must buy.

The transaction must not be one-sided; it must be mutual. Europe and South America need us—but we need Europe and South America. Overproduction is already beginning to make itself felt here, and if our export trade is seriously cut down, industrial difficulties must spread in this country.

Last advices from Chili, which we received in the bank the day before yesterday, quote the American dollar there as having gone to a 50 per cent premium. In other words, it is now selling for 77/2 pesos against a normal value of 5 pesos. That means if a merchant in Valparaiso, Chili, today owes a Chicago firm $100,000, it costs him $150,000 to pay his obligation. It might ruin many people if they were compelled to remit at this time. Because of these conditions brought about by the collapse in commodity prices moratoria in Brazil and the Argentine are a possibility. They have already gone into effect in half a dozen other countries which could not pay under these conditions.

The Brazilian situation is extremely grave because of the condition of the coffee and rubber markets. In 1913 crude rubber sold for $3.50 a pound. Today the producers of crude rubber in Brazil are having hard work getting 20 cents a pound. While none of us has noticed any particular decline in the price of coffee at the corner grocery—and the corner grocer is the last man to know that the price of coffee has declined—the wholesaler will tell you that the coffee for which he paid 18 cents a pound is worth only 6 or 7 cents today in New York and perhaps 37/2 to 5 cents, according to the grade, in Santos. As a large part of the Brazilian exports consists of rubber from Para and coffee from Santos and Rio, you can readily understand the situation that exists in that country.

Almost the same situation exists in the Argentine, where the principal exports are corn and hides. There is almost a complete suspension in the wool, hide and leather trade. It is almost impossible to buy or sell. I have as a client in Chicago a large firm engaged in the wool business. Let me tell you this instance to illustrate the peculiar mental attitude or psychology in the wool trade at present. Wool is quoted here and in Boston, which is the principal market, as unsalable—and it is unsalable. If you have any wool you will find that you cannot sell it, because nobody will make a bid for it. This Chicago client, however, conceived the

idea of buying some cheap wool. He had read that the Montana sheep-growers and clippers had had a splendid clip this year. Therefore he came to see me about a month ago with two of his buyers and I equipped him with a letter of credit for $100,000 and sent them off to Montana to buy wool. These men spent thirty days in Montana; they offered good American gold dollars to every farmer they met, but they could not buy a pound of wool. They would ask the farmer why, and the farmer would reply: "You don't offer enough.” My client said that his answer to that was: “What is this wool quoted at in Boston today?" Now Boston, as I told you a moment ago, is the only real wool market in this country. The farmer would say, "Six cents." "Well, I will give you eight cents a pound in Montana for your wool.” The buyer and seller could not get together. There was a practical impasse, a suspension in the wool trade. Prices have declined so low that the sellers think if they sell now they are giving the commodity away; and while some of the buyers would buy, many of them are afraid the price will go even lower.

The situation in South America has lately grown very acute. Last spring a loan of $50,000,000, which had been made to the Argentine government, fell due in New York. The Argentine government wanted to renew the loan, but the American bankers thought they wanted to have their money back again. The result was that the Argentine government paid off the United States, but in order to pay us they went to London and borrowed the money there. Our attitude which compelled them to do that was, in my opinion, short sighted. Fifty million dollars, considering the figures in which we have been dealing for the last year or two, is a mere bagatelle for the United States, but it is a considerable sum for the Argentine.

We have been working hard in this country—or at least we want it thought that we have been working hard-to wean Central and South America from trading and banking with Europe. A transaction of this kind is not the way to do it. By it we are helping to throw South America back into European hands, and today, notwithstanding the condition of the European money markets as a whole, South America can get a longer and better credit there than she can get in the United States.

Our crops, nature having been kind and bountiful to us this year, are too big for home consumption. Europe is still hungry.

Our low-grade cotton is literally overflowing the warehouses of the south. It largely exceeds our home demand, while the spindles of many European countries are idle for lack of it.

Experience seems to teach that most men throughout the world are honest. In the past Europe thought American business men were honest, otherwise Europeans would not have lent as freely as they did for the development of this country. America would not be what it is today had it not been for our ability to borrow in the old world. They trusted us in those hard-up days of ours, and we must trust them not only for their sakes but for our own. This is our problem, if we ever expect to get payment of the interest on the money which Europe already owes us. This is our problem if we value our own financial and social security. This is our problem if we would keep our own factories going and our own labor busy. An idle, unfed and discontented Europe is a menace to the security of the United States.

There are one or two figures which I want to read to you that are interesting and have some bearing on what I have just been saying. I believe they are fairly accurate.

It may not be generally known that with only six per cent of the world's population and only seven per cent of the land surface of the world the United States produces :

20 per cent of the world's gold.
25 per cent of the world's wheat.
40 per cent of the world's iron and steel.
40 per cent of the world's lead.
40 per cent of the world's silver.
50 per cent of the world's zinc.
52 per cent of the world's coal.
60 per cent of the world's aluminum.
60 per cent of the world's copper.
60 per cent of the world's cotton.

per cent of the world's oil.
75 per cent of the world's corn.
85 per cent of the world's automobiles.

In addition we also refine 80 per cent of the copper and operate 40 per cent of the railroad trackage of the world.

Believing these figures to be substantially correct, can we expect to get on without an international market? It is impossible.

The domestic demand for funds continues strong, and the need for extending help to Europe and to South America is pressing. However, it is generally true that money is forthcoming at some sort of a rate, and the time has apparently come when rates that a few years ago would have seemed very high may no longer be regarded so.

It is well to remember that money, while high, is only relatively so. Money as a commodity, during a period when other commodities soared in price, advanced little in its cost to the consumer. The prices of most other commodities have advanced from 100 per cent to 350 per cent, but money costs have increased on an average of only 25 per cent--and that in the face of a great increase in the cost of rendering banking service. The increase in the interest rates to the borrower has been less than the increase in the cost of any other element entering into production or distribution.

Foreign trade and foreign exchange, which go hand in hand, require immediate help. The situation is bad, but not to my mind hopeless. It will work out in time. We have all got to go on working and living and working for a living; but things will work out much sooner and much better if not allowed to drift entirely by themselves.

Some means must be found, and should be found speedily, for funding into a long term loan the ten billion dollars which the allied countries owe to our government. All of you have no doubt read from time to time suggestions in the newspapers and elsewhere to the effect that we should remit that debt or cancel it. In other words, that we should call it off. I am not at all sure that that would be the right thing to do. As a matter of fact, I dissent from that opinion. I know from talking with the leading bankers of Great Britain that they would not listen for a moment to any cancellation. The French have not declared themselves positively on the subject, but I do not believe they can afford to consent to it, and I believe the same thing is probably true of the Italians and the Belgians. There is a vast difference between compromising or canceling a country's internal debts and failing promptly and properly to deal with a country's external debts. What England, France, Belgium or any other foreign country may eventually do with its own internal debts is an absolutely different question from

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