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In discussinWthe development Of a discount market one its relation to our foreign trade," it will bo well first to describe briefly the :.amnion discomfit market in prier that what is desina2 xxxxxxxxxehmet in this country m4y be clearly understood. Mi .'he develeirkelt of modern international eons erce has made :.onion the settling market, and the sterling bill the settling medium, of the world. nglJwd's vast foreign trade, her snipping and her overseas investments, bring a constant flow of fends to onion. Gold moves freely in and out of :..ondon, and iota= banks and bankers keep revolving there a great volume of credit instruments, of instzint aegotiability and recognised the world over an tho nost 11111d of banic investnents. It is these accoptancee, the direct or continent obligations of banks and bunkers, which constitute the ondon discount market. Paris and lierltn, and to a lesser extent Amsterlan4 are also settling centers and have their discount rrtarkets, but the volume Is relatively light, and the transmarket actions are rare between banks than in the open/through brokers. Merlin and Amsterdam finance nuch of their own foreign trade, --ngland finances not only its awn but the forelt,fn trade of `"may other nations, includinc t :e greater pert of ours. 23reloiers oottlinc; for goods, foreigners settilw; for freight, foreigners settling for interest, ana foreigners settling for the financing of their commerce, Make a constant flow of fends towards ;Anion. -Landon funds are in derund in every corner of the globe, and the sterling bill has a currency far above that of any atnur. Just aa In nanny of our clearing houses, differences are settled in :low fork funds, so in many parts of the world, especially in countries more the Mid atandard is not firmly established, local and international balances are settled in union funds. At tan iiondon and the arodit neohanism he boon hiplik; developed. The banks give credit not merely by diecountime notes and drafts, or openinc drawing accounts, bet also by acoortinv drafts payable in Prod stmt.; to one hundred and oldhty days, for ;Allah a commission of from 1/4 to 1:, or from 1 to 2 1/2 nor oent. por annum, is Charcod; the customer fireoirse: to provide funds to toot the amalgam° rhortly botoro it maturoo. Until r000ntly thoeo accoptamo Oneidas hare been granted primarily by a too firms wit/. LarTe capital etiohi mamas this their 'mole businessond only to a limited emtont by the elegizing banks. The latter, bovine: other kinds of liabilities, accort nmemodorately in ronortion to their oapital then trio 3°cent:zoo houses. The volume of ame-,ti noes normally ontntanding has been estimated at considerably in excess of t3J2.,:.W,} The rive ntatia of crodit oxtendod hy bankoes ameptanee is; (1) It do os not lase the funds of the aneeptor; (2) It transfbrms a aommercial obligation into a bank oblimation and, being based usually upon the roveremt of roods, it in of a molt-liquidating nature. Aoceptod bills are dietributod mainly throudh the maw of the bill brokers, eto either sell then to the disoount (=ponies and houses, or orrgy the tar their ern ammo* eeellsionally they soli thou to the olaaringloads. Tbs discount houses sloe assist in the diatribution. :;ot only is mills trading carried on in bills just aompted, but bills hold 07 Nankai dismount houses and brohers aro constantly changing/rani, to moot their reopirsmimaa for funds or their viers of the probablo oouree of nonny ratos. Haas: of the narkst at all times stan4s the Bonk of ftgland, itself a ready buyer of and lender on bills at its minimum dismount rate, which regalatoe the merkots but is generally slightly ievivo the rate at te'lloh bills are aateally moving. :-Inment in times of crisis the rates are lour and ihmeasta within narrow limits, judged by Amorloan standards. linnitlasmameinsstn Bark of England is prwared to relieve the market in ease a sudden tightening of nomoy Should raise market rates to the Banks minima rate. The BALS also goes into the market and tows bills bolos its rate if for any reason it wishes to raise the rates to protect its roserves. Ono cause which contributes to this Aability is the number Or different parties to the diccou.lt market, what different angle; each approaching it Mtn a some- the acceptor who pate his aoceptiag commission; the broken* who gets hie settling carrission, but =ow also be Interested in eeeine ratos decline; rate for his money; the bnnk buyer, who is interested in getting the beet either and tie discount house, whose position nay bo like the bunk, that of an inwostor, or like the broker, that of a cline, operator nor a &- The r sultant of them forces is a atomiy rate but onr- whichrewes largely in accordance with the obb and flow of commerce, credit nod gold, T prime of the sterling bill hats co: polled important banKo sAnd merchants all oviv thr, world to keep fonds in London, add many foreign banks to maintain branches in London, in order to ficilitato the donlinrc in sterling bills which they are inevitably compelled to transact, and fifty such banks maintain landon offices: 'Vero ox Immured they are not only acceptors, but also buyers or seller:: of bills according to their Yerlment or the profit.-blo couroo from tire to time to be pursued, :he sterling bill is oleo a favorite intr,rmtional ineestroat, 'hen the di corm market is higher in London aan ILI continental centers, bnnking funds not needed at home will rloa to Lcndon for invootment in billet, rot:arming when the London rate ham be equalised, or when hbe ham demands quicken, This influx and roturn of foreign tends bee been another potent influence in keeping the London clucount rate steady and enabling London to finance cheaply its own and other foreLoa ounmeroe, Ith thoao bills, whith aro either the direct obligation e of basics or bankers of the highest credit, or bear at least one hank indorsement, the scrutiny of indiVidnal mares is scarcely nocessa-y, .'r ire bi lie sell or chance hands like so coach cotton or s-oat, :bare is always a za,:..rkot for Vier at a prW nod eimOst tbo 3014 oOnoid(A6atlOo count rate, loaoa to buytle or The Bark of selliig is the 1and present or proopectIVO Lis- a watakful Tio over the mrketrwhieh serves to rortrain Urn fluntirg of 64oeuoivo teceptanco credits, for no price acoevtor could afforci to have his bills declined, or oven discrininated orainst in rate, became° of an over -nupply of tier in the market, ammups tz zuiv. ves situation in the United Mates prior to the "...cropeen war and the inaokuration of the r'ederal Reserve 4yetemY Jar basks had no authority to Gvant aocoptance orIdits and oar norollante and manufacturers bad to depend almost entirely on .,onion or oontinental *entree for the credits upon which their foreicn p:rohamos and pales could be financed. :OM York oould not booms mu iuterUakiinal credit riGrmt, attractive to it at favorable tine Urgt bankinG feels of other nations, because maize Landon it tx.,(1 no credit lastrtklent of the necessary etendard of safety. liquidity, and instant oonvertibility, no open disoount market. A ft.: Luropean banks 000asioually lout monej here on mil, but tho tree moveramt of -lropwo basking foods to this narket when rates wore attractive ham not been practicable. faotory medium throaj whioh funds from other markets or burden (tarried es our -4 here had ac satIs- maid ammo a credit strain either by attruotlac bg thro?sing off upon other mrtets a portion of the banks. At the beginning of the Loropoan our, the elastomers of some of the larger Uwe York institAtions, findi4; theswelwes out off :'row., their ioudon ore- dita sought similar credit facilities in flew !ors. Ravin; just reoeired aathori.. ty to aaoept bills, these institutions promptly adjusted then uelvee to the nes oo4ditioas, Zhe kind of bills stunk they bed latterly bass belic and maading forward to London for motsptanoe, that{ nowasooptod themselves ander spealial arramLAments. Z..le bills were sold in the United 'Antes and the beglanince of a discount marketwise" established. In :iew York only but a donon national banks, state bones, trust oompanioe and private bankers hove thus far asoepted bills in substantial volume. although $1 aver Is seestambly inareasiag. A few beaks in Heston. Ibilatel. phis, Nee Orleans. Jherleeton and elselhers are also taking adsontamo privilege, of the me under preeeet abenrual seaditioss some beaks have proferred alines direct advanoee at coine rte to aooeptint; fur the smaller commission of 1 to ait per annam. jany of them, dories the proosat period of surplus reserees and relative eoaroity of loans, have ruralised their eau adeeptenees from their embalmers. - he emoAnt of bills actually offered is the open narget has been reduced and dealings in then somewhat retarded by this practiee as well as by the austere whioh soave Unica have of offering their amseptanoes direct to the Federal Newry° Blink. in vies of the desire of eederal reserve beaks to ac- *emulate a substantial ?ammo of eeeeptanoes to oover oleratina espouses, tLe oustom has net been disoonraced, but eventually, if we are to have a really open market, dealings meet not be direst between the awe/Alec bank and the parohaser of the bills, but must be eonduoted through the medium of brokers in the open market, juAt as in the oase of securities, cotton, 'Wheat, or other commodities. A present throe or four brokers in raw York have interested Ciemselves in aoceptanoes. But the oomnissions aed volume are so small and the rate om aocevtanoes la so low, stood for oevern1 months at about 2.; for price ao- oertencee ooverinc imports or exports, that the, look :eon their acooptance dealings as very vrach of a side isous. Two total volume has probably not nueb as. needed 420o41),,i4J. to ,1;15,0-34J)). at at time. :Ace :Mite loss nuthori7e 6tato institutions to acoopt for domestic as well as forelon transactions and a oonsiderable proportion of tho total volume of aooepteee is oomposod of bills based upon tbo movenent or storage of goods within the country. It is to be hoped that national banks will soon receive this privilege as well, and that their domestic aeoertanoes will substaitielly swell the volume of bills now =serest in the market. 1 t has been raxested that the relatively small volume of olooploome Wants whioh has been availed A', is perhaps a reflection upon the eatorprioe of Alltriallai berms, but I as satisfied that even under the exoeptiOnal opportuni- ties ago poseallias this has not bees due to aoy unwillilless or lace of eater 1 prise on the part of the banks, but to far pore fundamental difficulties god obstacles quite beyond their cortrol, of which I vill mention a fee of tho core im2ortant, In the firet place, but few, even of the lame banks, he foreign oenzloction suffiolentl; extonnive for the prompt Oevelopment of the use of their credit facilities in large volume. .second; uith but fall excolti:Jns the boyars of bills cwicinating in foreign countries are ;lot (;cr not knew 4hother tie discount narket in New York is u permnent or osly Voce of :merican tomporaVy or which of me, gsaticiabb bank timazasauntria=naers-n-tni=ramaapitine the multi- acceptors. it ranks us -print,' ..7W =Aurally prefer bills drown in a currency recoguised as the starilard the world over, to bills drawn in fl currtncy relatively new iu International transactions, and conmegnently do not qUOtn tia5 low rates ou collar as on sterling Figurine emehange in dollars is new to thin, r.nd the conversion of prices into dollars thnyur.jh tho nedlem of sterlinc is often an unfavorable proven., Zhirdg besides- this natural reason, there is a patriotic reason as well, for the 1-... met ar4 tweet Ilportant of the foreign trade hr,nke operntinC outside of :lurope are nrrlish owned, with hood otfloss In London, an' t!Afir in- fluonco may be counted on to preserve for London and the sterling bill their primacy in international settlerorts, .:hey tic not look with favor won the entrance of a strong- conpotitor into the field. fourth; This feeling is no loss sarong In London placos of the earth, the distant The Joint stock banks and the accepting houses there, whogRit ri,t3ea tv.vo even the sterling bill the Lame no desire than In highest laternationra currenoy, boo zuy part of this business. rifth; 41=0 (loll/Clay of bills to their destination being fully as inort=t for 41-4r currency as the prompt ocalvery of foods, the collar bill is at a disadvantage compared with the etorlinv bill in every place In which the rail conrunic%tion with _:41:3ade reticr:. Is not actual to the nail cocniondmAion with Sixth; in distant countries like the Orient and south America, es:coo:Italy while sterling exchange in in the present fluctontlmr condition, another consideration militates alai sat the dollar bill, rZhe nurchaser must :Uwe not only the usual tiro, interest .rld other f,..ctore attaching to any bill, but in the case of the .ollar bill. unless the movement to and from .inerica substantially bishanoss, h, mist MIAs* ale e the probrible coot of transferring the pronged* of the bill from Raw York to London, for :omien is the settling ommter sod it is afore he wants his functs, not in Now York, ton th se and other obstaclos have b' en gradually Lessened and ovrroome we Mould be in a position, like itwiand, to flounce not only our own foreign trade but the foreign trade of other countries as well, Naturnlly, however, the development will follow the line of twat rusistance and the first be concentrated upon financing our own foreign trade, Jitcavr4. mat promos Wassis She removal of these obstacles to the devoisp. rent of a discount market have sianteen months of the war ant the Federal Remorse System brought about* first, an enIaraement of our banatng power anticipating over a decade of nomnal growth, which, if retained after the war is aver, should permit larval credits to be extended in aid of our foreign trade. aecond, a volume of bankere' acceptances which, however modest, would normally have taken years to create. :bird, a beginning of the establishment of American banks and bninches of American baaice in foreign countries needing capital, primarily in South Allelic& and the Orient, and a movement in eoneress to authorise the chartering of foreign trade banks and permit national bante to hold their stock. he bationsi City lianas of Sew 'fork has established several branches in South America and acquired the international &inking Corporatbea with several branches in the °Mat. Private bankers in Uow York have organizod the Uercantile Jana of the amerioaa to operate in Central an :south America. aourth, a realisation by our banks aad bankers that part of their vast resources, hitherto devoted almost exclusively to domestic development, on and should be permanently alai profitably employed in aeveloping trade sand financial relations with debtor oountries abroad. Fifth, a beginning of lending abroad, the aggregate loans for the year 1:45 huvine been nearly a billion dollars; ana coincidently therewith the re- purchase during 1915 of our securities from abroad to an extant estimated at not less than a billion dollars in addition. Cixth, the organization of the American international Corporation to facilitate investment in (Ina tide with foreign countries. Seventh, the adoption by the loaoral reserve banks of the policy of 1 stabilising the discount market by buying bills freely at low raters. 2he progress is undoubteely substential, but as yet neither the volume nor the nur'ber and eines of parties interested in the discount =arkst are sufficient to make it either real or stable. :low can further progress be made and the volume increaeee until a real market is developed! One sometimeo hears as suggestions that our bank' might accelerate it by compelline their customers to teke our dollar credits houghtfal Instead of continuing to provide them with sterling credits. bankers know that this is neither practical nor desirable, that nothing is so elusive and uncampellable as credit, anu that our Uiscount eerket can be developse only by service and merit and not by pressure. . ;e must proceed in developing the discount market by rweeving ob- staclee which now prevent its growth along natural lines. Our importers can help by opening dollar as well as sterling credits end encouraging the use of the formor vhorever they are as cheap and available as the latter; by a greater willingness to extend credit to foreign purchasers; our exporters our investors by studying the opportunitiee far extending lei;iatjjag credits to countries with which we desire to increase our trees; our beakers, either directly through branches, or indirectly through foreign trade banks, by extending short time crelits in such eouetries and by buying dollar bills there on teres as favorable as those which sterling bills enjoy; us quick and steady mail service; our transportation cempanies, by giving our federal reserve banks, by maintaining as low rates of discount for dollar bills as market comditione justify; and our national and other banks by eerrying as a secondary reserve such vaiume of billy as the earket develops. a TO FOAMM now co L19 to our subject, the relation of the discount market to foreign trade. ;i.hon we talk about extending our foreign trade what we usually have in mini is our exports; and our efforts in this direction are largely devoted to increasing our exports to distant debtor countries like Fouth America, the Orient, British colonies, r.nd others. To retain the far larger markets of creditor countries in l'urope, no lose care and effort is required, Nor should we overlook our imports as well, ?rade, in the international sense, implies the exChange of commodities, and our imports must keep pace with our exports other- wise we shall have such unwieldy balances as those we are now creatitc which only the stress of war enables us to mintain. The development of a discount market in the United `.states has a more direct relation, perhaps, to our imports than to our exports, for it will enable our importers to furnish letters of credit abroad more cheaply at times in dol- lars than in sterling. Heretofore our iorters, unless large enough to maintain direct valet/one with a London bank or accepting house, have had to procure their letters of credit throud; a bank in this country which has naturally charged a corral usion for guaranteeing the credit in addition to the corasiesion charged by Landon for iasuing It, thile the prospective course of exchange will always bo the controlling consideration, the Collar credit, when it can bo availed of, will often reduce the coat to the importer, will seouro for American bankers tho comm!ssions connected with it, and will add much needed volume to our discount market, 4ith exports to countries or purchauers not demandinf; credit from the seller, and able to furnish a banker's credit against which our sellers may dram the situation is substantially the same, `.ugh purchasers in foreign countries will gradually establish credits here and use them whenever they are cheaper than starling or other credits. The London discount narkst =slats primarily of bills drawn to finance foreign trade, and the develolanont of our discount narket is likely to bo along similar lines. Therefore it boars a direct relation to our foreign trade. ant by itit is not in itself a aanacea for our foreign trade problems, nor will it ven self/stiamlato foreign trade expansion, of the name without foreign trade; -e should have no discount trarket worthy but for years we have had a vast foreign trade without any discount market whatever, The discount nnrket is a tool whereby we may facilitate and finance at home our foreign trace, a an international medium whereby the ebb and flow of credit between nations may be equalised. Through it those methods will gradually evolve which are best adapted to financing our foreign trade, and foreign funds will be attracted hero to relieve periodical credit stratns. Just as the Federal reserve note was designed as a safety valve in currency strains, so the discount market was contemplated by the Reserve act as a safety valve in credit strain, enabling us to exert son e control and regulation of our cold position, While its development will be accelerated by the growth of the very trade which we desire it to facilitate, its development seems likely to be accelerated even More by the establiehnent of the kind of agencies before referred to, through which the extension of both short and long time credit may be made or encouraged in countries needing it so that in time we may becorm an important settling center, like London, towards which funds are always flawing and on villa collar ozchange in everywhere as current as sterling. The permanence of our position as banners for our am trade will depend largely upon the Mill with which we create facilities at leant equal to those enjoyed by our competitors, and upon tho assurance which we can afford to the world that a bill drown in (tellers for acceptance by an American bank, cnn be converted into cash in any part of the world with uny bunk in the world, either american or 1 foreign owned, at rates of exchange which are stable and dependable and upon the like assurance that such bills, when accocted, can be converted into cash here at rates at least an low as those prevailing: in any other money centers of the world. rii,erve 8,40 Mstric040.2 i-4-0 MR. 6TRONG: Mr. Auchincloss, and 4-Minute Men: A After hearing Mr. .curdy, I have a feeling that the battle is about won, but I don't want to admit it because we might infect ourselves with our own enthusiasm that, as a rule, may have other purposes than our own infection - so to speak. Gentlemen, your task undoubtedly is to create the foundation for the actual work of selling bonds. Our great organization of salesmen in this dis- trict - about 15,000 people - is going to work on ground that you are to prepare. They know the magnitude of their task and they depend upon your preliminary work to make it possible of accomplishment. I am going to bore you with a few figures to impress on your minds the magnitude of the task of selling 03,000,000,000 of bonds in twenty-seven days. opponent. It is like entering a race where you don't see your It is unfortunately a fact that most people make their subscriptions at the last moment. In the meantime we are not going to know, at least until a day or two before the subscriptions are closed, whether or not we have succeeded. We will not know whether we are ahead or behind in the race. We won't have a sight of the other contestant before the race ends and we have to race at full speed every minute from the start if we are to get there ahead of him. Reduced to dollars, we have assumed in this district the burden of selling one and a half billion of these bonds. Our minimum quota is nine hundred million but we have set the mark at a billion and a half. It is an immense undertaking. an issue of 8,872,000 bonds. That means 462,500,000. dollars a day. The two billion of bonds sold last June required If placed end to end these bonds would reach from New York to Chicago anti a thousand miles beyond. If placed one on top of the other they would make a pile two miles high and would weigh 237-1/2 tons. figures may seem ridiculous in a way; actually selling the bonds; These they have no relation to the task of but if you could see them in a pile as described and realize what a task it meant to persuade people to buy that many bonus you would understand its immensity and understand that it requires all our energy. Now a word about the legal basis upon which this service is rendered to the Government. For a great many years our Congress has provided in every issue of bonus authorized - those isuoa at the time of the Spanish T;ar, those for the construction of the l'anama Canal - in fact for all issues - Congress has provided that they shall be sold by the Treasury Department by popular subscription without the deduction of bankers' commissions. No syndicates can be organized to make profit on the transaction and Congress has allowed us one fifth of one percent out of which must be met all expenses. In 1913, when the Federal Reserve Act was passed it provided that the Reserve banks should act as the fiscal agents of the Government. Consequently, the duty has devolved upon the Reserve Banks of organizing these campaigns, enlisting volunteer workers, etc., and to get the work done we have relied entirely on these volunteer services as patriotic aia to be rendered to the country in time of its need. I do not hesitate to say that that service is vastly more effective than it would be if paid for. It has been proved in the course of the last six months that we never could have accomplished the things that we did accomplish through paid organizations alone, and some of the bond houses of this city have urged us that no arrangement be made to compensate their salesmen. I justify have mule this statement to,the claim that this army of people is working, through the Reserve banks, directly for the Government as volunteers. 1 understand that you are all good speech makers, and .1 have tried to put myself in the position that you are in when you face your audiences, and puzzle out just what is best to be said regarding bonds. In looking over the last circular (i17), it seems to me the ground is fully covered, with the possible exception that as you are addressing a great many different kinds of audiences and as you have a great many different kinus of speakers, there must be a great many different kinds of speeches. Some can speak better on one subject than on another, and one auaience may be more interested in one feature than in another. -3- It in fact must be approached from a great many different directions. tried to sort out what appear I have to be the strongest and what the least important arguments. Now the natural thing for a bond salesman to do is to crack up his particular article. campaign. But that is not going to be an important element in this Everybody recognizes that the bond of the Government is good. The submission of complicated statistics about the Nation is not going to help sell these bonds. Furthermore, I don't think the terms of the bonds themselves, the rate of interest, the fact that they are practically exempt from taxation, that they are convertible into a later issue, etc., would prove a very important element of your address before an audience. It is important rather to the man of very large income to know what interest he is going to get - and he generally makes it a point to secure this information. The terms of the bonds should be simply and accurately stated. But there are some features of this loan that must appeal generally to everyone, rich or poor. The one that possibly can be submitted to the more in- telligent audiences is the meaning of the War. I am not a 4-Minute speaker but to certain audiences I should think the following would make an appeal. Four hundred years ago the Anglo-Saxon race received the first great bill of rights upon which their personal liberties are founded, when King John of England signed the great Magna Charter at Runnymede. For two hundred and fifty years that race in England has been engaged in building up constitutional government. the beginning, the foundation of our personal liberties; It was the foundation of the liberties of the English speaking peoples throughout the world. It was be- queathed to us one hundred and fifty years ago by Great Britain, and for substantially four hundred years we English speaking people, and those from other countries whom we have adopted, have been developing our institutions based upon that foundation of constitutional law. For forty years, since the war between Prussia and -4- France, a military autocracy in Germany, filled with lust for power, has been building up a great military structure on an entirely different theory of personal or autocratic government, and now they have come into conflict - so the question is - Which is going to win? That is the greatest problem the human race have ever faced - Constitutional Government against personally organized military yet The American people do not realize the government, with the Kaiser at its head. immensity of the stake. The subscription to these bonds is simply the beginning of the contest, so far as this country is concerned. That is one view your audiences might be persuaded to take. Another theme is pure, simple patriotism; that is the narrower view of the protection of the interests and ri6hts of this country. assailed and outraged and we are defending them; They have been we are doing no more than a father does for his family in defending the thing he values most in the world. Another appeal that is going to grow stronger, is the appeal in regaru to these boys we have sent abroad. many families in this country. That is an appeal that will now reach a great My view of it is that the risk we are imposing on these boys who are going to France is susceptible of mathematical calculation. The longer they stay the greater the risk. the risk. If we can shorten their stay we shorten This appeal in regard to these boys I find in the West is taking hold very rapidly and I would not hesitate to use it to the limit. Right here let me say a word about addresses to those whom we generally class as immigrants; those who have come here recently, who don't understand our language perfectly, or the children of those of foreign birth. ,You will agree with me that most of this population from abroad are people who have grown up under conditions necessitating industry and thrift to a very much greater extent than is required of those who have lived in this country for many generations. They bring to this country a great asset in bringing the traits of industry and thrift, but they bring another thing that has to be combatted - and that is a very natural -6- suspicion of their new environment their money; they are also suspicious and timid about many of them were victimized when they first came here. we overcome that? How can A great many of these people hardly know that we have a gov- ernment of any account. Many of them either have been engaged in military train- ing or have come to this country to esoape military training. They had a close contact, as a rule, with their government in the country of their birth. In this country they have very little contact with the agencies of our Government. Those who dwell on the east side of this city are conscious that we have police in the streets to prevent them from doing wrong or protect them from the wrong doing of others; they are also conscious of the fact that we have a post office where they can send or receive letters; Government. beyond that they know very little of our These people can be brought into direct contact with this Government and can be made citizens for the first time by a very short process - by asking them to make an investment in their new Government and then they will be conscious of the fact that there is a government in the United States and they have a part in it. They can be approached in a way that will appeal to them by informing them that the Government needs their help. They have not known that before. Repeating what I recently said at a meeting of ladies' organizations, it would be vastly better for this nation if we could sell three billion of these bonds to our 30,000,000 foreign born citizens, than to sell thirty billions to three million rich Americans. It would make the former better citizens and strengthen the country. I think this thought can be enlarged upon with audiences of suitable character. This sale of bonds is an appeal for help which our Government is really making, It is making that appeal to your organization and to the 15,000 people in our organization and to everyone it asks to subscribe to these bonds. Let us just analyze that appeal for help and see what it means, and let us keep it ih mind all the time in relation to our participation in the war. I was in Europe lastyear and saw myself what horrible suffering was imposed upon the people over -6- there. I have seen women in the streets of :earis during an unusually severe snow storm - poor women, late at night, sopping wet, cleaning the streets; driving the slush wagons and shovelling the snow, and almost all of them had the little strip of black crape around their heads. I attended a re Osption in London and, in talking with some English ladies, when asked if I heard any news, told them I had heard that an English war vessel which I named, had been sunk in the North Sea, and all but two or three on board lost. around and went out of the room without a word. One of the ladies turned I was told by another that her husband was second officer on that boat and that that was the first news she had had of the loss of his vessel. On every hand there is suffering, and the cry for help. There are countless millions of people over there that have been watching our country for three years to see what we were going to do. That has been their mental attitude. I saw it in England and in France and realized what was in the back of the mind of everyone of them - Are we going to get help from America? Now we have started - and I think we have started under auspices, and with a motive behind our entrance into this war, which will mean an imperishable glory to this nation - we are doing one of the greatest things any nation ever did, to send an immense army three thousand miles across the water to join hands with those suffering people and to help them. There may appear to be selfish motives behind it; protecting our rights; we surely must be but don't forget that there are over one hundred million people in Europe who feel that we are in this thing to help them, This army of workers in the United States, all these subscribers to the Liberty Loan, you and I, in fact, may sometimes wonder why we do it all. What do we do it for. I tell you if you could go to Europe and search the hearts of those people you would find yourself repaid, for those anxious hearts are filled and overflowing with gratitude for what you are doing. I am a director in an organization that for the last five years has studied the Here in New York we run up against them continually. foreign born. a gathering of Russians, Austrians and Italians. move them. I spoke of Russia; out enthusiasm. I thought I needed something to of Democracy in Russia. I wanted that. we had no personal aims; German people, but their leaders." Of course that brought I wanted to warm up the audience. something however that surprised me - I said to them; selfishly; I addressed There was "We entered the war un- we felt that Prussia was our enemy - not the I spoke of these facts. I told them we entered the war unselfishly and that unselfishly we were going to win the war, and I was surprised at the enthusiasm that remark brought out. for liberty; Those men were here they had suffered more than we can realize from the terrible autocracy of their native land. out his police book. The man in Austria is not allowed to work with- He comes over here and is free from all that and liberty be- comes a real, a material thing to him. If we play on that interpretation of the word liberty we are going to reach such people as this. MR. STRUNG; portant things I find I omitted in the course of my remarks one of the most imI had it in mind to say. You will find, if you read the state- ments made by Secretary McAdoo before the Ways and Means Committee of the House of Representatives an incident which he described which is typical of thousands of similar ones which occurred during the last loan. He heard of the case of a subscriber to 41000. of the Liberty bonds who had asked the bank where he had made his subscription when it would be necessary for him to pay the interest on these bonds. That man had been asked to subscribe 41000. to the Liberty Loan and he thought he was giving 41000. to the Government and paying interest on it besides. We have got to be mighty careful about that. It must be told to such people that they are buying the obligation of the Government of the United States; that it will be repaid when it matures and that every six months they will get interest on it. It is amazing the degree of ignorance or stupidity that is displayed; 1116, -8- ignorance of the fact that the United States has issued bonds. It is important that the people be made to understand that they are not giving their money away. They are getting something which is worth just what they pay for it; which they can sell and if held will be repaid with interest when due. I want to say a word of appreciation for this meeting. more interested than I in what has been said. couragement. No one can be It is the greatest possible en- Mr. Stone, the head of the Associated Press, once said to me - "The most influential people in the United States are these news boys we send around gathering news. They make public opinion;" makes false public ppinion. they make sometimes false news that You gentlemen are going to make the public opinion required as a foundation to sell these bonds. Your enthusiasm makes me feel at the outset that we are going to be successful. MR. TaADWELL: The bonds of the last issue have not yet been delivered. I know of one case where ;50,000 worth of bonds held by a savings bank and where it is considered questionable how many subscriptions are good today because the United States Government has not delivered the bonds. not fill the bill. It is the duty of the Federal Reserve Bank that these bonds should be delivered and distributed. bank in New York. The delivery of certificates does This is what has occurred in every savings of efforts by labor in sasses of that yrdinartly produced and etvloyed. priors rose and expncion resulted, and now the therefore, 1l this empaniet neution is - level, both of :mato of prodnet and of bank credit, be her -after maintained and be permesant element in the world's eaonomio structure, or mat it again thrift to eigthiss appireashiag its former terms. 01 Is can hardly escape the conclusion at there mas .. be some shrinkage is predmetion mod pries' bentasne there will be a shrinkage to demands Ism* mad the morld'a chip)int; were to be restored in few years. it could not possibly mitre, so vast a calmly of goods and of enemy SO ems motive prrorcnti n of the war. vireo if devastated raktuired for the is most iiftertsting. in fast tacit vitally imeertent to the interests of men of affairs, is to get semi fair Appraist..ent of the processes which are nor beinc est in monies toward re-establishnont of anything approaohin6 for er prim! l*vols, wad some medorstamdieg of the speed rith which then preessees will operate.. flare are boo NM fasters of uncertainty to Justify more thee a guess to be made: on this soars. Nash imdeed appends upon the extett to which the aonfeinne at Versatile(' will undertake to deal with imponoxio affairs, and the terms up_ r. hioh they or dealt with. very great deal &speeds, in this country, upon the extent to widish we build up international relationships in oCinneret and Tisanes such as will enable in vita safety, to ontend credit and to export heeds. It is axiomatic that bowies is the skepiost trade to oonduet in a maShet where priors are rising, and one of the most difficult is a 'whet where prises are falItn;. rat this statement applies tr all trades. of daelimin primes and liquidating bee* goodie, it Ulm are to have a period mad be veil that .!* spirit of optimism so shosmeteristio of the Amerieem people should net Lead them to spesela tion and otertreding. ihmm oleos have been foamed to to higk 'Limas lbw beak credit blooms enheneteds it is sot only the 4older of securities who Mode that his sleek in twee* essomes nnliquid; it is 1usssitse the tri r oh ants and it is at these t Imo* rith the world's financial future as obscure as it is at Jensen% and subject to influences unique ie history, it is obviously hasarot,es to attempt definite predictions. It is probably safe to assume, however, that the nagnituRle of the readjust:mutts to be *posed upon time world from now op, may, to some extent bu maal.ureed by the asositato sad ehotraoter of the forces weigh have brought about itrouut4 t vaio conditions. Prise ehengee, both ae to material, and labor, and eredit reatjuttnents vhioh amt acoompsny obarwet in the price level, are the fundamentult of the situation. Amterinis donfumod in thee war and the labor employed to predate them rep- resented to a great =Sent (and more in tole country Wan elsewhere), an enlarged prOdootion or geode over that of peace times sod aerreepuediall3, a larger working force, or longer hours of labor, or both. ':ho insistent eompetitive demonds veTring opvernments to procure these goods, resulted in rapid SIAVUnaceio in erica,/ and labor, and stimelsted the emissive production. are the wbooidteaveta" of business, as Jae banks of We world yid/ reeord there skaVsinoolk in the krloo Level toe torn of expansion or inflation as the case iJray Ca. Theoretically, had it been possible for people to so recidoe tiieir demands MuKin the worla's normal produotion and upon the efforts of labor, so that all the materials and services consuoed and employed in the rar work merely took the place of 'hut AIMO uses normally aonsumad In time of pease, there voold nave been no substantial increase in the generl prise level and nv ounsteeruble esi4oulon or inflation. the war vas conducted by am enforced mot toga sec met the, eau.; stimulated proemetion of materials end that debts become difficult to pay, and sometiolos oa't not be paid. And if that condition prevails in Europe, their price level may fall more rapidly than ours. It will hardly be safe for us to expect a continuance of our past abnormal volume of trade; but on the other hand, by substitution of normal exports for abnormal war exoorts, the industry and commerce of the c untry should be able to readjust gradually along the lines of least resistance, Our enerur should be directed toward mac tine the &r ends of Europe for clods viecti they can not produce they selves but hich they urgently need in ordo production and transportation in motion. will be no to start their own machinery of It also seems safe to predict that there reat surplus of credit for speculative operations, whether in securities, commodities, real estate, or anything else, so long as the Government is a heavy berrower, and so lon as the reserve banks are lending the immense :.tims which they now are to the balks f the oeuntry, which loans, naturally, should be gradually repaid if Our central reserve reservoirs are to be restored to anything approaching their pre-war conditions. Sueiness men and banker in the United States wilinnot overlook one factor in our situ tion whion is so sharoly in contrast with conditions in the great nations f Europe, and which should enable the=.; to proceed wLt:, confidence in undertaking conservative and non- speculative b4sinese ventures; end thatiie the fact that this oountry is still the great reservoir of credit for the world - our financial position being very much less impaired by the war than that of any other of the great mations. A reasonobl; economy by our Government and by ou citizens and a sound tax policy will rapidly reduce the war debt; will reduce bank borrowins; and reduce the borrowings of Individuals from the banks. All of the credit retuired fr.r to develop Dent of new business enterpr ses ono. the extension of old-established enterprises is ben and will be available to finance our own trade, doestio and foreign, as well as that of other nations, if we do no of extrova once. lose cy, heads and fall back into our old ways