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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.


.'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.


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;

It do os not lase the funds of the aneeptor;


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


Tbs discount houses sloe assist in the diatribution.


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

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.


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 market,

what different angle;


approaching it Mtn a some-

the acceptor who pate his aoceptiag commission;


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
and tie discount house, whose position nay bo like the

bunk, that of an inwostor, or like the broker, that of a

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,


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,


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,


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


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.

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


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

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


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

- 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


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


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.


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


or which of

me, gsaticiabb

bank timazasauntria=naers-n-tni=ramaapitine

the multi-


it ranks us -print,'

..7W =Aurally prefer bills drown in a currency recoguised as


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


besides- this natural


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


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,


tic not look with favor won the

entrance of a strong- conpotitor into the field.

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


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


of foods, the collar bill

is at a disadvantage compared with the etorlinv bill in every place In which
the rail conrunic%tion with


reticr:. Is not actual to the nail cocniondmAion with


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

.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,


however, the development will follow the line of twat rusistance and the first

be concentrated upon financing our own foreign trade,

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.


bationsi City lianas of Sew 'fork has established several branches in South America

and acquired the international &inking Corporatbea with several branches in the


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


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


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;


our national and other banks by eerrying as a secondary reserve such vaiume of
billy as the earket develops.


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.


by itit is not in itself a aanacea for our foreign trade problems, nor will it

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 settl

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

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



Mr. Auchincloss, and 4-Minute Men:


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.

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.


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;


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


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.


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.
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.


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


Now the natural thing for a bond salesman to do is to crack up his
particular article.

But that is not going to be an important element in this

Everybody recognizes that the bond of the Government is good.


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.


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


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
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.


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


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 th

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.


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;

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

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

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



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.


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;

I thought I needed something to

of Democracy in Russia.

out enthusiasm.

Of course that brought

I up the audience.
I wanted to warm wanted that.

something however that surprised me - I said to them;

we had no personal aims;

German people, but their leaders."

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.


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

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 is amazing the degree of ignorance or stupidity that is displayed;



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.

No one can be

more interested than I in what has been said.

It is the gre

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.


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


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


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

rat this statement applies tr all trades.

of daelimin primes and liquidating bee* goodie, it

Ulm are to have



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


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

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


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


lose cy,

heads and fall back into our old ways

Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102