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o-t'x'X, N, J.,
JAx, 0lA-l* ^ *,

X 5c X.

I come before the bankers of the Empire State and the Metropolitan
city with some trepidation, but with all confidence that you will deal kindly with
a country banker somewhat abashed in this presence. He is so new to official
responsibilities as to feel profoundly modest about his justification to intrude
upon your time and attention. I am glad of the privilege of corning to you, and
from the bottom of my heart thank you for your generous greeting. It is my wish
to learn, not to instruct; and I estimate highly the privilege of learning from
men who largely represent national leadership in the vital function of economic
This has seemed an appropriate time and place to speak of inter­
national exchange in its relation to foreign trade. I venture that it never was
so important as now, and that the wise and practical solution of its problems
would represent one of the longest steps toward the security of human society.
At the beginning 1 want to say that in what I shall suggest I shall
speak for myself alon&. I assume all responsibility for the outline of a program
that I am about to present, making no effort to commit any political authority to
it, or to lead you gentlemen to assume that it comas to you with the indorsement
of any fiscal agency. I offer it in the belief that it is worthy of your con­
sideration, and that whatever will direct earnest thought to this question, will
at least be of some value.
In a time when international exchange is so vital not only to our
foreign trade and to the people throughout the world who have need for our
products, we must take the broadest view of the relations among money systems.
Our earlier ideas about exchange have undergone some modification.
The time was when the movement of gold in one direction and of products in the
opposite was. accepted as the assurance of substantial stability in the relations
of currencies. But today we find our own country receiving geld in such quantities
as to threaten us with gold inflation, while there is not a satisfactory compen­
sating movement of our products to the countries which are sending us the gold.
WO are accumulating more go3d than we need, while other countries, because of
sending us their gold, are weakening their power to uphold the gold standard, to
maintain an assured ratio/.of exchange, and to buy from us what they need to use
and we need to sell.
There is not that freedom of commercial interchanges which in normal
times is the great equalizer and leveler. The situation demands attention lest
the gold standard be gravely impaired; and so I come to bespeak your earnest con­
sideration for the problem. I want you to be sure that in every wise effort to
deal with it you will have the fullest support that the national fiscal
authorities can give.
After the civil war, our own currency was impaired by reason of
paper inflation. Other countries had drawn from us much of our gold, and had


tnereby been able to establish the metal basis of their currencies more firmly,
while our own had lost that foundation. It was obviously sound policy, for us, then,
to deflate, to resume, to lift our own to the level of other currencies. We did
resume specie payments; we did it fo soon after the v/ar's end, and despite the ex­
istence of so great a debt, that it constituted a striking demonstration of our
economic capacity.
But the situation is now reversed. We are not only the great credit­
or nation, but we have put the reverse on the "Crime of *73" by making ourselves
vellnigh the monopolists of the world's gold. There was a widespread belief in
that earlier period that a too restricted supply of gold was distinctly to our dis­
advantage. Some among you will possibly recall that a quarter century ago certain
gentlemen anticipated dire consequences from a drought of gold, and later were sub­
merged in a flood of that metal. Somebody suggested then that if Bosh, had advo­
cated the construction of irrigation works instead of an ark, he would have proved
himself almost as good a prophet as Mr. Bryan. However, to be fair with Mr. Bryan,
most of us were quite as amazed as he by the developments that left him standard on
the iirarat of Sixteen-to-One. The truth is that none of us is very dogmatic nowa­
days about these questions; and in this is Justification to hope for good.
Just imaginative souls were rushing two generations ago to Cali­
fornia and Australia to dig gold. Thomas de Quincey published an essay on Cali­
fornia, which solemnly warned that if they kept on digging gold, it would presently
become degraded in value, useless as a monetary standard, and uninteresting even as
an enhancement of milady's charms. Be Quincey foresaw the broak-down of the gold
standard, pointing out that continued production of gold a t .the rate then attained
could only bring cataclysm. Yet his fancy never approximated the huge production
that was actually attained a few decades later when Africa, America, Australia and
all the rest were turning out gold in their full flood. He was sure that gold
would be debased and demonetized by the first rivulets; yet in fact a deluge was
absorbed with no more effect then to establish gold as a wellnigh universal
There are similar astonishing phases in the history of silver- One
mountain in Bolivia produced for the Spanish oonquistadores so much silver that
European economists feared the ruin of money systems. It has been said that the
inflation of money and the excitation of imperial ambitions in Spain, due to this
one mountain’s reduction into circulating medium, might fairly be held responsible
for the adventure of the Spanish Armada, the overthrow of Castilian designs for
world-rule, and the transfer of naval dominance to Britan. Yet the world of today
has forgot the misgivings which that medieval inundation of silver aroused. The
white metal regained its prestige, became the equal partner of gold — and then was
divorced again during the nineteenth century. It seemed doomed this time to a per­
manent inferiority; its price in terms of gold went down, down, down after 1896; —
and then, just when we ware all about to bid it adieu it came back with a rush, and
during the war commanded for a time an actual premium over gold at the "sacred
Prophesy is a dangerous business. The wisdom of one generation is
apt to fall hard afoul the experience of the next. CO may well avoid predicting
consequences from the unprecedented conditions wo see about the world today, but
we will be warranted in studying the experience of other times, for whatever il­
lumination it may shed upon the problems of today and tomorrow. We will be well
advised if we go slowly about scrapping old standards and systems, but on the other
hand we will be wise to consider wherein we might well modify, adapt, and modernize,
the mechanism of credit and exchange.

-3In the middle centuries when the relations among money systems were
less definite and systematic than today, banks of exchange were created in the
Hanseatic cities to exchange one money for another, These banks played a large
part in establishing the commercial importance of the Hanseatic towns and others
which adopted the system. The city of Amsterdam placed its municipal credit
squarely behind the Exchange Bank of Amsterdam, and the institution became a power
in western Europe. Banks of issue were a natural development, for the exchange
bank, when once its faith and credit were established, could put out its own notes,
which were accepted by merchants wherever its reputation was known, and become a
sort of common denominator among different kinds of money.
The wide circulation of these notes, which were not money but simply
promises to pay money, presently brought the goldsmiths of London and the exchange
banks of the continent to understand that it was not necessary always to maintain
a 100 per cent, money reserve, because not all the outstanding notes would be pre­
sented at any one time. So the system of issuing circulation against a compara­
tively small reserve of metallic money grew up; and banking as we know it was the
development of these experiences. Paying interest on deposits vastly expanded the
scope by bringing in deposits of comparatively small amounts which, once aggregated
together, enabled the bank to loan large sums and become a real financial engine.
There is so much mystery about the mechanism of exchange that people
tend to fear international trade in a time of such fluctuating conditions as mark
the present. It is for you banking leaders to tear away the veil of mystery, to
help the public understand. You know that the depreciation of a nation’s currency,
in terms of gpld, is sometimes the proof of determination to maintain its obliga­
tions on a gold basis. You know that the great government and quasi-government
banks, with their perfected mechanism for testing credits and securities0-are sound
and reliable. You know that depreciation of a currency may be no proof that busi­
ness transacted in it is unsound. You know that many currencies are likely to re­
main for a long period at levels which, tested by our gold-covered dollar, will be
far below the pre-war parity, and that this need not be taken as an unmixed evil.
You are familiar with the serious question whether it is going to be of ultimate
advantage to us to have our own currency held at too high a level in comparison
with the moneys of other countries. You realize that the most important thing is
not the ratio of exchanges, but the permanence of some particular ratio. You can
do much practical good by simple educational work to make the community understand
these facts; and I urge you to do that in every possible way.
At the beginning of such an educational campaign I could wish that
business men would study carefully the history of the Amsterdam Wisselbank ox
Exchange Bank. In a t ime when there was an even greater chaos in money systems
than now, it established its own unit of value as a standard for settlement in
international exchange. On the basis of this merely fictitious unit it was
able to bring currencies into a remarkably stable relationship with one another
and with this unit, which was called the Bank-guilder in Holland and the BankMark in Germany. With this as a datum plane, so to speak, in money values, the
bank made Amsterdam the chief clearance and settlement headquarters of Europe
for generations. A study of its operations cannot but impress anybody with the
striding similarities between conditions of that time and of today. Adam Smith,
in his ’’Wealth of Nations”— a work that is quite worthy of more consideration
than it gets nowadays — gives son® illuminating adversions on this institution,
and Dr. yissering, President of the Bank of the Netherlands, has recently p£b~
lislidd an excellent description of its workings, with a simple suggestion of how
they could be adapted to modern conditions. Indeed, the operations of this
institution have in the last year or two constituted the theme of many disquisition

the 'basis of various plans,

l o o k i n g to the adj u s t m e n t of p r esent conditions*

I may frankly state my belief that the efficacy of international
cooperative measures to deal with these matters must in large measure depend
on the hearty participation of the United States. I need not state my rea­
sons for that conviction; you will all know them without the statement. But
1 may frankly tell you that I have not always seen the matter thus. My
present views have been forced upon me by study and observation of the whole
range of financial and economic developments, and of the essential unity of
the world* s business fabric. People who want to feel generous may urge us
to this kind of cooperations on the ground that we will be helping others.
I do not need that unction. I can urge them in all since re ty from the
entirely selfish motive of helping ourselves; but I realize that in help­
ing ourselves we^will also be helping others.
It is possible that a generation of us modern bankers has grown
up since the almost universal establishment of the gold standard, which
has not been sufficiently familiar with the devices for equalizing exchange,
that were employed in simpler times. Adam Smith, after alluding to the
unsatisfactory and uncertain currencies of many minor states, proceeds:
"If foreign bills of exchange are paid in this
currency, the uncertain value of any sum...must render
the exchange always very much against such a state, its
currency being, in all foreign states, necessarily valued
even below ;vhat it is worth."
We have recently seen many instances of this: a country manages very well
in its domestic commerce with its own currency, but finds it wellnigh im­
possible to get that currency accepted in international transactions at
its domestic value.
"To remedy this," continues Smith, "such states
have frequently enacted that such bills should be paid, not
in common currency, but by an order upon or by a transfer
in the books of, a certain bank, established upon the credit
and under the protection of the state; this bank being al­
ways obliged to pay, in good and true money, exactly accord­
ing to the standard of the state. The banks of Venice,
Genoa, .Amsterdam, Hamburg and Nuremberg, seem tc have been
all originally established with this view....The exchanges
between the countries which pay in what is called bank
money, and those which pay in conmon currency, generally ap­
pear to be in favor of the former, and against the latter."
Dr, Vissering, President of the Netherlands Bank, one of the
ablest and clearest expositors of these problems, proposes what he calls
an organized internationsl system of barter. But on careful examination
it will be found that he is really proposing establishment of a bank of
settlement, to use a fictive unit of its own, precisely as the old Amsterdam
and like institutions did. Applying the plan to present conditions, he
proposes a general market in which the offerings of all countries would

be presented for what he sails barter, but which would really be
ordinary commerce measured in terms of the bank unit.
He proceeds:
"How that money has, for those countries, been discarded as an
intermediary, a new intermediary will have to be discovered. For this
purpose we can make use cf a new form of exchange, which we shall call
the barter institution.
"She simplest form will be that two countries set up such a
barter institution between them.
Tak9 Germany and the Netherlands as
an example. Germany would have to prepare a list of the goods she wishes
to buy, and the Netherlands would state the quantity which they would
eventually be able to supply to Germany. Germany would, further, have to
furnish a list of what sh.8 could deliver immediately, and what within a
comparatively short time, say three months to a year, after the harvest
or completion of the process of manufacture. All these inquiries and
offers on eitner side will have to be registered at the barter institute.
"On registration, the value will have to be determined, for
which purpose the mark now in circulation can naturally no longer serve.
The value could therefore, be fixed, for both parties, in Dutch guilders,
or, if one has not sufficient confidence in the stability of the value
of the guilder, a new unit of account can be selected, e.g. fictive gold
mark or a fictive goiLd guilder, which would, in the end, naturally come
to the same thing. These offers and, when eventually carrying out the
deal, the delivery of the goods could then be cleared for their value,
as is constantly taking place in contango business, when dealing futures
and between bankers. Large amounts are thus mutually exchanged, by strik­
ing them off on either side of the account ana only actually paying the
insignificant balance left, such final settlements frequently taking place
between two parties who originally had nothing to do with each other.
"Seeing that the same unit cf account can be adopted for all
transactions, either party is certain of obtaining the full intrinsic
value of the goods supplied by him and will no longer have paper money
palmed off upon M m which upon subsequent re-issue to foreign countries
may only possess a part of the value at which it was accepted.
"Through the intermediary of the barter institute it will be
again possible to advance credit on goods to be delivered at some future
date. Indeed, if it can be reasonably true that the electrical engineers
in Germany will be able to deliver a certain number of machines within
six months, for which machines they have already found buyers in Holland,
provided the silk spinner will only supply the silk, the bankers and other
money leaders may, in combination with the barter institute, render finan­
cial help in order to pay cash to the silk spinner, thereby granting credit
to the engineers.
the electrical engineers in Germany and the buyers of the ma­
chines in Holland can apply for this assistance from their bankers; a legal
form can readily be found and from a financial point of view adequate guar­
antees will certainly be found on which the money lenders can base their credit.
"Each of the parties on either side may then convert the value in the
unit of account of the barter institute into the currency of his own country.
The following example will explain the method in which tnis is done:
"The engineers* production cost is x; on delivering the goods
they will, over and above this, make a profit of y. From x they will


pay the cost of all the raw materials, wages, etc. and y then ultimately
remains as a profit at their disposal* They can convert this y into marks
at the rate of the day, because other persons in Germany will also requirea sum
of y to purchase goods abroad. Should the manufacturers not require marks for
their y, they may themselves purchase so much the more goods from abroad, or they
will on the next occasion require so much less credit from the banker who had
previously granted them credit.
"Similar circulations in fictive units of accounts were done on a
large scale a few centuries ago through the Amsterdam Bank of Exchange, and the
Hamburg Bank of Exchange, the latter only being transferred to the Beichsbank as
recently as 1875* These institutions carry out international settlements and.
clearances in the bank-gui1der and the bank-mgrk with great success, both i ic1 1 *.

« 3ff8asstm*!«ia».>t m w * sMium
settling institution for the whole of Europe for more

than 100 years.

"This barter institute will also be able to act as, intermediary for
new countries which do not even yet possess a system of currency, such as
Czecho-Slovakia and Poland. 'The so-called bills on Prague and 'arsaw are c r-'d
scarcely negotiable on the open market; by means of the unit of account of a
barter institute these countries could ha easilvbe connected uo with the world1s
money traffic.
"If the traders in the various countries take part in this barter
institution this must,, as far as possible, be done voluntarily. The dealers'
own interest will induce them to join for it is obvious that everyone in
Germany and the Netherlands has a personal interest in the resumptibn of normal
Dr. Vissering points out that his proposal has the authority not
only of medieval usage in the case of the exchange bank, but of modern demon­
stration in the reorganization of the currency systems of the hutch East
Indies and of China. But he points out that in applying it on the sccale required
by present world conditions success would only be possible if the cooperation
of many countries, preferable through their government, were enlisted, He
proceeds "only by an extensive international consideration and conference will
the way be open for granting these new credits and for the reconstruction of
the world. And this conference -will now also have to include the neutrals. **
* * * An international conference, on a broad basis, must now therefore oe made
possible, not in the first place in order to lav down terms of peace and
indemnities, but in order to prepare a common action toward reconstruction of
the world. **** The governments of the various countries should take the
initiative toward this end. If for state or political reasons the govern­
ments can not take the first steps in this direction, ,e trust that bankers
anc. leading business men in the various countries will be mole to meet ahd
submit the matter to general discussion, with a view to preparing a scheme of
X ^ave entered thus somewhat lengthly into consideration of the old
exchange banks and of Mr. vissering*s plan because I lame t bought it p o s s i b le to
give point to my own general i d e a , b e employing these q u o t a t i o n s . th e re
have been many s is borations upon the idea o f b a r te r nd of E s t a c l i s . m
a fic ­
tive unit o f monetary exchange. likewise t h e m have beer, nnmerev.. proposals


for developing the exchange bank idea into a wide reaching international
system. A number of excellent European authorities have taken our own fed­
eral reserve system as a possible model.
They have suggested the Central
Exchange Bank, to correspond to our Federal Reserve Board; with this,
they would affiliate institutions in the various countries, corresponding to
bur Federal Reserve Regional Banks; and through such a chain of institutions
they believe it possible to establish a currency of international transactions,
while leaving each country free to continue its domestic operations, to deal
with its debt, etc., in its own domestic currency.
I agree decidedly with Dr. Vissgring that it is not necessary that
such an international trade banking establishment should have the direct back­
ing or participation of governments. On the other hand, I think it might
well be f o u g h t about thro cooperative effort of banking leaders, and probably
more' Quickly.
Two years or even a year ago, I would have hesitated to bring for­
ward such a proposal. Then, American business sentiment decidedly opposed such
international cooperatlong, because it feared they would draw in and drag down
our own superior money system. But the events of last year and this have, I
believe, done away with much parochialism and forced us to realize to what
extent our own prosperity, our own rehabilitation, must depend on the restora­
tion of the world as a whole* We find that we can not live and prosper alone .
It is as necessary for us to sell as for others to buy; as necessary for us
to join|£n extending credits to those who would buy as for them to secure
those credits.
If my proposals seem radical, I venture that men who are most familiar
with present international trade conditions will be least shocked at them.
They know how grave is the situation in the world and how necessary it is to
mobolize the credit of the world to deal with it. They know the suffering and
depravation that are being imposed upon men and women everywhere. They know
how imminent is the danger to odivilization itself if, for want of the courage
to adapt new means to meet these conditions, we shall permit affairs to drift
from bad to worse. They know of frozen credits, of the bottom falen out of
demand, of consequent idleness and suffering among the people. They know of
capital unemployed, locked up in warehouses and factor ies when its potential
production is desperately needed.
You of the" ha&KSlsg and business world and we of the political world
will be unworthy of the confidence that has been given to us, if we dare not
nobly adventure in the effort to rescue the suffering people. This is no
time for the selfish view. He who is merely less unfortunate must not stand
aloof, imagining that by doing so he will strengthen himself still further.
We will not climb up, by using as stepping-stones those peoples and com­
munities who are hoplessly downi We must help them to stand, and to help them­
selves. In war, we learned how magnificently men could cooperate for a great


eomrnon purpose. If we will "but see it,.we have just as great a need for
cooperation now, just as great an end to he attained in the rehabilitation
of mankind, as we had then. Mighty social forces are at work everywhere. We
have seen some of their most unfortunate results in the demoralization of
great communities, Wa have seen that the attempted remedy may be vastly
worse than the disease, if treatment be too long delayed. Our question, and
we must face it soon is shall we treat these conditions before it is too
The world is not bankrupt.
Society has not gone into liquida­
tion. As a whole, mankind has just "pome through an experience that has
proved an amazing, almost unbelieveafle, capacity to produce, to meet ex­
traordinary demands, to sustain great stresses. The things accomplished
during the war consitute the complete proof that in peace the structure
of business will be able to uphold and restore itself. To make people
know these things, to reestablish confidence and the sense of security,
is in a large part the duty and obligation of you captains of barking.
Misunderstood, and suspected by the uninformed, the modern system
of banking has been one of the greatest socialization devices that our
civilization has formulated. It is possibly the most noarly perfect
scheme in economic cooperation that we know. Banks have at times been
persecuted, and even destroyed, to the injury of the public interest,
because it was not realized that wise regulation, not destruction,was the
treatment needed. At other times banks have been accorded too much of the
public's confidence; they have bean induced to inflate, to: spread their
commitments too widely; and this likewise has caused disaster. In most
cases the blame may fairly be divided between bad policies of the bark
and unfortunate attitudes of the public. But on the whole their service has
expanded, their administration has improved, the public's appreciation of
them has grown. It is merest truism to say that without the consolidation ’
liquefaction and unification of credit which banking systems made possible,
civilization could not possibly have supported itself under the strain
of the last few years. And I want to say, in acknowledging the compliment
that you financiers of the metropolis are paying to the country barker
who is addressing you, that I recognize among my audience more than a few of t
the menvwho made possible that mobilization of credit and confidence. You
gentlemen are of the profession which led in drawing together,cementing, di­
recting, utilizing, the fragments of economic utility. These, onee built


ir>to a machine of irresistible power, saved liberty for men wherever
they might live* The concept of economic oneness, of universal mutuality
in interest, was the centripetal power that held the mechanism together
and at last overcame the forces that would have wrecked everything and
scattered broadcast the fragments of mangled, tortured, discredited and
repuciated social systems.
Paying to you gentlemen and your profession this richly keserved
compliment £»i:rfvLd impress an: you your obligation to deal with and solve
the problem of our international commsr&ial relationships* I doubt if
the men who under ’’/ashing con and Hamilton, tradertook the rehabilitation of
our domestic finances and international credit faced more difficulties
than I am thus cheerfully asking you to cope with, I caution you, do
not attemtp to deal with them alone. Summon to your assistance men of every
section, industry and phase of enterprise. Cultivate the confidence and
under standing of those who lead in every department of cur- economic life,:
Po not overlook the tendency of these times to recognise that he who
produces the necessaries of life is entitled also to a generous measure
of the satisfactions of living. Keep in mind that we shall have. 3, stable
commercial community about in the proportion that we shall have a stable
industrial commuhity; and that the stability of industry will be in about
the ratio that the great producing multitude feels assured that it is
being fairly treated and justly compensated*
the profits
taxation in

make no plea in opposition to the deflation of wages, the
of labor; but 1 do say that we mast liquidate rates of interest,
of the merchant, the burdens of the national debt and general
as great, and preferably a somewhat greater proportion.

It has iramemortally been an accepted thesis that you cannot
finance a great war without inflation. Its acceptance means that nations
expand their circulation and credit, in order to make a market for the
securities with which government buys the necessaries of war., It buys
these at inflated prices. Western Europe bought them at three to four
times their normal values. In this country we bought them at possibly
lover prices, but not much lowera
The question now arised-aiic- it confronts all the nations whether we shall reflate credit and currency and require the inpayment of
these debts in a currency restored to something like its Termer buying
power. To do that will mean, that these who hold securities which were
purchased with cheap money will draw interest cn them, and at last have
the -or&heipal returned, in dear money. It means that the profiteer, or
his children, or his grandchildren, will profit by the necessities of the
great crisis. It means that for the privilege of saving our institutions
of liberty we will pay, in economic terms, several times over*
Is our present political and economic scheme,

taking civilized society as a whole, strong enough to stand it? Hie
question has been asked in all earnestness by people who are entitled
to respectful hearing* Jfter all, the world*s producers are the groat
mass of the people; and if once they become suspicious that an economic
or monetary system is imposing upon them unfair and unjustifiable bur­
dens, we can not be sure that they will willingly submit. There is now­
adays too much questioning, too much doubting, a too cynical attitude
toward long-established traditions. The future is likely to entertain
no too good opinion of our generation, which has seen this world calami­
ty. - True, we may plead that we iih e r-ite d it from•the ages; b u t ton:.::row
will have small concern for our explanations. - If we impose unduly
upon its patience and credulity it, may say; "Ho, we will have none of
it. - It comes too high;- Generation after generation, century after
century, civilization after civilization, the wox-14 has been fold that
the mistakes of today may properly be paid for by the children of to­
morrow. We will not shoulder the load.” When that time comes, if it
ever does, this world will face a remaking of institutions and tradi­
tions, such as it has not known in any period of which we have record.
Tomorrow will .feel less responsibility for the mistakes of today than
we may think it ought. Tomorrow may decide that a scheme of things
which has produced so many and so grievous mistakes is well deserving
to be set aside and to he succeeded by some new experiment in human
relation. That new experiment may be for the best, but radical experi­
ments are dangerous and if possible, to be avoided.
Will we save the future from them, or will we invite the future
to indulge them? - I am pleading for policies and programs which will
look into a long and uncertain future with a view to the greatest ulti­
mate good, the least final injury, to all mankind.
We are all familiar with the processes by which inflation of
money and credits, together with the scarcity of goods and services, has
caused a continuing depreciation of money and appreciation of prices.
We have seen the classic illustration, in Cuba’s experience, of how a
country may find itself caught in a terrific crisis at the end of a long
period of unprecedented prosperity- At the beginning of the war, al­
most anybody, if informed that for five years the island would havebigs
crops of sugar and sell them at the enormous prices it actually did re­
ceive, would have said:
* will be in proportion to population the richest country
in the world at the w a r ’s end.”
Instead, Cuba is in great distress, beca.use its good fortune
tempted it to extravagance, speculation, inflation of money, credit and
prices. Yet, if you smile the smile of superior sophistication at little
Cuba, caught in the wreck of its super-prosperity, I will retort that
Cuba and our own mid-west farming country are in precisely the same
pickle. The farmers made money so fast, on the high prices, that "every­
body” did exactly what "everybody" did in Cuba; went to speculating in
farms, forcing the prices higher and higgler, selling and reselling on
small payments, and discounting the notes which represented deferred pay­
ments, Then .the prices of cotton and wheat, and c o m and hogs started
downward on the same path that Cuba’s sugar was following; and our farm­
ers and agricultural speculators found themselves in full fellowship
with Cuba’s planters.

11 -

So we see that the profits cf the profiteer, whether in Cuba
or here, have disappeared. He can net meet his notes, the banks can
not afford to carry him, and both he ana the t>a:sk« are being squeezed*
Pretty much everybody is directly cr indirectly affected and all of
them together stop spending simple because they ha it0 ?3Qthing to spend.
We call it a buyers1 strike, but it is really a buyers1 paralysis, a
clotted circulation, a case of credits congested and "frozen".
The question is, what can we do about it? This brings us
hack to considerations of money, of foreigh exchange, of international
trade relations. We need to increase our exports, but in our new quali­
ty as a gread creditor country, we find it more difficult than ever to
export more than we import. Hie difficulty is increased by the fact
that our money is the best in the world — the most expensive. On a
gold basis, five Italian Lira would buya dollar’s worth of goods from
us. But the lira is so depreciated that it takes more nearly 20, now,
to buy a dollar. Naturally, the Italian wants to buy in a market where
he gets more for his money; and, our money being at the top of the entire
heap, theyare all trying to get things somewhere else rather than from us.
No two money systems have been depreciated in the same degree;
none of them maintains any fixed relation to any other, 'ihey all fluc­
tuate incessantly, adding the complications of uncertainty to the funda­
mental difficulties that grow out of our generally higher standard of
money values in relation to gold. Is there ary way in which, for the
purposes of interna$&§&' trade, something like an international standard
could be fixed, wherein to pay .international balances at reasonably
fixed and permanent rates of exchange? Is it possible to help the
foreigh countries to maintain one currency, with especially sound re­
sources behind it, as a currency of international circulation, regard­
less of the domestic use of the present depreciated moneys of internal
Various projects looking to this have been put forward. In at
least one case, that of Argentina, it has actually teen done, and with .
apparent success; the value of the "fore&gh trade peso" was fixed at a
definite relationship to gold, and of the domestic"trade peso at 44 per
cent of the value of the foreign-trade peso.
But, whether, generally, it would be possible to effect such a
stabilization through independent action of many governments, must be
doubted. The question is an international, indeed a world-wide one. It
would seem that international cooperative.action, is necessary to deal
with it. A&d in considering the possibility cf devising a plan, the in­
quirer inevitable finds himself wondering whether Hamilton did. not point
the way to us. At least, the thing Hamilton accomplished is worthy of
serious study now.
Hamilton, when they were starting to organize the constitution­
al government, was asked by General Washington; w’«7i:iat can ws do with the
immense debt of these thirteen states, and of the general governme.nt as
'’Ihnk on it, and make it the basis of the soundest system
possible," was the reply.

13 That was what Hamilton did. He consolidated and assumed the
debtsi pledged the credit of the federal government — which was better
by far than the average credit of all the states taken individually
and created a great bank and a sound money system* His money had the
elementary virtusgof uniformity everywhere; and that is just what the
world needs now as a condition precedent to resuming free international
trade and exchanges.
I am aware that there has been much opposition to the United
States becoming a party to any such cooperation in the effort to create
an international medium for the purposes of international trade. It
has been assumed that because our money was the best in the world —
the most expensive in terms of gold — we could not afford to become
partners in any international trade banking plan with states whose
moneys wer^ofcdower quality. But I think it possible that, as we real­
ize the discrimination that other nations are compelled to exercise
against us for the very reason that our nfoney is so much more expensive
than theirs, we will be less and less disposed to hold aloof from plans
which might be efficacious if we were party to therm, and which, if
backed by a banking structure based on especially segregated and
guaranteed proportions of the national credit of many countries, might
be found practicable, sound, and workable. For myself, I believe the
plan deserves most serious consideration, and that this country could
well assume an attitude of interest, even of initiative, in behalf of
such a program.
In asking your consideration of this general idea which I have
laid before you, I am moved somewhat by consideration of alternatives
that will require attention, in my opinion, sooner or later, unless some­
thing is the nature of my proposal is taken up. These possible alterna­
tives, if one may-judge from discussions in Ehrope and this country, in­
clude proposals for a levy on wealth, international bond issues, inter­
national guaranty of the German indemnity, the ter Meulen plan of segre­
gating particular property as security for Rehabilitation loans, and
various others. I have been strongly impressed that a plan based on ac­
cepted methods and banking experience would be decidedly preferable to
any of these. This constitutes one of my strongest reasons for urgigg
consideration of the general project I have put forward.
It will be well for us to consider what our position in inter­
national trade would be, if because of our aloofness from such cooperation
other nations should unite without hs, establish such a system, and thus
give esspecial incentive and inducement to international trade among them­
selves, with us left out. There is already a good deal of reason to sus­
pect that the cheapness of their money, as compared to our own, is not
especially worrying some of the industrial countries that most directly
compete with us. They realise the advantage they enjoy by reason of that
condition. American manufacturers who have seen contracts go to countries
with depreciated currencies, and who have realized how impossible it is
for this country to bid successfully in many lines against those whose
money is at a great discount compared to ours, will not indefinitely
close their minds against considerations which look to removing this dis­
advantage. For the sake of ultimate stabilization of the world, of our
own resumption of production, of our field of opportunity in foreign mar­
kets, and of restored political security in countries threatened with
dangerous radicalism, it seems to me that the time is come when measures
of this sort should be given the most serious and generous consideration
by American business men and financiers.

- 13 Hie suggestion I am advancing is not new or novel. It has been
put forward in varying forms by many students of the present situation. It
offers, I believe* opportunity to deal cooperatively with the international
phases of business without getting them involved with politics. If we fail
to keep these two in separate compartments, and to help business independ­
ently of politics, we shall be likely to find business and politics at
length so intertwined that they will require to be dealt with together.
That, I take it, is precisely what this country is determined to avoid, and
wisely determined.
I firmly believe that along the lines of my suggestion can be
found a way to establish a secure basis for international commerce. With
each nation, participating in such a project, free to maintain its own
domestic currency in such relationship as it might choose to the inter­
national trade medium, there would be an ever-present incentive to im­
prove the status of the currency of domestic use, and thus to better the
outlook toward industrial revival and commercial stability. Hiis is a
concern of every nation, every people; it not only deserves, but it de­
mands the most earnest efforts at cooperative treatment; and in passing
the suggestion on to you gentlemen I venture that you are precisely the
right group, aimed with the necessary experience, vision and patriotic
purpose, to lead in formulating both favorable opinion and definite plans,
I cannot but feel that through some such instrumentality we should have
a fair chance to create a m o d e m machinery of international exchange,
measurably independent of the domestic currencies of countries. The sug­
gestion is offered for consideration, criticism, modification, and for re­
jection if it is valueless; but it is ventured with the thought that this
is a time whan constructive ideas are entitled' to attention, when it may
be permitted to offer new methods of dealing with new difficulties, and
When the essential economic oneness of the world has been so profoundly
impressed that there need be no undue hesitancy in considering means to
promote that closer relationship in the arts of peace that is the surest
guarantee against resort to these of international war or domestic revolu­