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PUTTING THE AMERICAN HOLLAR AT PAR ABROAD. S P E E C H OF HON. R O B E R T O F L.OWEN, O K L A H O M A , I n t h e S e n a t e of t h e U n ited S t a te s , May 1, 1918. P U T T IN G THE A M E R IC A N D O LLAR A T PAR ABROAD. Mr. OWEN. Mr. President, on Monday, April 22, 1918, ap peared an ostentatious article with big headlines explaining “ why the Federal Reserve Board allows United States cur rency to remain at a discount abroad, as explained by F. I. Kent.” Mr. Kent delivered this speech before the National For eign Trade Council at Cincinnati. Mr. Kent is in charge of the Foreign Exchange Division under the Federal Reserve Board. He is said to pass on all foreign exchange transactions. In this article Mr. Kent argues against putting the dollar at par. The article, in my opinion, in its argument that the dollar should remain at a discount abroad, is adapted to serve the German interests, because tbe effect of it is to prevent the American dollar buying its full value in neutral countries, and just to the extent that the American dollar is deprived of its purchasing power to that extent the taxes of the American people and their sacrifices in this war will be rendered abortive, unproductive, and useless. If it is a good thing, as Mr. Kent thinks, that the dollar should be at 30 per cent discount, as it is at present in Spain, then it would be a better thing, according to Mr. Kent, to have it at 50 per cent discount, or at 60 per cent discount, and the bigger the discount the better for the American people. It is a “ reductio ad absurdum.” The argument is false and serves Germany’s interest. Mr. Kent is posed in the press as a scientific expositor on foreign exchange and as a man “ in high authority.” I have carefully examined his article, which opens with the following paragraph: T h e c r y o f th e o r a t o r f o r a d o lla r a t p a r t h r o u g h o u t th e w o r ld m a y b e v a lu a b le in t i m e o f p e a c e a s c o m m e r c i a l p r o p a g a n d a , b u t it h a s n o p l a c e in t im e o f w a r , p a r t i c u l a r l y w i t h a w o r ld ’ s w a r , s u c h a s e x i s t s t o -d a y . Among others I have been crying “ for a dollar at par,” as the chairman of the Banking and Currency Committee of the United States Senate. A dollar at par abroad is just as im portant as a dollar at par at home, precisely in degree to the American business involved. Mr. Kent’s advice is injuring America, and thereby serving Germany, and on behalf of the American people— whatever 58830— 18530 2 the good purposes of the advisor— I denounce the advice as hostile to the interests of America. Keeping the pound sterling at par “ has a place ” in Great Britain’s policy. Keeping the India rupee at par “ has a place ” in East India policy, and the United States Senate and House of Repre sentatives passed a bill, at the request of the Treasury De partment, to melt 350,000,000 of silver dollars, among other things, to preserve the parity of British currency in India, which German propaganda was deliberately trying to break down. The advice of foreign exchange expert. Mr. Kent, that the cry of a dollar at par has no place in time of war I shall an swer. and will show the utter fallacy of his arguments, which are so misleading and so certain to injure America. Any man who argues against doing what reasonably lies within our power to put the American dollar at par is giving advice injurious to the United States, even if he be in charge of the Foreign Exchange Division under the Federal Reserve Board. The National Foreign Trade Council needs better ad vice than it got at Cincinnati from Mr. Kent. The United States Treasury needs a new set of advisers, because their ad visers are advising against the interests of the people of the United States, and I am not willing to be silent when this injury to America is being perpetrated. The President of the United States is in favor of keeping the dollar at par, notwithstanding Mr. Kent. The Secretary of the Treasury is in favor of keeping the dollar at par, notwithstanding Mr. Kent. The Assistant Secretary of the Treasury, Mr. Leffingwell. is in favor of keeping the dollar at par, notwithstanding Mr. Kent, and the chairman of the Committee on Banking and Currency o f the Senate, and the chairman of the Banking and Currency Committee of the House of Representatives are both in favor of keeping the dollar at par. The obvious reason why the dollar should be kept at par is that we are compelled to buy many necessities for ourselves, as well as for our allies, of neutrals, and to that extent we must, in making war purchases, have our dollar buy as much as possible, and not as little as possible. Any person of good sense might understand this unless his brain had become hopelessly confused in the tangle of his excessive knowledge as an expert. Let us examine this expert’s advice. The first argument made by Mr. Kent is as follows: T h e U n i t e d S t a t e s , in o r d e r t o c a r r y o u t h e r p a r t i n t h e w a r , i s g o i n g to be o b lig e d to s u p p ly fr o m h e r o w n r e s o u r c e s a n d fr o m t h o s e o f m a n y o th e r c o u n tr ie s o f th e w o r ld c o m m o d itie s to th e v a lu e o f m a n y b illio n s o f d o lla r s . R e g a r d le s s o f h e r g r e a t w e a lt h , t h e r e is a p o s it iv e lim it to h e r a b ilit y to fu r n is h su c h s u p p lie s . I n o r d e r to w in t h e w a r s h e m u s t b e in a p o s itio n to d o so fo r a lo n g e r p e r io d t h a n th e e n e m y . The le n g th o r tim e t h a t sh e c a n c o n tin u e to fu r n is h n e e d e d s u p p lie s w ill d ep en d u p o n h er a b ility to c o n se rv e h er re so u rce s. And Mr. Kent thinks we can conserve our resources by selling gold dollars in Spain for 60 cents, instead o f selling them for a dollar. The simple truth is that to the extent we are required to buy from neutral countries we should control the shipments from them to our actual necessities, and this we can do under the existing law. We can and do control our exports in like man58830— 18530 3 ner under existing law. Great Britain and France do the same. And France, who has borrowed funds from Spain at 7 per cent to meet her balances there, sets a suitable example to Great Britain to do the same thing. It is better for Great Britain and France, and for the United States, for that matter, to pay 3 or 4 per cent interest above the normal rate than it is to pay a 40 per cent discount, and anybody should be able to see this, especially a person engaged in conserving the resources of the United States, which Mr. Kent so anxiously desires to do. It is better to pay 6 per cent or 7 per cent or 8 per cent in Spain for money or on Spanish balances here rather than to compel our importers to pay 30 and 40 per cent for money in Spain. It comes back immediately upon our own consumers. It comes back upon them with the merchant’s profit added. Great Britain understands this per fectly well, and so does France, and both of them are making strenuous efforts to place credits in Spain for the purpose of putting their own currency more nearly at par; and an attempt is being made now by the Treasury Department, on our behalf, to do the same thing. In other words, the Treasure Department is trying to do now what Mr. Kent, the Treasury expert, argues it is against our interest to do. They are trying to put the dollar at par, and Mr. Kent is arguing before the country that its dollar ought to be at a discount. Mr. Kent argues that our interest and that of our allies de mands that we maintain such commercial relations as will enable us to continue the purchase of neutral commodities con stantly for a long period. And he argues in consequence that by this system— . W e w ill a ls o b e h e lp in g t o k e e p t h e c o u n tr ie s w ith w h ic h w e t r a d e i n a h e a l t h i e r f i n a n c i a l c o n d i t i o n , w h i c h s h o u l d b e o f g r e a t b e n e f i t in h e l p i n g u s t o fin d a m a r k e t f o r o u r g o o d s w h e n t h e w a r is o v e r , * * *. Selling Spain American dollars at 60 cents on the dollar would certainly serve to keep Spain in a healthier financial condition, but at our expenses, and at our serious expense. It is unpar donable to permit our gold dollar to be at 40 per cent discount. It is shameful to the United States, and I shall not submit to it if I can help it. Mr. SHAFROTH. Mr. President-----The PRESIDING OFFICER (Mr. C u r t i s in the clufir). Does the Senator from Oklahoma yield to the Senator from Colorado? Mr. OWEN. I yield. Mr. SHAFROTH. The proposition which is made is. it seems to me, so absolutely void of any reason, that I should like to know whether Mr. Kent gives any other reason. Mr. OWEN. I shall put the article in full in the C ongres s io n a l R e c o r d , and I invite Senators to read it. It is abso lutely shameful and disgusting. It has no argument in it worthy of the name. Yet this man as an expert of the United States Treasury goes out and addresses a great convention of business men in "the United States to persuade them that the dollar should be kept at a discount. The President wants our dollar at p a r; the Sec retary of the Treasury wants it at par. and this alleged expert argues against having it at par. As the Senator from Colorado said there can be no reason why the dollar of the United States a dollar worth par in gold, should be selling at 60 cents on the 58830—18530 4 dollar in Spain. There is no just reason for it. It is because the dollars we have loaned to our allies have been used in large part to meet the trade balances due to Spain for the Spanish commodity shipments to Great Britain and France, and because our own purchases here by our own importers compel our peo ple, our importers, to have a certain limited number of pesetas, and the banks control the supply of commercial bills in pesetas and are speculating upon them and compel our importers to pay any price that they please. That is the reason of it It is all right from the bankers standpoint, but it is highly offensive to a good American. „ ,, It is argued that the United States will find it advisable to curtail its exports to neutral countries and to hold our imports within reasonable limits, and says: A n a d v e r s e e x c h a n g e r a te is th e k e y t o su c h fo r c e , a n d is a g r e a t r e g u la t o r o f t r a d e . I t p u t s s u c h d iffic u ltie s in th e w a y o f o u r im p o r t s t h a t w i t h o u t o t h e r p r e s s u r e w e e n d e a v o r to d o w i t h o u t t h e m in s o f a r a s p o s s ib le . Certainly if our gold dollar buys 60 cents’ worth in Spain, our merchants do regard it as a serious difficulty, because they must impose this excess charge on Spanish commodities on their own consumers, with the merchants’ profit in addition. It is a very serious difficulty, obstructing trade, interfering with legitimate commerce. It is precisely for this reason that such a difficulty should be removed, and imports and exports con trolled by our other mechanism provided by law by means of a license system. We provided for that by a license system. To argue that this obvious evil is a benefit because it is a means of preventing Americans from buying their necessities is illogical and senseless. The things they are obliged to have they will buy at the market cost. The purchase and sale of things nonessential to war can be and has been stopped by the license mechanism otherwise provided by law. The discredited American gold dollar puts the United States in the attitude of having its currency dishonored and its finan cial credit abroad impaired. It gives psychological encourage ment to the German and psychological discouragement to the allies. It has no commercial sense in it for the reason that just as France borrowed money from Spain at 7 per cent—3 per cent above the normal— and to that extent avoided the tax, we could borrow and avoid the tax we pay of 40 per cent on im ports. It is better to pay 3 per cent per annum than 40 per cent with each turnover. The merchant keenly feels this. A bank expert does not. His class profits on fluctuating high exchange rates. Mr. Kent’s article emphasizes the fact that the Federal Re serve Board, through its Division of Foreign Exchange, knows the exact cash balances each Wednesday night which every country in the world has in the United States, and he states that the neutral countries are putting heavy balances into the United States. If this is true, then these balances have been transferred 10 the United States by bankers by the sale of cred its acquired in neutral countries (by the sale of their commodi ties. payable in terms of their own money), and the New York bankers may sell such pesetas at a high rate to merchants com pelled to compete injuriously for such pesetas or croners or guilders. 1 would discourage this profiteering. Mr. Kent’s advice would encourage it. I look at the problem from the view58830— 18530 5 point of the importer, exporter, consumer, and producer. The banking expert looks at the problem from the opposite side. His class profits on fluctuating exchange. Moreover, the neutral countries are voluntarily sending their balances to America, which is the only thing required to bring the dollar immediately to par if sufficiently encouraged, but Mr. Kent is opposed to encouraging the putting of the dollar at par, if his general thesis be correct. While it is to our obvious ad vantage, as Mr. Kent says, to encourage these countries to put their balances in the United States, what 1ecomes of Mr. Kent’s argument that it is to our advantage to keep the dollar below par when he would encourage these balances which would bring the dollar to par. The one argument contradicts the other. We can put the dollar to par in several different ways. First, by forbidding the sale of pound sterling for dollars and compelling the Spanish merchants to buy dollars with pesetas. And this only means limiting arbitrage until the dollar reaches par. Second. We may accomplish it by placing United States bonds payable in pesetas in Spain, and thus buy pesetas neces sary to meet the urgent, though limited, demand of our im porters. Third. We can accomplish it by encouraging what Mr. Kent says is taking place without encouragement. That is, encour aging foreign banks to keep balances in the United States at interest, and we can afford to pay them 6 per cent or 7 per cent for such balances, rather than compel our merchants to pay 40 per cent for exchange and the customer in the United States 40 to 50 per cent for commodities. ^ Moreover, if the dollar was at p a r; if the policy of the United States was to keep the dollar at par, these balances of neutral countries would greatly expand, because then foreign bankers would know that they would not suffer any loss in the future by the depreciation o f the American dollar by this adverse ex change. When they know that they will get their principal back with interest in terms of their own currency at par thev will deposit their balances here more readily. Fourth. We can bring the American dollar to par by impos ing an extra tax on goods required by Spain, putting the export tax at the currency rate of the exchange, whatever it is. It would not take Spain long to discover the wisdom o f exchang ing pesetas for dollars at par, but I do not believe in such a friction-arousing policy. Fifth. Another way to put the dollar at approximate par is bv negotiating with the Government of Spain, with the cooperation of France and Great Britain, and seeking their just treatment as a matter of amity and commercial decency. This, however would require a constant series of negotiations, and while of value, is not of as much value as using the absolute power which we have to require commercial justice through the regulation of individual transactions. It will be remembered we put upon the finance-corporation bill a provision that those bonds might be issued in terms o f for eign money, and we put in the third liberty-loan bill that the bonds of the United States might be issued in terms of foreign money, so that a person acquiring those bonds in foreign coun tries would know he would get his principal and interest back without the discount of an adverse exchange rate. Congress did 58830— 18530 6 that very thing for the purpose of bringing the dollar to par, showing that the Senate of the United States desires to put the dollar at par, that both Houses desire to put it at par, and yet this expert of the Treasury is advising the bankers of the United States and argues in favor of keeping the dollar at a discount. The Congress of the United States expressly authorized the President of the United States not only to embargo gold and silver, if desirable, but also to embargo credits; and when we put an embargo on the sale of dollars for pound sterling and compel Spain to buy the dollars she requires of us with pesetas, thus giving us pesetas in exchange for these dollars, we have an immediate remedy without dealing unjustly in the slightest de gree with Great Britain. Because Spain imported from us last year $92,000,000 of goods and we imported from her only $36,000,000, she owed us on a net balance $55,000,000. Yet the American dollar has come to so low a level that it only brings 60 cents in Spain, when, in point of fact, if we compelled Spain to buy her dollars from us exclusively we could make a dollar worth 60 per cent above par, because she is obliged to have our dollars. Our loans to our allies have been injuriously, if not wrong fully, used against us. On May 21, 1917, in Des Moines. Iowa, Hon. W. G. McAdoo delivered at a meeting of business men and bankers of Iowa an address, in which he explained that the loans already authorized to be made our allies of $3.000,000,000— and that was enough to consume our credit trade balance for that year—would go to “ five billions or six billions,” and said in relation to the bond issue: “ This money is not going to be taken out of the country. All of this financing is largely a matter of shifting credits; it is not going to involve any loss of gold ; it is not going to involve any loss of values.” and so forth. The money was taken out by hundreds o f millions. We shipped, I understand, 80,000,000 gold dollars to Spain last year, through London. Spain owed us $55,000,000. We let Great Britain have that $55,000,000 to pay Spain, and we fur nished $88,000,000 more of our gold to pay British balances due Spain; and on top of that our dollar has been permitted to go to a tremendous discount, and every dollar we buy now is costing our consumers 50 per cent more than it ought. In our normal purchases in Spain it would cost us one-hall of $36,000,000, or $18,000,000, per annum. In that one country there is a great net loss to America. Is that to the advantage o f the United States in a great war? It is against the interests of the United States, it is in the interest of Germany, and I object to it most seriously. I filed my objection in the Treasury Department. I argued this matter before the Federal Reserve Board, with Mr. Kent present, and Mr. Kent told me to my face it is better for the dollar to be at a discount. That argu ment was made in the Federal Reserve Board room ; and, after I presented the answer fully on the floor of the Senate, to have this expert go out in the United States carrying on a false propaganda is unendurable and ought not to be per mitted by the Government of the United States. The money was taken out by hundreds o f millions, involving loss of gold and of values, and then Congress passed an act au thorizing the President to control the sale of dollars or transfer of credits. The President put the power in the hands of the Secretary of the Treasury by his proclamation of October 12, 58830— 18530 7 9 r 1917, and Mr. McAdoo trusts it, apparently, to Mr. Kent, who now seriously argues against keeping the dollar at par, as the President and the Secretary of the Treasury desire, and as the Congress desires it shall be done. We must stand by our allies, and we can do so and still protect the dignity o f our own currency. We ought to protect the American dollar, and as economically as possible. We can be as generous as we please with our allies and still preserve the honor and dignity of the American dollar. What was the anxiety shown by the British Government a few days ago when an appeal was made to us for $350,000,000 of silver. It was to keep the rupee at par. Did Great Britain think it important? She thought it vital. The rupee was being put below par by a well-organized German propaganda in India. I will not stand for any propaganda to put the Ameri can dollar below par for this country; I do not care what the motive of the man is. and I assume, indeed, I am glad to be lieve, that his motives are not bad. I do not think his motives are necessarily bad. I merely think that he lacks common sense. If necessary for us to borrow from these neutral countries who are without effort placing their balances here and paying them a high rate, 6 per cent, 7 per cent, it would only be 2 or 3 per cent margin per annum on enough money from the Spanish banks to pay foi our imports from Spain at par, whereas Mr. Kent would advise us to pay 40 per cent discount on our goods shipped from Spain as a means of winning the war. It is bad advice, and if Mr. Kent does not know better he ought to be retired. If he does really know better— and I do not think he does— he ought to be indicted for aiding the enemy. It is a serious thing, putting the dollar at a discount. It is a veiy serious thing. Suppose the American dollar were to fall to a discount to-day in the United States, what would it hifimJ t , T " U T ai‘ - that ever-v gold dollar would go in hiding. I hat is what it would mean. It would mean that every contract in the United States would be suddenly thrown upon a fictitious basis and dislocated. It would mean the most complete upset of all our business life. Every man knows that aad y'e have taken infinite pains to store up gigantic quantities of gold for the purpose of keeping the American dollar at par in the United States, so that everyone who deposits in our 25 000 banks should know that he can get his deposit in gold on'de maud. To say that the dollar should be at a discount abroad while it is at par at home has no logic, has no justification and is mischievous in the highest degree. Mr. Kent emphasizes the fact of the bank balances of neu tral countries piling up in the United States; also that the neutral countries have stripped themselves of commodities to sell them at a high price to Germany, and they must after the war look to us for commodities. This is true- and it means that the normal demand for commodities from Amer ica after the war would give us the equivalent o f probably in excess of an annual commodity trade balance of a thousand million dollars. In addition to this will come interest char ms from Europe amounting to a half billion more, and in addition’ to this will come the mercantile marine freight credits of American ships, so that America may be expected to have a flow of balances 58830— 18530 due her amounting to two or three billion dollars per annum after the war is over. , , .. . All of these neutrals will need their trade balances then in the United States, and they need, and they know they need, them now to begin the arranging of credits in America to supply them with needed commodities after the war, for America will be In a position to control commodities all over the world be cause of the balances which will be due her. Mr. Kent does not see that these facts comprise an overwhelm ing argument why the dollar should go to par and stay at par. because the necessity of the world for the American dollar will be gigantic. We have the right to anticipate their needs for this dollar and place our own bonds abroad and invite neutral balances here. Indeed, our trade balance last year was $3,000,000 000 That must be paid with dollars, or commodities, or gold, or securities. Indeed, it forms the basis upon which the American dollar would go to a premium if it were permitted to do so, which we ought not to allow, however, as the dollar should be used as a standard measure of value, never varying, utterly de pendable", the standard of value throughout the world, if we want money to protect every other place as the financial center of the world. The bankers should not be permitted to tamper with our financial yardstick, even if they do profit by it or profiteer bj it, as I verily believe some of them are doing n ow ; I hope not with Mr. Kent’s knowledge. Mr. SMOOT. Will the Senator yield? Mr. OWTEN. Certainly. Mr. SMOOT. I am very much interested in what the Senator is saying, and I think it would be good if the American people generally understood the situation. I wish the Senator would also add to his remarks that it is not only the banks in Spain that are profiting by a depreciated United States currency, but speculators, and the speculator to-day is making all the way from 20 to 25 and 30 per cent on every dollar of foreign•currency bills that he can secure. Mr. OWEN. I have no doubt that is the case, but we ought not to allow a condition to remain where this kind of thing can be done at the expense of the American people. That is the point I am making. Mr. Kent justifies our gold embargo and enlarges upon our exact knowledge of balances held by neutral countries in America. This is the end of the argument of Mr. Kent in telling why the Reserve Board allows United States currency to re main at a discount. His alleged explanation of three columns is no explanation whatever. It explains nothing. And the lauda tory headlines of the article, with its boast that it is a scientific exposition is utterly inaccurate but very serviceable as a piece of propaganda. He makes no adequate or convincing explanations whatever to justify keeping the dollar at a discount. The utterly fallacious argument has been made that while importers lost heavily exporters gained. That argument appears on page 158 of the Federal Reserve Bulletin of March 1, 1918. As a matter of fact, an exporter neither gains nor loses. A man who takes a thousand dollars’ worth of goods from New York to Barcelona gets his $1,000, and if he pays the freight and commission he gets his freight and commission back and $1,000. If he gets 3 pesetas for a dollar 58830— 18530 9 he immediately sells his pesetas for dollars and gets the dollars back, and it comes out the same $1,000; and that is all there is of that. As a matter of fact, in a country where the currency is depeciated workmen are temporarily paid less and goods are made for less and exports are stimulated by this fact of the goods being made cheaper at the expense of labor. 1 hat is an old truism in the doctrine of international ex changes, explained by various writers, and a school boy who has studied international exchange knows about it. But this is a transitory matter and has no relation to the United States be cause the dollar in the United States has not depreciated. Labor is not underpaid in the United States ; goods are not selling below a normal profit in the United States. The contrary is true of Germany. German labor is underpaid, her currency at home has depreciated, and she is making goods cheaper than they can be made in Sweden, but at the expense of her own German work men, and Germany is thus underselling the manufacturers in Sweden. Sweden is on the point of passing a tariff act to exclude that advantage over Swedish manufacturers gained by Germany at the expense of the poor, underpaid German workmen. While that appears in the Federal Reserve Bulletin, it affords no justification in keeping the American dollar at a discount because we gain no advantage in exports. Mr. Kent is advertised as having complete control of all foreign-exchange transactions. If he had exercised the powers given to the President and restricted the transfer of United States credits abroad, the American dollar would have been at par now. It can be brought to par within a very short time in most o f the neutral countries. It is perfectly plain to any man who will follow this with the east attention. If we forbid the sale of dollars for pounds sterling, then the only way Spain can get dollars from us to pay her $92,000,000 of bills to us is to buy dollars from our market by the sale of her commercial bills in payment for shininent from the United States to Spain. Spain would have, then, to buy $92,000,000 worth of dollars from us, less our purchases of $36,000,000 of commodities from Spain. Purcnases Mr. SMOOT. Or send gold for it. Mr. OWEN. Or send gold for it, and therefore our dollars would immediately go to par. They would go to par inside of a week. Congress gave that power to the President, and he gave it to the Secretary of the Treasury, and the Secretary of the Treasury gave it to Mr. Kent, and Mr. Kent advises us now not to do it, notwithstanding the President wants it done and Congress wants it done. Mr. GALLINGER. Mr. President-----Mr. OWEN. I yield to the Senator. Mr. GALLINGER. If the Senator will pardon me, I ought to have understood his statement concerning Mr. Kent but I was engaged otherwise. Will he state who Mr. Kent is?’ Mr. OWEN. Mr. Kent has charge of the foreign-exchange business of the Federal Reserve Board, and he vis£es the trans fers of credits from the United States. Congress authorized the President to control the transfer o f credits from the United States. The President authorized the Secretary o f the Treas ury to discharge this function. The Secretary put Mr. Kent in charge, and Mr. Kent tells us it is better not to do it. 58830— 18530 Mr. GALLINGER. So Mr. Kent in a sense speaks officially; that is, he is an official of the Government? Mr. OWEN. Y es; he is supposed to speak officially; but I insist that he is misrepresenting the officers who are in control of that department. I am satisfied from what he has said to me that the Secretary of the Treasury wants to put the dollar at par. The Spanish Government in 1916, finding that there was danger of Spanish credits and Spanish commodities migrating from Spai-i to furnish the sinews of war to the belligerents, passed an act prohibiting the placing in Spain foreign or Spanish securities except with the approval of the council of ministers. I wish, without reading, to put the Spanish royal decree and act of the Cortez in the R e c o r d for the information of Senators. I will not take the time to read it. The VICE PRESIDENT. Without objection, permission to do so will be granted. The matter referred to is as follow s: [ T r a n s la t i o n .] ROYAL DECREE. In a c c o r d a n c e w it h t h e c o u n c il o f m in is t e r s , I h e r e b y a u t h o r iz e th e m i n i s t e r o f fin a n c e t o p r e s e n t in t h e C o r t e s a p r o j e c t o f l a w p r o h i b i t i n g t h e in tr o d u c tio n in to S p a in o f fo r e ig n s e c u r it ie s w it h o u t t h e a u t h o r iz a tio n o f th e G o v e r n m e n t. G i v e n in t h e r o y a l p a la c e t h i s 1 4 t h d a y o f J u n e , 1 9 1 6 . A lfon so. The M in iste r o f F in a n c e , S a n tia g o A lb a , to th e C o rtes: T h e a b n o r m a l c o n d it io n s c o n t r o llin g th e e c o n o m ic lif e o f a ll c o u n tr ie s in c o n s e q u e n c e o f t h e p r e s e n t E u r o p e a n w a r d e m a n d in o u r o w n c o u n t r y , a s in o t h e r s , t h e a d o p t io n o f m e a s u r e s o f a n e x c e p t io n a l c h a r a c t e r to p r e v e n t , a s f a r a s fe a s ib le , t h e e m ig r a tio n o f S p a n is h fu n d s to t h e d e t r i m e n t o f t h e d e v e lo p m e n t o f n a tio n a l w e a lth , a n d th e w it h d r a w a l fr o m th e S ta te o f th e m e a n s fo r c a r r y in g o u t, a t th e p ro p e r m o m e n t, su ch c r e d i t o p e r a t i o n s a s m a y be d e m a n d e d * b y p u b lic in te r e s ts . B e a r i n g t h e s e c o n s i d e r a t i o n s in m i n d , a n d w i t h o u t f o r g e t t i n g t h a t m e a s u r e s o f th is n a tu r e m u s t a lw a y s h a v e su ch e la s tic ity a s m a y p e r m it th e G o v e r n m e n t to a lte r th e m a s th e c a se a n d c ir c u m s ta n c e s m a y d e m a n d , t h e u n d e r s i g n e d m i n i s t e r , in a c c o r d w i t h t h e c o u n c i l o f m i n i s t e r s a n d w it h H is M a j e s t y ’ s a u t h o r iz a t io n , h a s th e h o n o r to s u b m it to th e d e lib e r a tio n o f t h e C o r te s t h e fo llo w in g PR O JE C T O F L A W . A r tic le 1. A f t e r th e p r o m u lg a tio n o f th e p r e s e n t la w , a n d u n til a d a te w h ic h s h a ll be fix e d b y d e c r e e a g r e e d u p o n a t a c o u n c il o f m in is te r s , t h e r e s h a l l b e p r o h i b i t e d : A n n o u n c i n g , i s s u i n g , p u t t i n g in c i r c u l a t i o n o r f o r s a l e , p a w n i n g o r i n t r o d u c i n g in t h e S p a n i s h m a r k e t s e c u r i t i e s o f tind e b t a n d o t h e r le g a l t e n d e r s o f fo r e ig n g o v e r n m e n t s , a s w e ll a s s t o c k s , o b lig a tio n s , o r title s o f a n y k in d o f c o m p a n ie s o r c o r p o r a t io n s not S p a n is h . N e v e r t h e le s s , o n tn e p r o p o s a l o f th e m in is t e r o f fin a n c e , t h e c o u n c il of m i n i s t e r s s h a l l b e a b l e t o g r a n t , in r e s p e c t t o p r o v i s i o n s in t h e p r o c e d in g p a r a g r a p h , t h e e x e m p tio n s h e m a y ju d g e p r o p e r . A r t ic le 2 . T h e G o v e r n m e n t lik e w is e , o n th e p r o p o s a l o f th e m in is te r o f fin a n c e , m a y p r o h ib it th e in tr o d u c tio n in to S p a in o f S p a n is h s e c u r i tie s . o f c o r p o r a t io n s o r s o c ie t ie s , a ls o S p a n is h , w h e n e v e r t h e s e s to c k s a r e d o m ic ile d abroad . T h ose w ho d e s ir e to in tr o d u c e th e m are hereby o b lig e d to r e p o r t t o t h e G o v e r n m e n t a s to s u c h in tr o d u c tio n a n d d e s t in a tio n . A r t ic le 3 . T h e v io la t io n o f th e p r e s e n t la w s h a ll b e p u n is h e d w ith a f i n e o f 1 . 0 0 0 t o 1 0 , 0 0 0 p e s e t a s , a n d i n c a s e o f r e p e t i t i o n , w i t h a t in e o f f r o m 1 0 , 0 0 0 t o 2 r > .0 0 0 p e s e t a s . A r t ic le 4 . T h e m in is te r o f fin a n c e w ill d ic t a t e th e p r o p e r o r d e r s fo r t h e e x e c u t io n o f t h is la w . M a d r id , J u n e 1 4 , 1 9 1 6 . S a n t ia g o A l b a , T h e M in is te r o f F in a n c e . 58830— 18530 Mr. OWEN. It was precisely the same principle which caused Congress, as a war measure, to pass the trading with the enemy act, approved October 6, 1917; among other things the act providing—That th e P r e s id e n t m ay in v e s tig a te , r e g u la t e , o r p r o h ib it under su e h r u le s a n d r e g u la t io n s a s h e m a y p r e s c r ib e , b y m e a n s o f lic e n s e s o r o th e rw is e , any tr a n sa c tio n s in fo r e ig n exch ange, export or ea rm a r k in g s o f g o ld o r s i lv e r c o in o r b u llio n o r c u r r e n c y , t r a n s f e r s o f c r e d it in a n y fo r m (o t h e r t h a n c r e d its r e la tin g s o le ly to t r a n s a c tio n s to be e x e c u te d w h o lly w it h in th e U n ite d S ta t e s I. a n d tra n sfe r s o f e v id e n c e s o f in d e b te d n e s s o r o f th e o w n e r s h ip o f p ro p e rty b etw ee n th e U n ite d S ta te s an d an y fo r e ig n c o u n tr y , w h e th e r e n e m y , a llv o f e n e m y , o r o th e rw is e , o r b e tw e e n r e s id e n t o f o n e o r m o re fo r e ig n c o u n tr ie s , b y a n y p erso n w ith in th e U n ite d S t a t e s ; a n d h e m a y r e q u ir e a n y s u c h p e r s o n e n g a g e d in a n y s u c h tr a n s a c tio n to fu r n is h , u n d er o a t h , c o m p le te in fo r m a tio n r e la tiv e t h e r e to , in c lu d in g th e p r o d u c tio n of any b o o k s o f a c c o u n t , c o n t r a c t s , le t t e r s , o r o t h e r p a p e r s in c o n n e c tio n th e re w ith in th e c u sto d y or c o n tro l o f su ch p e r s o n , e ith e r b e fo r e o r a f t e r s u c h t r a n s a c t io n is c o m p le te d . Why? For the very reason that I have mentioned, so as to prevent credits migrating from the United States, unjustly and unfairly to us, and putting our dollar below par abroad. It was the same principle that caused Congress to pass the espionage act, approved June 15, 1917, which among other things provides— •finuEC+ w t N ,.n " Jrat # * v .e o o u t o f th e a n y a r t 'c l e A ' (lu r in g th e p r e s e n t w a r th e P r e s id e n t s h a ll ; s a f e t -y 80 r e q u ir e , and s h a ll m ake p r o c la m a rr u n la w fu l to e x p o r t fr o m o r s h ip fr o m o r ta k e U n i t e d b t a t e s t o a n y c o u n t r y n a m e d in s u c h p r o c l a m a t i o n o r a r t i c le s m e n t io n e d in s u c h p r o c l a m a t io n , e x c e p t a t s u c h i0 -1 arul a a d e r su ch r e g u la t io n s a n d o r d e r s , a n d s u b je c t to su c h lim it a t io n s a n d e x c e p t io n s a s th e P r e s id e n t s h a ll p r e s c r ib e , u n til o th e r w is e o rd e re d b y th e P r e s id e n t o r b y C o n g r e s s : P r o v id e d , tw ic e v e r , of a n o t h e r e fe le D C e Sha11 b ° g iv e n to t lle p o r ts of one S ta te over th o se tt ° n <)etober the President vested in the Secretary of f,.le ireasui'y the control of foreign exchange, exporting, gold ansfer. credits, etc., in the following terms: t r a t i o n ' ' ( ! ' / n r f v ^ in w n J l? S e c r e t a r y o f t h e T r e a s u r y t h e e x e c u t i v e a d m i n i s t i n n in f n roicrn i n v e s t i g a t i o n , r e g u l a t i o n , o r p r o h i b i t i o n o f a n y t r a n s a c - of Jr b u h io n e u r r e m c r e d it s r e l a t f n ^ « o t« iv y t h e T in ite r i s t n f e a i J h th e U n ite d s t a t e s , a n d T v e X p 0 ,r t ’ ^ e a r m a r k i n g o f g o l d o r s i l v e r c o i n , ’ tJ ^ s fe r s c r e d lt in a n y fo r m (o th e r th a n J tr a n s a c tio n s to be e x e c u te d w h o lly w ith in t r a n s fe r s o f e v id e n c e s o f in d e b te d n e s s o r o f th e ^ 0 L ? r<!.P e f VV ^ ‘ ' t w e e n t h e U n i t e d S t a t e s a n d a n y f o r e i g n c o u m t i y , o r hi tw e e n rt s id e n ts o f o n e o r m o re fo r e ig n c o u n tr ie s , b y a n v p e r s o n w i t h i n t h e U n i t e d S t a t e * ; a n d 1 h e r e b y v e s t in t h e S e c r e t a r y o f t h e ( t r e a s u r y t h e a u t h o r i t y a n d p o w e r t o r e q u i r e a n y p e r s o n e n g a g e d in a n v to fu r n is h u n d e r o a th c o m p le te in fo r m a tio n r e la tiv e th e r e to , in c lu d in g th e p r o d u c tio n o f a n y b o o k s o f a c c o u n t , c o n t r a c t s l e t t e r s o r o t h e r p a p e r s in c o n n e c t i o n t h e r e w i t h in t h e c u s t o d y o r c o n t r o l o f su ch p e r s o n , e ith e r b e fo r e o r a ft e r s u c h tr a n s a c tio n is c o m p le te d . At tlie same time the President vested in the W ar Trade Board the authority to issue licenses for exports or imports in para graphs 2 and 3 of his Executive order of October 12, 1917 in the following language: I h e r e b y v e s t in s a id b o a r d t h e p o w e r a n d a u t h o r i t y t o is s u e l i c e n s e s 8 i a ‘h t e r m s a n d c o n d i t i o n s a s a r e n o t i n c o n s i s t e n t w i t h l a w o r to w it h h o ld o r r e fu s e lic e n s e s , fo r t h e e x p o r t a t io n o t a ll a r t ic le s exceD t c o in b u llio n , o r c u r r e n c y , t h e e x p o r t a t io n o r t a k in g o f w h ic h o u t o f t h e U n ite d S ta te s m a y be r e s tr ic te d b y p r o c la m a tio n s h e r e to fo r e o r h ere a f t e r is s u e d b y m e u n d e r s a id T i t le V I I o f th e e s p io n a g e a c t 1 fu r t h e r h e r e b y v e s t in s a id W a r T r a d e B o a r d th e p o w e r a n d a u t h o r i t y to is s u e , u p o n s u c h t e r m s a n d c o n d itio n s a s a r e n o t in c o n s is te n t w ith la w . o r to w ith h o ld o r r e fu s e , lic e n s e s fo r im p o r t a tio n o f a h a r t ic le s th e im p o r t a tio n o f w h ic h m a y be r e s t r ic t e d b y a n y p r o c la m a t io n h ere a f t e r is s u e d b y m e u n d e r se c tio n 2 o f th e t r a d in g w it h -t h e -e n e m y a c t The President of the United States, the Secretary o f the Treasury, and the best bankers, and various international ex 58830— 18530 perts with whom I have discussed this matter are convinced o f the wisdom of maintaining the dollar at par. The only diffi culty having been the means by which to accomplish it. I re gard it as grossly unbecoming in Mr. Kent to attempt to create public opinion in favor o f keeping the dollar below par. Such conduct I regard as disloyal and insubordinate to the Presi dent’s wishes and deserving a stern rebuke. Mr. Kent should devote his knowledge in suggesting and perfecting plans by which the dollar could be put at par and the Reserve Board and the Treasury Department officials should find a means of thus protecting American interests, and Mr. Kent's conduct in going before the National Foreign Trade Council and attempting to mislead public opinion I regard as very reprehensible. In my judgment the Secretary of the Treasury should dismiss Mr. Kent from office as unfit to advise the Treasury Department o f the United States. It is this kind of advice, the advice of the banker who thinks in terms o f interest, or profit and of com missions, that is calculated to mislead the Government officers. Some banks profit by fluctuating exchange rates, and some banks profit by speculating in exchange rates, by acquiring for eign credits at a low rate and selling them to our merchants who are compelled to have foreign credits in foreign currency at a high rate. The bankers, however, should not prevail over our importers and consumers. Mr. GALLINGER. Mr. President, alluding to Mr. Kent, I will ask the Senator from Oklahoma if he has knowledge as to whether or not any member of the Federal Reserve Board in dorses Mr. Kent’s views? It has been suggested, or at least I have heard it suggested, that at least one member of the Federal Reserve Board was in harmony with Mr. Kent. Mr. OWEN. I think that the influences surrounding Mr. Kent have been persuasive with some members of the board. I should not like to quote their names, unless they wish to put themselves on record with regard to i t ; but I think one or two members of the board have been led to that belief; and it is perfectly ob vious that they have been grossly misled. Mr. GALLINGER. I do not wish to mention any name myself, but it has been suggested to me that such is the fact. Mr. OWEN. I think it is the fact. That is the reason why I regard this advice as particularly mischievous, because the members of the Federal Reserve Board who have lived only within our domestic lines, who have not been engaged in inter national banking, and who have had no particular reason to have studied this matter, necessarily would rely upon such alleged expert advice; I should not be inclined to blame them for accepting the opinion of a man whom they regard as very high authority; but when I see the advice is wrong I feel it my duty to the country to speak out and show why it is wrong, because it is injuring American interests in this war, and I do not think we ought to permit it. I submit a statement o f the exports and imports from the neutral countries o f Europe with the United States, showing a net balance due us of about $200,000,000 last year. These bal ances must increase because those countries have denuded themselves in large measure in supplying the belligerents around them, and they have to call on us more and more for supplies. 58830— 18530 13 Balance of trade in the commerce of the United States tcith the neutral countries of Europe during the calendar year 1917. Excess o.— Countries. Imports. Exports. Imports Denmark............................. Netherlands............................ Norway................................... Spain........................................ Sweden........................................ Switzerland.................................... 2977, 453 $32,388,864 22,744,504 90,520,301 6,281,233 62,866,850 30,881,030 92,469,320 18,000,487 20,900,854 19,834,008 19,502,045 Exports. 531,411,411 67, 775, 797 56,586,617 55,587,690 2,831,367 $332,623 I lie international credit trade balances to the neutral coun tries of Europe were large, and they received in lieu thereof gold and credit and securities, the securities being merely a form of credit. The Government of the Uuited States can control both imports and exports under the law. It can, as far as the neutral countries are concerned, immediately bring the dollar to par, because they owe us more than we owe them, and we only need to require them to buy the dollars they owe us in terms of their own currency to give the American consumers the benefit through tlieir merchants of foreign currency at par. Inducing the foreign banks to place their balances in the United States directly is another way to do it to accomplish the same end. Selling United States bonds in these neutral countries is an other way to accomplish it. All of these factors should be employed and through every available agency the dollar should be brought to par and kept at par as a means of helping us win this war. I ask permission to put the article of Mr. Kent into the R e c o r d , without reading. The VICE PRESIDENT. Without objection, it is so ordered. The article referred to is as follows: 111 rom the New York American, Apr. 22, 1918-1 K e Ss U uL lT t TF kom J iP O oL l iIC cy NEn NT T ? TC <“H IL NE 0WFOB C R E D IT S . t h e IvL i ’ KOM Y*— H I!N T TO W ar W il l Attention has been so intensely centered on the increasing discount to which the dollar has been falling abroad that an explanation of the international financial position of the United States at this moment is °f 1 Ute^rLt‘ . More s °, if this explanation comes from one in high authority. The following simple and yet almost scientific exposit on of the foreign exchange relations of this country was given in a sneerh by Fred I. Kent before the National Foreign Trade Council at it's con vention just closed at Cincinnati. Mr. Kent is in charge of the Foreign Exchange Division under the Federal Reserve Board He passes 'on all foreign exchange transactions, and in his hands is concentrated the stupendous task of seeing that no funds pass out of the country into enemy hands. This^requires examination of an immense number of drafts and papers. But t also places in his hands information invaluable to the country while at war. W hy certain of our exchanges have been allowed to depreciate is fully explained bv Mr Kent He nfso outlines the general policy with regard to our giving aid to strengthen allied exchange rates in other countries. 6 [B y Fred I. Kent in his speech before the National Foreign Trade Council.] The cry of the orator for a dollar at par throughout the world may be valuable in time of peace as commercial propaganda, but it has no place in time of war, particularly with a world’s war, such as exists to-dav The United States in order to carry out her part in the war is going to be obliged to supply from her own resources and from those 58830— 18530 of many other countries of the world commodities to the value of many billions of dollars. Regardless of her great wealth, there is a positive limit to her ability to furnish such supplies. In order to wrm the war she must be in a position to do so for a longer period than the enemy. The length of time that she can continue to furnish needed supplies will depend upon her ability to conserve her resources. There are many products which she can obtain from within her own territory that will outlast the war needs. There are many others, however, which need supplementing from other countries of the world if we would maintain the highest efficiency of the war engines which we produce and of tne men who operate them. OUR B E ST COURSE. Our greatest interest, therefore, and that of our allies, demands that we maintain such commercial relations with the neutral countries wnicn have commodities that will be needed by us as will enable the united States to continue the purchase of such commodities constantly tor a long period. W hile there are probably none of these commodities wnicn we can not (if need be) develop substitutes for, yet if we can continue their purchase from other countries, partly in exchange for tilings which we can better spare than the articles received for them, we will have accomplished two most important results— we will have main tained our foreign trade with other nations and so have held their in terest in this country, and we will have saved the time of that portion of our population which might otherwise have had to be engaged in creating and manufacturing substitutes, in work that will result to our greater advantage. W e will also be helping to keep the countries with which we trade in a healthier financial condition, which should be of great benefit in helping us to find a market for our goods when the war is over and our manufacturing interests turn from war industries. M U ST C U RTAIL E X PO R T S. As the war goes on, the United States will find that it will have to curtail its exports to neutral countries, as Great Ilritain, France, and Italv have been obliged to do, so that it is reasonable to suppose that t h e ‘ balance of trade with many neutral countries will be constantly against us throughout the war. This being true, and it being greatly to the advantage of neutral countries to have our market for their goods continue in as large a way as possible, we must have some strong force to hold our imports within reasonable limits. An adverse ex change rate is the key to such force and is a great regulator of trade. It puts such difficulties in the w ay of our imports that without other pressure we endeavor to do without them in so far as possible. The countries of export, in order to keep a market for their goods, will strive to find ways to allow continuation of such exports as we must have, even to the point of allowing funds to pile up in this country or through the extension of credits. FU N DS ACC U M U LATE. A s funds accumulate here which can not be exported there will be an increasing tendency on their part to purchase commodities from this country with them, which will offer a great inducement to the people of the United States to strive along with their war work to pay a part of their accumulating indebtedness through current exports. In Argentina, for instance, we find that for the protection of its people the Argentine Government considered it to its very great interest to make an arrangement with the United States under which Argentine funds would he left on deposit in this country until alter the■ w rt , provided the disbursement of the equivalent in Argentina teas made for exports from Argentina to the United States. It is also true that the exports from the United States to Argentina increased from $ 1 6 . 8 .4 ,2 5 8 in 1910 to $107,641,905 in 1917, even though we were not at war in the first year and were at war in the second. A s long as exchange con tinues against us with Argentina the same tendencies will continue active, and when the war is over we will be as much less in debt to Argentina as the amount of exports which we have been able to furnish her year by year, that have been withdrawn from this country by her in order to "get her funds home and make it possible, together with the extension of such credits as she can afford, to keep our market for her goods open, AS TO ARG EN TIN E W OOL. On our part we have, for instance, been induced to conserve and in crease our supply of wool, so as to be able to Import less from Argen tina. As a result as the war goes on, we can hope to keep our rela tions with Argentina in such position that she wdli look upon us as be ing a country of great value to her, and, further, that she will accept us as her banker, so to speak, in that her surplus funds made through her war profits will have been accumulated in this country only to a natural extent, and not to such tremendous sums that she wtll become 588 3 0 — 18530 15 for tlu“,ir safefy ; or In actual need of them l)elieve that a f t e r thp , , . , , Z exist there is also excellent reason to our commodities t o o u r g o M and" ’’ t hat ' The” hankin, rdationsldp which she has Established «... p,™;1a s H K M H » iS T o : ln 1i rge part t0 C° ntlDUe the “ whWcbite'.to»rstr. w il. enable u V w conti'oue^to"import isXwnToTJ2* IK? ^ E S # P . S balance of trade has ffeen in 011^ fa v o r8’ ! ^ en1^ S 5 S % W > ® Wf F m The exchanne STU BS 1 S k ' s ugh *,n this case the we ' W O " * ' 10 S M I" / o X to“ tPbert™ ioe0o“ ? « ' by the s a i e T A t e r K K n S ^ A S " 0 and, second, by the sale by this country a m ' ^Untry by ^Pain 1 Spanish pesetas. y country to South American countries of H E L P IN G GREAT B R IT A IN . in 1 if to a$M.swto,s88 i“ t j i ™ A r to ° m i a a i ’ S r * 45.v T h 4(i2 llrifain etoPobtaln" from ° 4 C?e" , ' “ ' " V ” a'llles. as Vt' m . b M c S t which rnniri h E a i i f r0m. i c o m m o d i t i e s required by her in France to SouthU!Emerica for °th E h1*?h ' rfr1 EE!a FIII6 1 * ' When * » « “* Pesetas for much-needed fmm prices obtained, we were helping pay ered to us wi t hE t d'fne r cou° trIef- and as they could be delivintcrest, w h i l e S , 1" T ^ marm1s- i* V(,s to our c e n t e r America and pay in pesetas t h a >e/ w-fA ma&e, to import from South pesetas. Pesetas than to import from Spain and pay in D OLLARS P IL E D P. which has again, as has airf « l v h » n for our exports.’ When the war t ove » X „‘ ? Spanish * « :s s :nbankers, **, < * i of ‘ s ^ n f a i T 60* dema” d sheFwiH ^prefer ^ " S 5 b X ^ t C time in this country for the purchase of our goFds a ^ sl^ i^ tfr e s ^ h E m SUCh ° f ^ l a n c I /^ a V S We now come to a group of countries— the neutral countries adineem to Germany— in all of which exchange rules against th s country and where in every case it is undoubtedly of grEat value to us T h ese countries are Denmark, Netherlands, Norway, Sweden and SwitzeHand Taken as a whole, our exports to those countries have Seen over^ th ree times as great as our imports from them, and yet th r « c h a n a e h™ ruled constantly against us for a lone neriod 3 cnange has turned against us through the sale in the United sfaWs of sterlTng e ? change and through the remittance to the neutral countries ronEerned of German money. The transfer of funds to these c o u n t r i e f ^ f ^ E many has been most detrimental to the allies, as it has Enabled that country to pay for much-needed imports that she might othErw se have been unable to obtain in the desired quantities. omerwise nave N EUTRAL MONEY H E RE. The purchase by this country of sterling exchange from „ii o* a , countries in this group has resulted in the accumulation the States of huge balances belonging to the banks of t h e ^ u ra countri^ ^ “ tioned As in the case of the other countries which we hEEe con sidered, this caused a strong tendency to import from the United S tated 58830— 18530 crates, 16 b u t a f t e r w e e n te r e d t h e w a r a n d p la c e d a n e m b a r g o u p o n e x p o r t s t o s u c h c o u n tr ie s , e x c e p t w h e r e w e c o u ld fe e l r e a s o n a b ly c e r t a in t h a t th e y w o u ld n o t p r o v e o f v a lu e to th e e n e m y , s u c h e x p o r t s h a v e b e e n r e d u c e d . To D e n m a r k , fr o m $ 5 6 ,3 2 9 ,4 9 0 in 1916 to $ 3 2 ,3 8 8 ,8 6 4 in 1 9 1 7 ; to N e th e r la n d s , fr o m $ 1 1 3 ,7 3 0 ,1 6 2 in 1 9 1 6 to $ 9 0 ,5 2 0 ,3 0 1 in 1 9 1 . ; t o N orw ay! fro m $ 6 6 ,2 0 9 ,7 1 7 to $ 6 2 ,8 6 6 ,8 5 0 ; and to Sw eden, fr o m $ 4 7 9 6 7 5 9 0 to $ 2 0 ,9 0 0 ,8 5 4 . T o S w itz e r la n d th e re h a s b ee n a n In c re a se , a s s h ip m e n t s h a v e b e e n m a d e to h e lp o b ta in im p o r t s f r o m t h a t c o u n tr y to F r a n c e . T h e f ig u r e s w e r e $ 1 3 , 6 5 4 , 2 5 6 in 1 9 1 6 a n d $ 1 9 , 5 0 2 , 0 4 5 in 1917 A s w e w e re n o t a t w a r th e fir s t th r e e m o n th s o f th e y e a r , th e se fig u r e s d o n o t te ll th e w h o le s t o r y . A s a r e s u lt th e b a la n c e s m a in t a in e d in t h e U n i t e d S t a t e s b y t h e s e c o u n t r i e s a r e v e r y la r g e . In c o n n e c tio n w ith t r a n s fe r s fo r G e r m a n a c c o u n t, t h e a c c u m u la tio n o f s u c h .b a l a n c e s a n d t h e d i f f i c u l t y i n v o l v e d i n w i t h d r a w i n g t h e m a t th e m o m e n t is o f g r e a t v a lu e to th e a llie s . T h e e x c h a n g e s b e in g h ig h , it m e a n s t h a t e v e r y s u c c e s s fu l t r a n s fe r m a d e fo r G e r m a n a c c o u n t re s u l t s in t h a t c o u n t r y r e c e i v i n g a m u c h s m a l l e r s u m t o b e u s e d in p a y m e n t f o r im p o r t s in t h e c o u n t r y o f d e s t i n a t i o n . I t a ls o h a s g r e a t ly in c r e a s e d t h e d iffic u lty o f m a k in g s u c h t r a n s f e r s a t a n y r a t e , ™ r , a s b a la n c e s c o n tin u e to grow here, even lo a n in g a g a in s t th e m in tn e n e u t r a l c o u n tr ie s c o n c e r n e d b e c o m e s m o r e d iffic u lt. E v e n so, th e n eed o f G e r m a n y f o r f u n d s in t h e s e c o u n t r i e s i s s o g r e a t t h a t w e c a n n o t e x e r c i s e t o o m u c h v i g i l a n c e in p r e v e n t i n g t h e i r t r a n s f e r . Practically all of these countri-es are understood to h a t e s o them selves of much-needed commodities in order to obtain the high prices being paid by Germany that after the mar they will be obliged to replace them through import. . ,. ^ T h e ir s i t u a t io n a s t o g o ld is a ls o a n e a s y o n e , s o t h a t w e s h o u ld be a b le to p a y b a c k th e s e b a la n c e s a f t e r t h e w a r w it h o u t f r ic t io n i f w e a r e p r e p a r e d t o s u p p ly t h e g o o d s t h a t t h e s e c o u n tr ie s w ill r e q u ir e . M A IN T A IN ST E ltL IN G . of these countries have increased the balance of ef us by selling drafts on London in the A c t o Y o r k market . A ll ch ™9 e against I f it h a d n o t b e e n f o r s u c h s a l e s t h e U n i t e d S t a t e s m i g h t h a v e b e e n j u s t i f i e d In c o n t i n u in g th e s h ip m e n t o f g o ld , b e c a u s e o f th e t r e m e n d o u s s u p p ly h e ld b y u s . W hen h o w e v e r , w e w e r e t a k in g o v e r s t e r lin g c r e d its w h ic h th e s e n a t i o n s s o l d t o u s , because we were helping maintain the sterling e^ h a nge r a t e , t h e a c c o m m o d a t i o n w a s bn o u r s i d e a n d w e w e r e w a r r a n t e d in h o ld i n g o u r g o ld u n t i l a f t e r t h e w a r . u n le s s w e s h o u ld fin d i t t o o u r a d v a n t a g e t o r e l e a s e it s o o n e r . T h i s i s p a r t l c u a r l y t r u e in t h e c a s e o f th e n e u tr a l c o u n tr ie s a d ja c e n t to G e r m a n y , w h e r e w e h a v e fu r n is h e d t h e m m i l l i o n s o f d o l l a r s m o r e in g o o d s t h a n t h e y h a v e g i v e n t o u s a n d w h e r e w e h a v e ta k e n s t e r lin g o ff t h e ir h a n d s w h e n e v e r t h e y c o n s id e r e d i t t o t h e i r i n t e r e s t t o s e l l i t in o u r m a r k e t . Our 8 ° ^ em b arg o, th e re fo re i s n o t in t h e n a t u r e o f a r e f u s a l t o p a y . I t i s m e r e ly a to th e w o r ld to th is e f f e c t : T h a t w e d o n o t a t th e m o m e n t p r o p o s e to w a s t e -o u r g o ld b v e x c h a n g in g it fo r im p o r t s w h ic h w e c a n g e t a lo n g w ith o u t a n d t h a t n e it h e r d o w e p r o p o s e to p a y g o ld f o r s t e r lin g e x c h a n g e w h ic h w e a r e p u r c h a s in g w ith d o lla r e x c h a n g e a t a h ig h e r r a te t h a n it s n o r m a l v a lu e b a se d on th e p r e s e n t c a s h p o s itio n o f th e B r itis h Government w i t h t h e r e s t o f t h e w o r l d , b u t in t h u s c o n s e r v i n g o u r g o l d u n til a ft e r th e w a r w e a r e h o ld in g it a s a r e se r v e a g a in s t t h t d e p o s its w h i c h a r e a c c u m u l a t i n g in t h e U n i t e d S t a t e s t o t h e c r e d i t o f t h e o t h e r c o u n tr ie s of th e w o r ld . _______ EXACT BALANCES KNOWN. In th e m e a n t im e w e w ill a llo w su c h b a la n c e s to b e u se d a s fr e e ly a s m a v b e d e s i r e d f o r t h e p u r c h a s e o f s u c h g o o d s in t h i s c o u n t r y a s t h e e x i g e n c i e s o f t h e w a r j u s t i f y u s in a l l o w i n g t o b e e x p o r t e d , o r t h r o u g h i n v e s t m e n t in s e c u r i t i e s o r p r o p e r t y o f a n y o t h e r k i n d i n t h i s c o u n t r y . In th is c o n n e c tio n it w ill in te r e s t y o u to k n o w t h a t th e F e d e r a l R e serve B oard t h r o u g h i t s D i v i s i o n o f f o r e i g n E x c h a n g e , i s in P o s s e s s i o n o f t h e e x a c t c a s h b a la n c e a s it e x i s t s a t t h e c lo s e o f b u s i n e s s e a c h e d n e s d a v n ig h t b e tw e e n th e U n ite d S t a t e s a n d e v e r y c o u n tr y o f th e w o r ld . I t is ifls o h i p o s s e s s i o n o f e x a c t k n o w l e d g e a s t o w h a t c a u s e s t h e c h a n g e s in s u c h b a la n c e s f r o m w e e k t o w e e k . A s t h e s e fig u r e s d e v e lo p , th e“ P o s i t i o n o f o u r c o u n t r y t o t h e w o r l d w i l l b e a s c l e a r l y b e f o r e the; F e d c r a 1 R e s e r v e B o a r d a s is t h a t o f a b a n k e r t o h is d e p o s ito r s . T h is w ill m a k e it p o s s ib le fo r u s to a p p ly a b a n k e r ’s k n o w le d g e to t h e q u e s tio n o f t h * p r o b a b le d e m a n d s t h a t w ill b e m a d e u p o n u s fr o m tim e t o t im e a n d « o e n a b le u s to d e te r m in e h o w th e y m a y b e s t be m e t. T h e r e w ill b e n o n eed f o r l e a p i n g in t h e d a r k , b u t e v e r y p r o b l e m a s a r i s e s c a n b e c o n s i d e r e d fr o m th e s c ie n tific b a s is o f c o m p le te u n d e r s t a n d in g o f th e a t u a t l o n a s a w h o le a s it d e v e lo p ^ , a n d if w e p r o v e o u r s e lv e s w is e c u s t o d ia n s o r t h e w o r ld ’s m o n e y w e c a n h o p e to r e m a in a s th e w o r ld s b a n k e r s fo r n u n s a year to com e. 58830— 18530 7 . 1Q1, WASHINGTON t GOVERNMENT PRINTING OFFICE . 1918
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