The Portland daily press. [volume] (Portland, Me.) 1862-1921, 1866-04-28
The Austro-Prussian Situation. and Ameri-
can Securities.

The Austro-Prussian Situation. and Ameri-
can Securities.
The threatening aspect of European affairs
at the present time naturally suggests some
inquiry as to what would be the effect of a
war there upon ourselves, and especially up
on our commercial and financial interests
Hitherto, Germany. has been the largest alb
sorber of American securities abroad. 1t is
estimated that of the vast amount of United
States bonds held in Europe, at least $2O0,000,-
600 are distributed throughout the German
States. Such being the ease, it becomes a
question. of considerable interest how this i'm
mense aggregate would be affected by such an
outbreak OF hostilities as now seems immi-
nent. In recent number of the Financial
Chronicle we find an article containing some
intelligent suggestions in relation to this mat
ter, a brief extract from which may be of in
terest to our readers: 20 sa.sd i5 t.As
The first result of war in any country, and
+ under any circumstances, is to disturb conf
dence, contract commerce, and thereby pro-
duce depreciation of home securities gener-
ally. Capital is withdrawn from manufactures
and foreign enterprises, and the wonted earn
ings of commerce, instead of being employed
in reproduction, are invested in real estate, OF
in some form OF security least liable to depre-
citation from the condition of public affairs
Amid this general quiescence of capital the
Government generally comes into the market
as large borrower, and by adapting its offers
to the prevailing estimate of the pub bic credit
borrows portion of the capital thus taken
out of employment. Such would undoubted-
ly be the case in the event of war between
these countries. But would American securi-
ties held there necessarily suffer? The de-
cline in home securities would naturally in
duce many holders to sell them and invest the
proceeds in some form of securities the value
of which is independent of domestic disturb
ances. During the wars of France, a larger
amount of French capital sought investment
in the United States than at any other period
and soon after the outbreak of hostilities in
the United States, large amounts of capital
were sent to Europe for supposed safer en-
ployment, facts showing the tendency of cap
ital to seek foreign Investments pending aeon
dition OF war. Should the occurring of war
between Austria and Prussia call forth this
usual tendency, the capitalists of Germany
seeking sound and stable security into which
they may change their investment, have at
hand just what they desire in the 500 bonds.
Hitherto, they have shown remarkable con-
ddence in our securities. They have taken
them in preference to the bonds of their gov
erments; which, even in times of peace, have
been driven to negotiate their loans in Lon
don or Paris. 1t would be difficult to conceive
why, in the prospect OF destructive war,
they should sell our securities to invest in
those of their own governments. It is
true that, in time of war, there is ALWAYS a
class whose financial judgment is Influenced
by their political zeal; and it is quite probable
that some German capitalists may be induced
to sell out 5-20's and take up national securi-
ties; nor is it impossible that some bankers,
from motives of ydlty or political advantage,
may use their influence to induce others to
take that course. But the cases in which cit
zens deliberately make sacrifice of capital in
order to lend to their government are the rare
exceptions; the first instinct OF nine-tenths
of the people being TO insure safety for their
means during the war. The tendency of re-
cont events in the United States is in favor of
increased confidence in our securities abroad
The premium on gold has materially declined;
bill has passed Congress authorizing the
funding of the short term obligations Of the
government and the adoption of measures
looking to presumption Of specie payments;
and the general legislation at Washington has
been calculated to inspire confidence abroad
in the stability of the government. In view
vi tucSc COuSlucIdCtOu IL Is uOC easily seen
why five-twenties should be less esteemed, in
comparison with competing securities in Ger
many, than they have been hitherto.
The fact that United States bonds have not
as in all former cases risen, in Europe CORE
spondingly with the decline in the gold pre-
MUM, certainly shows that hitherto the effect
of the political situation has been unfavorable
to the price. Upto this stage in events, how
ever, we have seen nothing more than that in
discriminate failure of confidence which al
ways attends a grave crisis; the final results
proper to condition of war not having been
developed. 1t is, however, significant fact
that the decline in five-twenties has been
nominal, compared with what has occurred
upon many kinds of government securities,
especially upon bank notes. ..,i sac.. ~