Daily union and American. [volume] (Nashville, Tenn.) 1865-1866, 1866-04-21
PROBABLE EFFECT OF AN EUROPEAN
WAR ON AMERICAN SECURITIES.

In an article on the Austro-Prussian stu
alton and American securities, the Financial
Chronicle, of April II, says: "Of the large
amount of United States bonds held in Eu
rope, probably not less than 5000, 900 are
distributed throughout Germany. How
would this immense aggregate of securities
be affected by the outbreak of hostilities?
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 gen.
orally. Capital is Withdrawn from manu-
features and foreign enterprises, and the
wonted earnings of commerce, instead of be-
ing employed in reproduction, are invested
in real estate, or in some form of security
least liable to depreciation from the condi-
ton of public affairs. Amid this general
quiescensce of capital, the Government gen.
orally comes into the market as a large Dor
rover, and by adapting its offers to the pre-
vailing estimate the public credit, borrows
a portion of the capital thus taken out of
employment. Such would undoubtedly be
the case in the event of war between these
countries But would American securities
held there necessarily suffer? The decline
in home securities would naturally induce
many holders TO sell them and invest the
proceeds in some form of security 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 pc
Rod; and soon after the outbreak of HOSTILE
ties in the Southern States, large amounts of
capital were sent to Europe for supposed safe
IL, ii, Of
capital to seek foreign investments pending
condition of war. Should the occurring war
between Austria and Prussia call forth this
usual tendency, the capitalists of Germany
seeking a sound and stable security into
which they may change their investments,
have at hand Just what they desire in the
5-2O bonds. Hitherto, they have shown
remarkable confidence in our securities.
They have taken them in preference to the
bonds of their own Governments; which,
even in times Of peace, have been driven to
negotiate their bonds in London or Paris.
1t would be difficult to conceive why, in the
prospect of destructive war, they should
sell our securities 10 invest in those of their
own Governments. Ii is true that in time
Of war, there is always n class whose fnan-
cial judgment is influenced by their politi-
cal zeal; and it is quite probable that some
German capitalists may be induced TO sell
out 5-2Vs, and take up national securities;
nor Is it impossible nat some bankers, from
motives of loyalty OF political advantage,
may use their influence TO induce others TO
take that course But the cases in which
citizens deliberately make a sacrifice of cap
ital in order to lend to their Government are
the rare exceptions; the first instincts with
nine-tenths of the people are to insure safety
for their means during war.
The tendency of recent events in the
United States is in favor Of increased con-
tidence in our securities abroad. The pre-
MUM on gold has materially declined. A
bill has passed Congress authorizing the
funding Of the short time obligations Of the
Government and the adoption of measures
looking 10 the resumption of specie pay
ments and the general legislation at Wash
ingIop has been calculated to inspire conf
denCe abroad in the stability OF the Gov
ernment In view of these considerations,
1t is not easily seen why 5-20s should be
less esteemed, in comparison with COM
peting securities in Germany, than they
have been hitherto.
The fact that United States bonds have
not, as in all former cases, risen in Europe
Correspondingly with the decline in the
gold premium, certainly shows that hitherto
the effect Of the political situation has been
unfavorable to the price. Up to this stage
in events, however, We have seen nothing
more than that indiscriminate failure Of con-
hdence which always attends grave crisis,
| the financial results proper 10 condition Of
war not having been developed. It's, how
ever, significant fact that the decline in
5,20s has been nominal, compared with
what has occurred upon many kinds of Gov
ernment securities, especially upon bank
stock.