The Washington herald. [volume] (Washington, D.C.) 1906-1939, 1914-09-19
THE HEART OF
THE PROBLEM
tcoprrirht. l.n. b. Q. v. Ks,.l


Everybody knows that our grain crops
will produce more wealth for the people
of the United States this year than in
some years past Everybody feels that
though we will undoubtedly suffer much
from the war. in Europe this nation will
suffer less than any other great nation,
and will. therefore. be by long odds the
most favored nation OF Providence for
some years to come. Everybody knows
that on the whole our people are conf
dent, wealthy, and steady in this crisis
What, then. is the cloud that hangs over
the business world, that suspendS al
trading in securities, that has driven gold
and. gold certificates practically out OF
circulation. and that hangs heavy over
every business venture? That Is the
problem OF the near future. and 1t should
be understood at least vaguely by every
business man and every investor.
In a nutshell, It is the fear that Eu-
rope, which for generations has been
lending money TO all the world. will be
forced by the stress OF war TO liquldate
a large part OF her accumulated credits
and thereby TO call upon all the world.
ourselves included, 10 pay debts which
We thought would never have to be paid.
Look at it, for the present. only
from the standpoint OF security holdings
ABROAD. " men, IN past JhlltS d
Hill sold to the peerage OF England
large percentage OF the capital stock OF
the Great Northern Railway he created
a debt. On the face Of 1t. since stock
does not mature and II is not obligatory
Ito pay il of in cash. It was a debt that
would never fall due. Actually, how
ever, il was a call loan; for in theory
and in practice alike the holders OF that
stock can. il they need money, sell 1t
in the open market here in the United
States and so compel American capital
to take back the security and give to the
peers Of England that amount of money.
This illustration is merely typical Ac-
cording TO all the experts, the amount
Of this sort OF debt. which might be
called floating and unmatured debt, is
something more than o0000,OO0 1t is
held by all the capitalists Of Europe: II
is shared in alike by the great money
institutions of Germany. Austria. France.
Holland, and England, and by the little
peasant investors Of those same cOun-
tries. A $1,000 900 bond issue made by
the Pennsylvania Railroad some years
ago for the French market was made
in pieces so small that even the smallest
investor might participate, and did par
ticipate.
The heart OF our financial problem,
therefore, is the question how much of
this curious debt which we never con-
sidered debt at all. is now going to be
thrown back upon the American markets
as a result Of the death struggle in which
the great nations of Europe are engaged.
1t is the inability to answer that question
with any intelligence whatever that keeps
the stock exchanges OF all the world
closed, that leads to the boarding OF gold.
that has practically suspended specie
payments in all our markets and that
casts a deep and terrible shadow over our
banking institutions, not only the COM
merCial banks which are always on the
firing line, but also the savings banks.
the receptacle of the earnings OF the
poor.
One can hardly guess at this time what
the answer is to be. The length of the
war. the question who will have to pay
and what the amount OF those
indemnities will be. the question whether
the war will result in larger and larger
or in an almost complete dis
armament of Europe-all these and many
other similar unanswerable questions
have a bearing upon the problem. II
France and England should. in the end,
be compelled to raise billions OF money
for indemnitfes as well as to repair the
terrible ravages of war; there is no doubt
that the liquidation of this sort would be
so tremendous as to sweep away many
billions of dollars of value in our securi-
ties and absolutely swamp and paralyze