Daily capital journal. (Salem, Oregon) 1903-1919, 1914-05-02
HENRY cI.Ews WRITES OF
HExI0AN WAR AND FINANCES

MkxiOAN WAX AND flNANCA5
New York, April so-The long
! dreaded clash with Mexico has come.
What the end viii be is at present be-
yond human foresight A costly war
may result, but there is still hope that
il may be averted. The effect of such
IA calamity upon domestic business
should not be particularly serious.
Temporarily il win act as stimulus
upon certain industries. Its effect in
local financial circles has already been
largely discounted. Ultimately il
means the opening Of vast and rich
territory, especially in the north of
Mexico, to Americans and foreign en-
terpnse. Nevertheless prolonged Pc
riod Of disorder and idleness will be
upt TO disorder ETAOINSHRDLUNI
apt to affect investments in Mexican
orably. So it is premature to form any
positive convictions regarding the inn
mediate future value of these proper
ties. The whole Mexican situation is
one of extreme uncertainty, and strict
parallel can hardly be found in our war
with Spain. That struggle from the
nature of the case was upon the high
seas and quickly settled. Cuba was an.
island, easily approached in many di-i
rections. In contest with Mexico our
army may have to cover a large ter
ritory, mountainous in character and
inhabited by a population of fifteen
millions, q goodly portion of which win
scatter to the mountains and keep up
an indefinite gucrfilla warfare, some
what similar possible to the Boer war.
Unless favorable developments trans.
pire war with Mexico will likely be a
long and costly struggle. London is
a more active market for Mexican Sc
curities than New York, and the finan.
cial effect of u prolonged war will be
felt at that center as well as New
York.
Financing of the war would probably
be accomplished through stamp taxes
and the issue to start with of 3 per
cent short treasury notes which could
be readily marketed. Some other forms
of taxation may also be necessary. The
sugar duties might be restored or a tax
imposed upon coffee and tea. In addi-
tion to these proposals, some Of which
may not prove acceptable, the expecta-
tion is that the government will make
q liberal bond issue an basis of 1-2
per cent. 1t is practically certain that
an issue on these lines would be
promptly absorbed. OF course bond
issue would withdraw capital from
other and more productive directions,
and might temporarily depress the gen
eral bond market. There is, however
no lack of capital seeking diserable in.
vestment, and the government bond is
sue for carrying on war with Mexico
would have little harmful effect. Mex
leo will be unable to secure any con
siderable amount Of foreign capital fol-
carrying on the war, factor which
would hasten prostration in Mexico
and tend to shorten the period Of hos
tilities. 1t is generally argued that be
, cause the stock market made sharI
rally after the opening of the Span
ish war, similar results will follow the
opening of hostilities in Mexico II
support of this argue,it 1t is said that
the Mexican difficulties have already
been fairly well discounted, and that
prices are already low owing to the
combination with other depressing fac
tors. Prices Of the active stocks ar,
now down to about the low point o.
November, 1913, all of the advance OBJ
tanned in January having practical,
disappeared.
Much as the Mexican outbreak is /,
be deplored, it will have the effect o.
starting new activities and divertinl
public attention from ills upon whicl
it has been brooding far too long. TIL,
nation, it is true, has serious domesti,
problems to solve. This has Away
been the case and always will be. Busi
ness, however, must go on. Food
clothing and shelter must be providcc
under all circumstances, and while en-
terprise and new development hav,
been temporarily restrained the regu
lar activities OF life are going OF
much as usual. 1t must be remembered
that the market has very libertllly dis
counted the unfavorable conditions
and in case Of favorable developments
we would see general recovery il
this market. President Wilson, it is I,
be noted, still insists at this writinl
that our government has not as yet dc
clared war against Mexico. Neverthe
less the outlook is far from clear, an,
in view of our possibly drifting int,
deeper difficulties we repeat our for
mer advice of caution in financia
operations. HENRY CLEWS.
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