Evening star., 1914-08-09
HARD TOFOLL0W
MOVES IN EUROPE
International Events of Vast
Significance to Finance
and Business.
EFFECT IN THIS COUNTRY
IS MATTER OF CONCERN
American Foreign Trade and Com
merce misunderstanding Class
es in United States Affected.

During the progress of the war In
Europe Mr.. Cousins will make a spe-
ciaI study of the effect of this wnr
upon American business and finance
and deal with the subject in a series
of special articles. Next weeks story
will deal more specifically with cOndi-
tions In American monetary centers.
NEW YORK, August S.-International
movements of vast significance to the
worlds financial and business markets
have followed each other with such ra-
pidity since the first outbreak of Euro
pean hostilties that it is practically i'm
possible to keep in touch with the latest
developments or to anticipate with any
degree of certainty what the morrow
will bring forth. 1t goes without say
ing, of course, that Europe's financial
machinery is completely disrupted and
therefore useless, all foreign bank dis
count rates having been raised to pre-
hibitive basis and surprising absence
of specie from general circulation. What
concerns us in America, therefore, is the
effect which this European uproar will
have upon American foreign trade and
commerce, upon the general business
conditions in this country, upon living
conditions of the hundreds of thousands
of workingmen who depend upon daily
manual labor for their very existence.
It Is idle to say that America will not be
seriously hurt by general European
war. She will suffer by reason of the
wholesale loss of capital involved in such
a catastrophe loss which is necessarily
distributed over the whole world, though
the countries Immediately involved will
necessarily bear the lions share of the
burden. She will suffer by reason of the
temporary destruction of her foreign
market, to which she sends millions OF
dollars worth of goods and from which
she in return receives the manufactured
goods of Europe, plus a liberal share OF
European gold. She will lose her finest
market for American security invest
ment, involving not only the prohibition
of further sales abroad by the certain
wholesale dumping of American securi-
ties back on this market at prices that
bear no relation to the value of the prop
critics they represent paralyzing the
home market as well. She will lose by
reason of the tremendous drain of gold
from our country to foreign centers I'M
less this process is summarily arrested
by prompt action on the part of our in
ternatonal financiers.
An Offset to Privileges.
All these influences will more than off
set any additional privileges we may now
have for the sale of food supplies and
common necessities to the belligerent ma
tions across the sea. The trade which Is
built up upon the extreme necessities Of
other countries in dire straits is not the
normal natural trade expansion we de-
sire, even though it may stimulate busi-
ness SO long as we can produce to full
capacity and can deliver our goods where
they are in demand. Enormous losses
have already been sustained, but they
are losses rather of disorganization than
of destruction which latter will be in
calculable in the event of a prolonged
struggle between the great European
powers. We prefer not to increase our
trade at such enormous cost. 1t is only
by shallow and superficial reasoning that
any one can make himself believe that
European war will economically benefit
the United States.
Financial conditions in America are
now but a reflection of those obtaining in
the European bourses, and in fact are
caused by the extraordinary events trans
piring in the countries of Europe. Even
before the nations of Germany, Russia,
France and England were drawn into the
struggle the investment markets of Eu-
rope first became nervous then frighten-
ed, then paralyZed. The London Stock
Exchange, though normally kept open for
a day or two transacted no business. and,
in fact would not much as submit a
quotation. The Paris and Berlin bourses.
besieged by frenzed investors clamorlng
for gold. to obtain which they We're ready
to ruthlessly sacrifice good securities,
closed their doors in a panic and an
nounced their intention to suspend Lon
don soon followed suit.
Then the great European banks. in dire
necessity. raised their discount rates to
prohibitiye basis, and the paralysis of
th.. fpl iI1
Bank of England rate rose from ) to ),
and then to 10 per cent, the highest rate
since the Indian mutiny in 1891, the next
highest rate being per cent In 1913. Ihe
Bank of France marked up its rate to &
per cent; the Imperial Bank of Germany
to 6 per cent. prior to which time the
bank had maintained a 4 per cent rate
for more than year; the Bank OF the
Netherlands and the Bank OF BeisiuHi
took similar action.
The French and German peasants are a
hardy. thrifty class of people, extremely
simple in their wants and with hlshiy
developed instinct for saving. Ihey nave.
therefore. proved fertile Held Tor the
sale of investment securities. For long
time they confined their investments to
European stocks and bonds, but IN que
time, finding that higher returns We're
Forthcoming from American shares. pc
gan to invest in our stocks. mus was
the market for American securities broad
ened, and thus. under proper nurture and
development, might it have expanded to
tremendous proportions
There is one great difficulty, however,
and that is found in the inherent fear
and superstition of the willy French IN
yestor: for in times Of trouble his hrst
instinct is to dig a hole in the ground,
sacrifice his investments for as much
gold and silver as he can obtain, ana
bury his precious treasure until the cloud
passes over. The relation or seinHs
price to intrinsic value is of no concern
to him. He wants gold. and wants II
quick, In such time he naturally tries
to DISPOSE of the securities OF foreign
corporations, and this causes a whole-
sale dumping of American stocks pack
to our market. When it is remembered
that the total European investment IN
American securities is inquired at SIN
thousanad million dollars. 1t is easy 10
understand why the throwing OF inns
huge amount of stocks back TO US 10 pe
sold Eat the market when means re-
gardless of price. must OF necessity cause
inter- decentralization. This Is the eNpla-
natIon of the closing of the New YORK
Stool, Exchange last Friday.
Stock Exchange and Gold Shipments.
In considering the safeguarding OF
Americas financial position two lmpor-
rant problems Immediately confronted our
f,nancial leaders: First. the preservation
of security values, and, second, the re-
tention of our gold and specie supply.
For the reason already stated, it was
deemed wise to close the New York Stock