The sun. [volume] (New York [N.Y.]) 1833-1916, 1915-07-02
Sees $1,OOO,OOO,OOO
WAR CREDITS HERE
National City Bank Thinks
Great Buying by Allies
Not Improbable.
NEEDED IN COLDS PLACE

NEEDED IN COLDS PLACE
The National City Bank in its July
circular says that II Is not improbable
that nations at war In Europe Will
est blish credits amounting to $1,000
600, 900 in this country II they con-
tinue to purchase supplies here In such
vast quantities as In the past Few
months. And Il IL pointed out that
II seems certain that the nations at war.
through their inability TO produce their
customary crops. will be forced to Keep
on buying largely in the markets here
The gold fund in ottawa is practically
exhausted and shipments Of gold
from Paris, London and Petrograd are
not practicable. In spite OF the heavy
shipments OF gold already made. ex-
change on London. Paris and Petrograd
has declined and exporters here must
either take their pay in deprecated eN.
change or some way must be arranged
through which they can receive thelr
compensation In gold. The circular then
says:
The problem directly concerns the
United States. for without means or
payment there will b. no EUROPEAN mar
ket for our grain and cotton this fall
not to speak OF other supplies or OF the
enormous contracts now being executed
upon foreign account
Securities a. Basis of Loan.
After gold shipments and the return
Of our securities the alternative is the
placing OF loans In this country. ard the
most promising suggestion as to these
,s a scheme for borrowing American
securities owned in Great Britain ana
France and piedsing them here as the
basis Of an issue OF notes. This IL
being done in France. and II the securi-.
ties can be obtained the policy may Dc
largely extended.
That bans OF this character can
he placed In the United States. the
proceeds to be expended for our prod
ucts. admits OF no doubt. There 10 so
much Idle money In this country thai
II does not seem improbable to say
that a billion dollars OF credits might
be established II high grade railway
and municipal bonds Of American issue
ale available for the purpose.
Aside from the difficulties OF trans
portation." continues the banks cir
cular. ''the allied countries are naturally
reluctant to reduce their stocks OF gold.
which are the basis OF their currency
system, but 1t Is not likely that the
governments will discontinue the pur-
chase OF war supplies or Of II neces-
--l " IL a. -ANat, nNfN
The need for these things Is imperative.
and the gold was accumulated largely
for Just such an emergency.
Importance Of Gold Foundation.
ct is. moreover. a mistake to suppose
that the domestic currency systems VIII
collapse unless there Is a given per-
centage OF gold behind them. An ir-
redeemable paper currency will fiuctuate
In value. and hamper transactions with
other countries according to the degree
Of the fluctuations. II is a misfortune
for any country in this g OF inter-
national trade to be on the gold basis,
but when "A country Is engaged in war
smaller misfortunes do not count.
THE fact Is that a currency fixed
upon a gold basis IL a luxury that only
a few countries have been able to afford
until compa ratively recent lines. Rus
STA and Austria-Hungary established
gold payments In 1897 and Italy since
then.
Few countries nav gone through a
| great war without suspending specie
payments. The Bank OF England was
of the gold basis throughout all OF
Napokon's times and our own civi! var
! experience 10 familiar. 1t is safe TO
say that none OF the countries will hest
tate to use their gold as long as II
lasts for governmental purposes. al
though they are likely to disregard the
fluctuations OF exchange in ordinary
commercial transactions"
hat the very situation which has
done 10 much to cause heavy gold inn
portations to this country and swell the
American trade balance to nearly ST.
GOO, 900 900 may prove a danger to the
United States is show In the circular.
II Is pointed out that irredeemable paper
money. IL not issued In excess OF the
normal needs OF a country for currency,
will maintain a fairly stable value.
but that II It is issued in excess II Will
depreciate. as II can neither he retired
nor exported. IL the whole amount Is
forced into use its purchasing power
will decline TO that Of the amount nor
rnally required TO do the work. This
principle also applies to gold and bank
$3.50 ~ aboli " va SbhlI ~ tllut-
ton as now seems I'm prospect here. In
ordinary times there is a free movement
OF gold among the countries which use
that metal as a base for their monetary
system and the effects OF an increasing
supply are spread over all countries.
In recent years the large volume of
International securities has had much
TO do with stabilizing the relations
none markets, At this time.
however. II Is shown that the checks
and equalizing influences are absent and
that trade Ia not subject to any OF the
ordinary rules. The circular then says
For the time we lose touch with nor
NAL world values and are subjected 10
conditions that have always worked mis-.
chief. 1t Is a singular demonstration OF
the fundamental interdependencs of
moder society hat w cannot safely
use this gold until normal conditions are
restored and the other nations are able
to sell us something for it. We dare
not use the available credit ourselves
for that can only be done by wholesale
borrowing on the part Of the public
borrowing far beyond ths needs of our
legitimate, natural and safe develop,
ment.
"The condition of the country undo
such an Indebtedness and with the in.
fation of nominal values which such ar
amount OF expenditure would caus.
ura,.ll ~ ~