The Washington herald., 1915-10-03
What the Anglo-French Loan
Means to the United States

Great Britain's debt with the ex
cepton or this loan. is all held at
nome. and the country is rich in high
ly developed industry and a capabIs
population The taxes for the support
of the national government resi- yerv
lightly upon the great body of the
people.
The French people are industrious.
irusai ana thrifty. and have borne
sS eaS puraens In the past without
nlnching. The war indemnity which In
1871 they agreed to pay to GERMANY
was so great. according to the stand
ards oil that time. that the accom-
phshment was regarded as doubtful.
but its payment had no noticeable ef
rect upon the progress of the country
rrehch Investments abroad have
greatly increased since that time. and.
| when marked conditions have become
normal again will proba bly, be drawn
upon for the means to take up all
French obligations abroad"
Ihe dangers to the country of in
nation IT continued gold importations
had been decided upon instead of the
loan are described as follows:
"A period of rising prices is a period
OF debt making. There is great temp-
tatlon 10 use credit at such a time
and it requires unusual resolution to
enable a man to pay his debts when
opportunities for using money moro
adVantageouSly seem to abound
Even now the very warnings that
are written against imitation are being
used to encourage people to buy-buv
go into things. The average man IS
more interested in the prospect of
rise than in the probability of a COL
lapse afterward.
IT should be clearly understood that
II is the OF
In the country. or the possibilities OF
the gold itself entering the circuIa-
uon. that is the source of danger II
Is the possible use of this gold as
a basis of credit that causes appre-
hension
THE American people will not
change their habits as to the MONEY
they carry or their use Of checks. Gold
will not take the place of paper o.
silver. II will all 20 into bank re-
serves where its potency is multi
piled several times over.
The United States cannot absorb
into its credit system large portion
of the gold which is normally re-
quired in Europe without raising the
entire level of prices and wages m
this country. and. per contra Europe
cannot lose 1t without having its level
depressed. The difference between the
two levels would be so abnormal that
1t could not be maintained after the
war was over. All of the rest of the
world would he on the European level
and be able to do business with Eu-
rope only.
Would Leak Gold in Every Pore.
Under such conditions the United
states would leak gold from every
pore After the war is over the COM
petition of Europe will have to be
met and ii is a mistake to expect Eu-
rome to be hopelessly crippled.
1T is defying all experience to sup
pose that the United States could hold
an undue and disproportionate amount
of gold under such conditions Unless
the tariff was raised European prod
ucts would flow into this market and
quickly turn the trade balance. but
even il the tariff was made prohibi-
tory upon competitive imports the out
flow of gold could not he stopped
But the merchandise balance Of
trade is not the only thing to be con-
sidered. Capital in the form of gold
would flow from congested market
in tn" United States to needy markets
elsewhere
Once outward gold movement
was started. and the resulting con-
traction of credits hecan. the fictitious
and precarious character of tn. whC,a
situation would he apparent
This is not prophecy The United
States unquestiorably has an oppor-
tunity t" improve its position in in
terna tional trade and finance All the
world expects 1t to do So But if this
trade balance which ia thrown into
our lap results in raising the perma-
nent level of costs and prices. So as
to diminish our export trade and in
fate the volume of home credits. ou-
international position and domestic
situation vii be both changed for the
worst"