The Washington times., 1915-09-18

PAYS WITH NE>
Let me illustrate in o homely way.
You and I are running a shoe factory.
An order for 10000 pairs OF Hottentot
shoes for the Hottentots In North Rho
desia comes to US. We, ship 'em. The
buyer can no longer pay US with draft
on London for E2,000: London 10 become
a creditor city. with It's big credit In
New. York: 90 our African customer
pays with q draft for $4,000 on New
York. and 1t 10 CHARGED AGAINST the
British credit there. We deposit the
draft in our Now York bank, and q
bookkeeping entry transfers the credit
to us. Perhaps the money doesn't even
70 out OF the bank at all. But II be-
comes the basis under ordinary bank
Ing procedure for a banking credit for
Us of about four times as much. say
$4,000 We pay the leather man and
It. and take on more contracts for more
shoes. The leather man and the rest
Of them pav their bills from It. and the
working people who have done the work
on those shoes deposit their part In the
savings banks where 1t becomes the
basis for more banking credits to be
expanded In like manner. The fashion
in which credit multiplies itself is one
Of the most fascinating things about
commerce"
The speaker. himself for many years
q man Of big business affairs before he
became a public Official. proceeded to
develop an elemental explanation Of fur
ther ramifications from such o trans
action as the great loan to Europe.
Banks Full of Cash.
ut i nonsense to talk about tho
country's capacity to make q credit loan
up to . billion dollars. The banks show
that We have an aggregate holding Of
cash. in excess Of reserve requirements
in our banks. Of about two billions Of
dollars. That money would better be
In use: that's what money Is for. Re-
naming idle It would become a tempta-
ton to speculate. imitation. and nnally
"A stock Of money In banks, asRre-
eating two billions. represents three
times that amount in available credit
capacity; say from six to eight billions.
1lnat. rhst y: A., customer ,,,,. whose general
ried" for about four times his average
balance: and the country has q cash
balance IN bank. unused. Of two bill
necessary. that this fund OF credit be
utilized: necessary. II industry and en-
te5prise are to be kept moving ahead.
the case Of the shoes for Hottsntots.
stasnstio4 ensues: then there 10 a de-
cay OF confidence. fear Of giving
eredits-and then collapse. and panic.
prex s.. may Sc psnc
when the banks are full Of money, az
easily as when they haven't 1t. This
country. unless It were willing and
If. up DwoSd sss 9ssssn sss ss
imminent danger Of Just such a panic
as that.
'Uniess we adopt this method Of en-
us. the world presently will be un:
able to do the business at all. 1t will
be Unable to buy our wheat and corn
and rye and beef and lard and bacon
and the output of our busy manufac-
turing interests. and falling market
conditions will bring depression and
tdleness to US. We are really financ-
ing our own business.
Great Credit Fund.
mot a dollar Of money will be taken
out OF tkis country II this loan is
made: 1t will simply be the creation
of a great credit fund out Of which
our own business will be financed
That is why I say that this transac-
tion is not financing the war; but
merely financing our own business
with the world; business with China,
Japan. South America. Africa. as we'll
az Europe: business with all the
us because We are the one country
with, reservoir OF credit on which
they may draw in this crisis.
Let me illustrate further how the
America win affect world trade. Re-
Gently, We have seen the pound sterl-
ing. the franc. the lire, the rouble, the
mark, all at various discounts in the
raS 70 whst maststs , Discounts as
standard Of first-rate Importance in
the world that can still be recognized
as sound and normal-the American
dollar. The exchanges among the ma.
through America. where in the past
| they have been settled through Lon
don. and In dollars instead Of sterling
"British investments in China COM
ihand a constant income to Britain
from China. 1t will be natural that.
as England owes more and more tn
over to our side to pay part of the
British debt to us Thus, precisely as
in the past most OF the worlds inter
national exchanges have been settled
the new consitons sisrns sSey vim 50 be unaf. ssi!
| tied through New York in dollars. New
| trade relations, new exchange direc-
tions. new commercial experiences will
be created. Why, this loan will be
worth. at say. a half-billion, its whole
| amount In prestige and advertising.
| The same thing that Is true about
China will he true of the whole range
OF International trade and EXCHANGE.
| New York will succeed London as the
| reservoir Of credit on which all ma"
| draw. We know what It has meant 10
London to be the financial nerve CEN
| ter Of the world. 1t will mean still
| more to us.
Trade With South America.
/, Germany has been marvelously sue
cessfui in developing trade with South
America; yet Germany has never beer
| able to force the acceptance of Ger
man money as the standard of ex-
] change. Even whore Germans have