New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1915-01-02
HOW THE COUNTRY
SAVED ITS HONOR
Every Dollar of Foreign
Debt Paid Promptly
as II Fell Due.
$500, 100000 GOLD
WENT OUT IN 1914
Foreign Exchange Restored to
Normal Through Patriotic
Action OF Bankers.

Action OF bdnhtIS.
: OF all the extraordinary events IN
q wear replete with the dramatic and
startling, none-in view Of the fnan-
cisl world was more strikingly sig
nifcsnt than the complete breaking
down In midsummer Of the Inter
national banking machinery. Not less
notable were tho ingenious and ultl-
mately successful efforts OF master
minds Of finance on both sides OF the
Atlantic 70 erect in a few weeks In
place Of the shattered mechanism that
had been nearly a century building,
a practicable substitute.
At the outbreak Of tho war the debt
Of the United States TO Europe for
goods bought. for loans and for in
terest and dividends on American Sc
; curities held by foreign investors was
/ huge. The Secretary OF the Treasury
is on record with an estimate OF the
amount OF s450,000,0OO Events have
/ shown. u is true, that his figures we're
probably exaggerated, but II Is fact,
nevertheless, that our debt balance
with Europe ran up well into the hun
dreds Of nillions.
Ordinarily hesedebts, acquired in
the spring and early summer, when The
import season is at It's height, are paid
Off I'm the late summer and fall with
foodstuTs and cotton. Il has always
! been the custom for bankers here 10
anticipate these later credits abroad
by borrowings in London and Paris
and Berlin.
with nothing but incredibly for
the idea that general European war
would break out, with disbelief almost
20 the last moment that the justice
/ Of Austria's quarrel with Servia would
/ he tested by armed conflict, bankers
and merchants in the United states
made their customary commitments in
/ Europe, and not until the very end Of
/ July did they take alarm. By that
/ time il was already too late for econ
omv or retrenchment to accomplish
/ anything, even If they had been tried
Americas Debt Piles Up.
/ England was not Officially" in the
/ war until August d. but a week before
/ that her security holders were pouring
/ securities into this and other great
markets, swelling by millions daily the
debts of other nations to her bankers;
sterling exchange vas advancing m the
New York market to prices without
precedent in living memory, and under
writers were beginning 20 quote war
/ risks on the millions OF American gold
going i'm seemingly endless stream 20
/ London. BY July q most Of the Con-
| tinental bourscs had closed. Only r
/ few hours after the London Stock EX-
/ change had followed their example the
/ New York Exchange, too, closed its
| doors, unable TO withstand the liquids-
/ ton Of practically the whole civilized
| world.
Confusion was worse COMPOUNDED BY
/ the entrance of England into the war
and the vision Of Armageddon that en-
/ sued was all but disastrous for the f.
nancial honor of the United States. In
those first few days the establishment
| Of a moratorium in this country TO
Offset the moratoria OF the belligerent
/ nations our debtors as well as our
/ creditors was widely urged, especially
I as England demanded peremptorily the
payment of her American claims in
/ gold. The demand, however. was sue
| cessfully cobatcd By the cooler heads
| among the banker here. I'm the end
( every dollar Of rightful debts was paid
/ by American debtors i'm gold, with tho
result that now. when the balance has
again swung in favor Of this country,
J.
/ feet justice that their claims shall be
satisfied In the same medium.
Situation Dismays Bankers.
When some order had been restored
after the closing Of the New York Stock
/ Exchange, on July 30, and II was pos
sible TO take stock Of the situation g
condition Of the most dish lartening
character was disclosed To the al
doh 81
United States had been added by the
last few days Of trading on the Stock
Exchange something between {25,000,-
600 and S5O,0OO,000. Prospect of selling
securities 70 Europa TO pay some OF the
debt, as in other years, there was none.
The chances for making any consider
. able Roadway against the mountain Of
debt through supplying what was GER
tain 10 be a great demand from Europe
Tor foodstufs, cotton and the munitions
OF war were seemingly reduced TO r
minimum by the fact that nearly all
the ships In the Atlantic carrying trade
were under the register of some one or
other Of the belhgerent countries. To
add to the embarrassment, New York
City but a few weeks before, thinking
by postponement 10 avoid paying of at
an eXorbitant rate Of exchange some
SS0,000,000 of revenue warrants shortly
TO fall due in London and Paris, had
extended their terms and now was con-
fronted with the necessity of redeem
ing her pledges.
The United States had already sent
to Europe in the six months before the
war broke out above S90,000.000 in
gold and in the first week of August
S35,000000 more left New York. The
Federal Reserve banking system was
I yet TO be organized, and as the law
requiring national banks in cities like
1 New York 20 keep a full % per cent
Of their deposits in gold or its equiva-
lent was still in force, further de-
pletion OF the gold reserves OF the
country was looked upon with alarm,
especially as the Clearing House in
situations. with a cash loss of $685.
100000 in single week, already
showed a deficit OF more than Sl7,-
5000.
Exchange at 81.
ia the foreign exchange market,
with offerings few and small, ster-
ling rose TO So a pound for demand -
figure itself without precedent.
/ Thence IL jumped 70 So so, 70 Sc. %
Sc 30. the small supply available being
/ furnished by bankers whose credit in
London was still open. Cables were
/ known TO have sold in that same first
week of August at ST. What private
/ arrangements were made for both de-
mand and cables above those prices
there are no records 20 show. In
francs and marks there was no market
whatever.
To meet the situation foreign ex-
/ change dealers convened and at
/ tempted 10 establish arbitrary prices
for demand sterling, for marks and
/ for francs, adjustment Of differences
/ 20 be made whenever something like
normal market should be re-estab-