The sun. [volume] (New York [N.Y.]) 1833-1916, 1915-01-02
After the Ware

What will lie the course OF money
rates after the war ceases? viii tho
price of capital he high or low: II
/ II is high. business here will natural y
have To go forward under arduous II
not distressing conditions. II 1t Is low,
or AT least not advanced very greatly.
business can go on as It ordinarily
would
So far AS we can see II Is the ma.
jority view among our bankers and
business men that the first one of the
two contingencies that We have name
will come 10 pass. The fear Is that be-
cause of the vast destruction Of capital
caused 10y the war the price Of capital
will be high, If not actually extortou-
ate, for an indefinite period to come
There will he movement To replenish
the capital that the war has diSsipated
This movement must entail the borrow
ing of money. and the borrowing Of
money will he so large that money
rates must rise. We are not prepared
to say that we take issue with tn y
view. IL may turn out 10 be the cor
rect one. as most people seem to think
1t will. However, we are not convinced
That II Is the correct one, and our re..-
sons for doubt upon the subject are as
follows
When the war ends there will he i'm
poyerlshment. II not financial distress.
practically all over The continent OF
Europe. 1t cannot he expected that
business men and merchants will at
once be able TO start operations. Irwin
he found that hundreds Of thousands ~
former employees have been killed out
right, and that hundreds of thousands
Of others have been ma lined by wounds
or lncapaclatcd by disease. II will he "A
long time before the wheels of industry
in Europe will he working as they for
merly were. and before the demand for
money Will be aS great as il once was
for general business purposes Also.
the demand for money for war uses W /
disappear, While the war IS in prog
ress the nations are spending money
AZ the rate of many millions n day. mosr
OF which represents borrowed capital.
In state Of peace all this expenditure.
mr. practically all Of it, will he absent.
There will he state of affairs wher,
the people Of Europe will he buy
Ing less Of everything, and where ryrry.
body engaged in business will have lpss
In do, that Is TO say, will require less
money TO do business with. Furtha".
sencd demand for commodities, com.
modify prices should be expected TO de.
cline; and this means in turn that there
will he lessened demand for money to
"carry" commodities. Under al these
circumstances we should took to see nor
an advance hut n decline in money
rates
Now. il Is very curious, hut this Is
exactly what did happen in money rates
after the last two great wars Of modern
times. Mr. JoHN MooDY has lately
pointed out in IN Interesting article in
the magazine bearing his name that al
though S5,OOOOO0O0O Of capital was de
stroyed by both sides in our civil war
tho average discount rate Of the Bauk
~ England fell from 7.41 per cent II
the end ~ the war in 1864 to 30 pcl
cent. four years thereafter in lSGS
After the Franco-PrusSian war. in
which Nm0,0oo.W0 Of capital was
huUrri az the hanhS rate declined
from 40 per cent In 1872 and l7s pc"
cent, in 1879 to 26l pcr cent, In 1875
I'm our own city interest rates averaged