davidaulloa/AmericanStories huggingface dataset:
New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1917-04-01

Tho average citizen probably docs not
appreciate what a blessing IL is TO this
country that the Federal Reserve act
is on tho statute books and the Fed
eral Reserve banks arc actually opcr-
atinc n our banking system consisted
to-day. as formerly. Of $4,000 isolated
banking units, the stage setting for a
financial panic after the declaration Of
peace would be perfect. The Federal
Reserve act has cemcnted together the
greater part of our financial system
into compact body that can be di-
rected by the Federal Reserve Board
safely through the dangerous period.
OF course, period Of readjustment
must come. and with it probably mod
crate business depression; but the es-
Enlistment Of the Federal Reserve
banks with their note issuing power
has removed all possibility Of a recur-
renee of the events Of 1907
One Of the most important remedial
measures that should now be adopted
is, in my opinion, the concentration Of
the gold reserves Of this country in
the Federal Reserve banks 1t is high
~ important that, when the golden
tide turns, such outflow OF gold a. it
is found necessary to make should be
carefully and scientifically regulated
by a disintcrcstcd body working for
the good Of the whole. This is a mat
ter that cannot be managed b. midi
vidual banks. Placing substantially
all the gold reserves Of this country
New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1917-04-01
Treasury Bills
Will Be Paid Promptly

II has been suggested that such
treasury bills may prove ualiquid and
that there may be danger Of the hold
iEg banks being obliged TO renew them
against their wishes. Just how remote
il such a contingency can be gagged
from the splendid manner in which all
the leading foreign countries haze met
their obligations in the past. Their
available supplies of gold preclude me
possibility of trifing amount OF
few hundred million dollars proving
source OF embarrassment TO them.
The treasury bills would operate 10
take Up the slack in our money market
and their volume would change from
time 10 time with general money mar
ket conditions. After 4 time there
would be a constant stream Of these
treasury bills maturing daily, and on
the other hand there would Likewise
DC issued daily a volume OF such bills
In tie event of the ending Of the war.
or the turning of the golden tide Tor
any reason whatsoever, one OF the first
effects would be the Tightening O. the
money market in this country. This
would Immediately have the result Of
stopping the purchase OF the treasury
D!ltc. as the Olu lItdcAtg b4llH tud-
tured it would be necessary that the
foreign governments provide coverture,
and in this way the demand upon US
Tor gold would be Offset This benef-
cial effect CT maturing treasury bills
would be automatic in its operation.
and they would thus perform for W
nationally the function OF filing in the
gap between the maturities Of our time
investments.
The fact that the issue of such treas
ury bills is UNLIMITED" has caused
some TO fear that our banks may in
vest too heavily in them snd thus
render themselves unliqud. This is
illogical. Was the amount OF our in
yestments in the time loans OF for
eign governments limited n the past
by the amount they offered US or was
it limited by the judgment Of our bank
ers? No banker Is anxious to render
his bank unsound. He would not in
vest in these treasury bills more than
his surplus funds. The amount Of his
investments in treasury bills would
depend upon his individual judgment,
just as does any other investment. To
say that perhaps our bankers may in
vest t0o great an amount in such treas
New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1917-04-01

within the control of the Federal Re
serve banks will result in the outflow
of gold being regulated by the Fed
eral Reserve Board. and il will be
their aim to prevent the gold going
out in sudden waves that might occur
if the matter we're left TO private en-
terprise. The Federal Reserve Bank
mas established relations with the
Bank Of England and the Bank of
France. and. as required. viii estsb-
lish relations with the other gOyI m
ment banks Of Europe, so that it will
be in a position to handle the outflow
of gold from this country when the
proper time arrives.
As | have already stated. it is nee
essary and desirable that we part in
due season with reasonable amount
of our present gold holdings, and a
gradual contraction Of credit is neces-
sary. but a sudden collapse resulting
from unregulated, spasmOdic exports OF
gold would be disastrous. Inc Federal
Reserve banks should be given some
power such as that possessed by prae-
tically all foreign government banks by
which they could exert more than an
indirect influence on gold expectations
The Bank of France has the option OF
redeeming its notes either in gold or
silver. which enables it to absolutely
control gold shipments; the Bank OF
England may redeem its notes by coin
light weight within the limits of toll
erance, etc.
A practical suggestion has been
made that all forms OF paper money
Of the United States be made redeem
able to private parties IN gold only a'
tho Treasury in Washington. while the
Federal Reserve banks could secure
redemption at the sub-treasuries. ms
would give the Federal Reserve banks
leeway in the matter OF gold snip
ments to the extent OF the cost OIL
shipping gold from Washington to the
seaboard. 1t is probable that any add
tional brake beyond this upon gold
movements would be undesirable. II
is seldom desirable to prevent gold
sbipments. but it is frequently desir-
able that they be Temporarily re-
strained.
The other and by far the more i'm
nor,ant reason for placing the gold
reserves OF this country move directly
within the control OF the Federal he
serve banks is that by so doing we arc
nIocinq it where most efficient use o.
:, con be made as the basis OF credit.
As the gold is being shipped out oil
,he country. it will be the duty Of the
Federal Reserve banks to counteract
the contyactivc effect of the move
mont upon credit. On the one side
thcv should endeavor to govern the
outflow of gold and prevent violent
tidal waves: on the other. they should.
bv iudicious expansion Of credit. OH
sot the harmful part of the effect. The
nrocess b. which the Federal Reserve
banks expand their note issues and
extend credit accommodations to the
New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1917-04-01

member banks OF this country has been
frequently explained.
The Federal Reserve bank, under eX'
istiag laws, can extend TO the members
of the Federal Reserve system credit
accommodations in the form OF cur
rency to the extert Of over one billion
dollars. This estimate ia based upon
the amount Of gold concentrated in the
Federal Reserve banks to-day. 1t nat
urally follows that as we increase the
stock Of gold held by the Federal Re
serve banks we make it possible for
the banks to render aid TO a proper
tionately greater extent. Certain
amendments to the Federal Reserve act
brought before the last Congress would
have facilitated the concentration OF
our gold holdings with the Federal Re
serve banks and would have also en-
abled the banks to give aid in the forI9
Of credit extensions even more efec-
lively than at present. These amend
ments have the approval Of the Fed
eral Reserve Board and the bankers OF
the country, srd should be promptly
passed.
Another remedial measure that
should be adopted by Us is one that
would tend tc counteract the factors
that Will cause the outflow Of gold
This measure consists Of extending
loans Of proper maturities to the Euro
pean countries.
Below will be found table showing
the amount of foreign loans outstand-
i.g m March 81 1000 omitted:
New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1917-04-01

AS the Reserves Of European Belligerents
Have Been Depleted by the Export to
Neutral Countries of Hundreds Of Millions
in Coin and Bullion to Pay for Munitions
and Supplies, the United States Has
Assumed Commanding Position IN In
ternational Fiinance-Responsibllity tor
Maintaining the Credit Structure Essential
to the Free Movement Of Commerce
Between Nations as Well as the Stability
of Domestic Business Has Been Placed
Upon the Shoulders Of American
Bankers-ProtectiveM Measures Which the
Situation Demands.
New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1917-04-01
Huge Additions to
Our Gold Stock

A. the outbreak Of the war there oc-
CURED a disarrangement Of interna-
tional credit which affected the man
ci.l relations Of the United States with
F,,one in such manner that Temporarily
NE were debtors on international pal
ance. and as a result we were called
unon 20 export large quantity OF goid
Tho acu+e condition created at the time
in this country was of only short dura'
ton. and the golden tide soon turned IN
our favor During 1915 and 1915 We
imported 81 OBS ,554 900 Of gold. We ex-
norted during the same time Sl74,226,'
600. leaving a net Of $685., 82S,OOO. Dur
ing this year we added about S27O,OOO,-
600, making a total addition to our stock
of gold OF about s1,130,O00,00O since the
outbreak Of the war. The main cause
of these gold imports has, OF course,
been the war purchases Of commodities
in this country by the various bellig-
erent nations. Neutral countries such
As South America, Scandinavia, etc.
have also made purchases heavier than
usual in this country, but the purchases
Of the belligerent nations outweigh
them TO such an extent that for our
present purpose We may safely ignore
them-the more so as the increase in
neutral" purchases has TO a large ex-
tent been offset by our increased pur-
chases in such countries on account Of
the closing OF the usual sources Of sup
PLY in the belligerent countries.
The bclligerent nations have paid for
their purchases here, primarily, by sell
ing back 10 us our securities; secondar-
ily. by the fotation Of loans and credits
in this country, and. thirdly, by ship
ping to US when and as needed liberal
quantities Of gold. The volume Of Sc
curities resold to us has been estimated
At about two billion dollars. The Lores
report shows that $1,000, 100000 Of
New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1917-04-01

% the foreign governments may adop
the artificial method Of attracting goi''
/. O.. purchasing it, One natural factor
will be the difference in interest levels
prevailing here and abroad. II seems
quite probable that the interest lever
on British government securities IN
Great Britain (Which at present are on
about : pcr cent levcD will be very
close. if not above. Der cent level
II also seems probable that the inter
est level for French government SC
curities in France will be about the
same. If that is true, when peace Is
declared Il stands 20 reason that Eng
lish and French holders Of any Amer
lean or other securities salable IN this
market, such as Argentine, Canadian
Mexican. etc. who rcfrained from sell
ing them in the past on account Of the
uncertainties Of the war, will sell them
to US and reinvest money at higher
return in their own government SEE
curitie5.
There doubtless remains IN Europe
a large amount Of American or similar
securities that are being held for one
purpose or another, and these will eX-
hibit tendency to come forward when
peace is declared.
A disparity of interest levels also
would cause American funds 10 How
from this country to Europe for in
ycstmcnt, attracted there By the high
interest returns on securities Of un'
questioned worth. An American to-
day is not attracted to an investment
in the internal bonds Of England and
France, but it will look quite different
to him when those countries are at
peace and he realizes their tremen-
dous productive capacity. The differ
ence in interest levels will tend to
equalize itself in many other less i'm
portant ways; through the operation
Of the discount markets; the diversion
of credit operations to this side; at
traction Of deposits, etc. These finan-
cisl factors being the most mobile will,
in my opinion. be the first to be felt
in the changing Of the direction Of the
golden tide.
As the economic machinery of the
various belligerent countries begins to
resume its normal functions their eX-
ports will increase and imports will
decrease. It seems quite fair to as
sumo that they will then export much
more to us and import much less from
US. as our price levels will undoubt-
eddy be far above theirs. With our
wages, commodity prices and general
standards of living at tremendously
high levels, it stands to reason that
We shall hardly be able to at first com
pete with the foreign countries. where
lower levels will prevail.
All these factors combined, the sale
10 US of such American and similar Sc
curities as may then remain in Eu-
rope. the investment OF American
funds attracted TO foreign countries
by their high interest levels, and the
adverse trade balance will undoubted-
Is result in exchange rates that VIII
send gold out of this country.
New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1917-04-01

Our national financial situation Is,
with respect to the maturity of these
loans, somewhat similar TO that of
banking institution. A conservative
banker takes great care to so arrange
the maturity OF his loans ard invest
ments that cash will be coming in at
such times as he is likely to need it to
meet all probable Withdrawals of de-
posts. The banker we'll realizes that
if his deposits are maturing at the rate
OF $4,000 per month it will do him
very little good if he has an investment
Of sl20.0000 900 maturing at the end Of
the year. His investments must ma
ture approximately at the same time as
the Withdrawals OF his deposits take
place. In the same manner We should
be careful to arrange the maturities
of the loans due us from abroad, so
that they will be likely to mature at
the time that the tide OF gold begins to
flow outward.
The table printed herewith shows
that the maturities of the past loans
have been quite we'll spread IL seems
quite probable. or rather it is fervently
hoped, that the war will end early in
1918. and, consequently, it would be
reasonable to suppose that the call for
gold will come upon us shortly there
after. If that should eventually take
place we would be quite we'll prepared
with the exception Of one measure
that n careful banker never oyer'ooks.
In every we'll regulated bank, in add
ton to the time loans and investments
made b. the bank. there is carried a
considerable volume Of call loans. that
may be made to mature and provide
funds at any time and thus "ill in"
between the maturities of the fixed
maturity loans. Thus, if banker has
invested his funds in loans maturing.
say, in August, and Withdrawals OF de-
posits take place Unexpectedly at an
earlier date, the call loans take care OF
the situation Until the time loans ma
ture. Our national maturity sheet
lacks the equivalent OF this item OF
call loans. For instance, should the
New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1917-04-01
Dangers Of
The Situation

That this situation contains many
elements of danger is clearly apparent
The greatest dangers are:
First Overe1pansion Of credit and re-
sultant stimulated trade.
Second General disarranRement Of eco
nomic structure; high prices. abnormal
wages: change in standards Of living. etc.
Third The inevitable reversal of the
golden tide.
We have already considered the over
expansion of credit. the resultant
stimulus 20 trade and the ultimate ef-
feet of both upon price levels. Wages
have tendency to 90 upward in con-
fOrmity with prices. but unfortunately
are not always as ready to come down
with general price levels Wage levels
have an effect upon our standards OF
living. which are difficult, if not i'm
possible, to change. Another evil effect
is that the overeXpansion of credit and
the higher prices resulting therefrom
have tendency to temporarily make
certain lines of business extraordi-
narily profitable, and capital is thereby
tempted to flow into unnatural chaa
nels This movement generally takes
the form of extensions to plants, new
plants, etc. which upon the resumption
of peace conditions will be found un-
necessary
That a reversal OF the golden tide
must take place when peace is de-
clared is proven by a mere glance at
the chart published herewith 1t
stands to reason that these abnormal
conditions cannot continue. Immed-
atcly upon the declaration of peace the
usual economic factors nov obstruct-
ed by war measures will begin to
freely operate, and ultimately an
equalization of the gold holdings of
the various countries will result. This
is highly desirable in the interests OF
both belligerent and neutral countries
once nation possesses as much gold
as 1t can conveniently use as a me-
dunn Of exchange and basis of its
normal volume of credit, it has no use
for any further amount, and any sur
plus naturally tends to flow out of the
country. Just what immediate causes
will bring about reversal of the tide
and the order in which they will oper-
ate It is impossible to forecast We
can only guess.
1t is certain that Immediately upon
the declaration OF peace, or, more
probably, some time previous TO such
declaration. there will be a great de-
crease in the amount Of commodities
now being purchased in this country
by the belligerent nations. Such de-
crease, if it was sufficient to bring our
exports down to pre-wsr levels. would
Immediately suspend gold shipments
our way, but it seems doubtful 20 me
that the decrease would be sufficiently
great to result in gold going outward.
We are importing commodities 10 a
considerable extent and prices are
very high, but it is hardly likely that
our imports would continue in such
volume that they alone would offset
all other factors and cause gold ex-
ports.
II seems fairly certain. however,
that number of other factors will de-
vclop at the close Of the war that will
result in forcing gold outward. Some
New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1917-04-01

traceable railroad securities have been
resold to US between January 81, 1915,
and January 81, 1917. Adding to this
amount the value of securities sold us
before January 81, 1915, and after Jam
uary 81, 1917; industrial securities, Ca
madam and untraceable securities would
easily bring the total TO S2,OOO,OOO,OOO.
The loans and credits foated here
amount to two and one-half billion
dollars, and the net gold shipments
have been estimated at over one billion
dollars, making total of approximate
" six billion dollars.
Paving Way for
Foreign Loans
The gold shipped to US has performed
its usual economic function. First, 1t
accomplished the direct payment OF
commodities Of equal value; second, it
has become the basis Of an expansion
OF credit. This expansion of credit has
facilitated indeed, it may be said, has
made possible-the fotation of the
loans and credits which we have ex-
tended TO the various belligerents. The
gold shipments to this country have
been directed by the master minds Of
European finance. Each shipment was
timed accurately 10 most effectively
perform its functions Of first paying
for an equal volume Of commodities
and then, finding its way into the
banks, becoming the basis of an eXpan-
sion Of credit In this manner the New
York money market has been kept in
an easy condition, and from time TO
time, when conditions were propitious,
foreign loans have been foated and
securities have been resold TO US. As
the proceeds of loans or resales Of Sc
curities gradually filtered into the in
terror the New York money market
naturally tended TO become firm. When
that condition was produced England
again shipped US gold, which would
have the effect described above, thus
New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1917-04-01
Great Expansion
OF Credit

on June 30, 1914, Just before the out
break OF war, the total amount Of cash
held by ell the banks Of the United
States national, state and private
banks) was estimated to be about ST.
639 100000 or this amount it ia esti-
mated that about s9l3,OOO,OOO was in
the form Of gold or Is representative
gold certificates Upon this basis there
rested a structure OF credit amounting
to S2I.35l 100000. In other words, the
gold basis of the cOuntry's deposit
credits amount TO 4.27 per cent. On
June 80, 1916, the total amount of cash
held by the same banks including now
the Federal Reserve banks) was 81
81 100000 of which II rs estimated
that about s1,14O,OOO,OO0 was in gold.
In addition the Federal Reserve agents
held quite an amount of gold as cover
ture for Federal Reserve notes issued,
but this gold cannot be taken into con
sideration in this connection as II is
not at present available as basis OF
credit expansion. Upon this gold basis
Of S1.l40,0OO,000 there rested a credit
structure of $2s25O, 100000 The gold
basis amounted to 4.02 per cent o.
the deposits. This is a clear illustrs-
tion Of how readily the gold taken into
our system is sssimilsted and how
promptly credit expands upon its basis.
The resultant effect upon our eco
nomic structure Of such an expansion
of credit and the stimulation Of trade
can well be imagined, and the next re-
suit higher prices of Commodities
also apparent. OF course, there are
many other factors that tend to drive
price levels upward, and primarily
prices have risen because Of the great
ly increased demand upon US for ma
terials by the belligerent countries.
New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1917-04-01
s27soo a 500 s62s 600 s274 s2a257'

. The total, two and one half oliiion
dollars, Is really a very moderate
amount. when we take into coDsidera-
ton that Turing the same tine we I'M
ported gold amounting TO over one BILL
ion dollars net. The gold imported by
us. if utilized as q basis Of banking
credit, would support volume Of
credits Of at least six billion dollars
ana By some the amount is estimated
much higher. 1t is therefore apparent
that we have not been over-liberal in
our extensions of credit, but quite the
contrary. We have been quite consery-
alive. As to the ultimate goodness o.
ttcce loans We reed have no fears--the
common school geography and history
furnish enough facts to thoroughly de-
monstrate the absolute safety OF such
loans as those 10 England and France.
We should. However, bear in mind
that the date of maturity Of the loans
Is very important matter.
New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1917-04-01

ury DIS is q renee
zion upon their
judgment.
Certainly the rec
ord of our past loans
to foreign govern
ments shows moth
ing to justify the be
lief that our banks
will be anything but
extremely conserve
tive in making such
investments. The op-
portune maturity OF
sueh treasury bills
would be found a
lery valuable aid
ghen the golden
tide turns and the
period OF redistribu-
ton OF the worlds
gold holdings begins.