The sun. [volume] (New York [N.Y.]) 1916-1920, 1919-04-03
WARBURG HAS PLAN
TO REFUND LOANS
Suggests Foreign Debtor Gov
ernments Issue Long
Term Bonds.
FOR INVESTMENT TRUST
Warns Wage Farmers Must
Absorb COuntry's Invest
ments Hereafter.

mat the U. 5. treasury might hccepI
long term bonds from the foreign gov
srnments. to which advances have been
made by this country during the war. as
one means OF iiquidating International
loans. He spoke at a dinner Of the
Council of Foreign Relations held in the
Metropolitan Club. Should congress
decline to authorize this action. or
should the foreign debtors prefer. Mr..
warburg suggested that tho necessary
money might be raised by the direct
sale Of the securities of foreign govern
ments in the American markets. He
also advocated the formation OF an in
vestment trust through which small in
visitors might operate in foreign
markets.
Mr.. warburg was one OF the speakers
IN q symposium on the investment OF
American capital abroad and sixty of
tho leading bankers Of this city, Chi
oago, Boston. Philadelphia, Detroit and
o. Louis were present.
Explains Americas Problem.
We around this table appreciate
faliy the duties now ours in consequence
of the attainment Of a position Of such
overtowering economic strength as to
place other nations with whom, both
for their sake and ours, We must con-
tinue to trade In a position of having
70 make good to us an annual debit bal
ance larger than they may be able to
equalize by the shipment of goods or
gold" said Mr.. Warburg. SIN these cir
cumstances II Is inevitable that such
foreign customers must either sell US
the foreign securities or assets they now
hold. or their own national obligations,
or failing that, they must make money
20 attractive within their own boundar-
les that our capital will seek to invest
there
1T is impossible to weigh at this time
the relative Importance of the services
our capital may render at home or
abroad. We are not dealing with a
moot question, but an actual condition.
The balance in our favor exists to-day
and 1t will remained to be squared every
year, unless indeed. we contemplate
that the peace settlement will provide
for cancellation of the approximately
$4,000. 900, 900 advanced by us to nations
associated with us in the common
struggle. Personally, 1 do not believe
that a cancellation of this sort will be
proposed, but l believe we should be
prepared for some years to come to
facilitate the remittance to us of the APP
proximate $500, 000, 900 which will be due
the United States on account OF interest
on its foreign loans.
''Relief of this kind could be brought
about by a scheme somewhat on the lines
Of funding operations That is TO say,
the debtors should be permitted to pay
: the creditor not in cash. but by the sale
OF additional long term bonds. This
would give our friends abroad a most
valuable breathing spell within which
10 adjust themselves to new conditions.
What form exactly such operations
might take II is impossible for US to
predict.
Two Possible Methods.
TT Is conceivable that Congress
might authorize the Treasury to accept
such foreign government bonds in lieu
of cash, the United States in turn rails
ing the corresponding amounts for the
payment of its coupons either by borrow
ing in the market or by taxation. II
Congress should be unwilling or where
our foreign debtors prefer to do so, they
might raise the necessary funds as faG
as possible by the direct sale in the
American market of their government
securities, the proceeds being used TO
provide the amounts due for the payment
Of the coupons.
1T believe l am safe in saying thai
IN planning for the future the country
wifi favor a policy of using wherever
practicable. the natural channels of in
dividual effort. rather than action by
the Government Whenever the Govern
ment enters business or finance, the nat
ural basis of cost OF production is soor
disregarded and resulting deficiencies are
made good by taxation.
Taxation, on the other hand, ha,
reached such unprecedented scope, and
II perpetuated In its present extreme
form, may have so disastrous an effec
upon the future development OF oul
country, that no step would seem ad
visable which would unnecessarily push
us further in that direction. II would
therefore. be preferable, so far as pos
sible, to work for a direct absorption Of
these foreign loans by the people insteaC
OF having them rest in the possession
OF our Government.
Foreign countries will require many
hundred millions worth Of raw materIa
and finished articles for which. in theil
present disorganized condition. they viii
not be able to pay by the sale OF goods
or services.
Wage Farmers Must Help.
Taxation at this time is in effec
confiscating the annual accumulations b,
the wealthy classes that heretofor,
formed the bulk of the capital available
for Investments. A continuation of sucl
policy of taxation would means that tn
successful placing OF securities In tn
future will have to depend upon far
reaching distribution among those VIII,
will reap the benefit of increased incom
without being subjected in the same de
greo to the burden of increased taxation
that is. primarily among the wage earn
ers.
These. in turn. will only be able L
perform their most important function
OF becoming the country's investors
they are taught to use higher wages no
for the purpose OF INDUCING In create
luxuries. euphoniously called the "highe
standard of living but for the purpose O
effecting greater savings
THE wage Garner, in making his IN
vestments has neither time nor abilit
for study and discrimination. GRAY
danger exists, therefore, that advantag
might be taken OF this circumstance an
that crooked promoters and the lik
might rob him OF his savings. The sma
investor needs protection. and that
why. in the past. he has resorted to III
tustrumentalities of the savings bank
or the life insurance companies.
This consideration has led me to bt
lave that II would be very opportun
aalA hat nF ut Id iIanf