The Washington times., 1920-04-29
Predicts Sharp Dropin
Prices Will Bring End
To Era of Speculation
By HOMER JOSEPH DODGE.

ny hOmEn JosEE" DoDN
During the war the banks OF
the United States were called
upon to do their utmost In assist
Ing the FEDERAL Treasury to noat
the Liberty loans. They were
urged to place at the disposal OF
customers every facility to en-.
able them to borrow money ana
buy bonds. The bonds were
security for the loans.
This operation created a vast
volume or bank credit The
people owed the banks hundreds
of millions on this account: The
last OF these loans by the banks
to enable people to buy bonds
are about paid up, releasing bank
funds for ordinary commercial
usages,
Ordinarily, Government securi-
ties, such as bonds which were
held as collateral for the loans
advanced to enable the owners 10
buy them, are regarded as tho
most gilt edged paper. But Tor
every dollar which the banks
have been paid back by those VINO
borrowed to buy bonds, two dol
lars have been lent out anew on
commercial paper and, in the
opinion OF many observers, large
ly for the purpose OF speculation.
Credit Financed Exports.
Practically our entire exports,
amounting in March to Ss2O,0OO,-
600, and for the nine months end
ed with March to S6,ool 100000
have been financed by credits,
mostly for long terms. Trading
In stocks has been extraordinarily
active for two years.
Ali these enterprises constitute
in greater or less degree, specu-
lstion. speculation Is born OF
business optimism and 10 rife in
boom times when prices are ris-
ing and when people are eager
TO borrow at high interest rates
In the expsctat:sn OF making
enough to pay the interest and a
handsome profit besides. Specula-
ton, usually, Is not based on
rock bottom value and specula-
tive prices usually are but tenn
porarily on o high level.
Practically all economists agree
that the United States now 10 in
an era Of speculation, and that a
sharp price recession will bring
q radical rehdjustment. The speed
with which such a readjustment
comes determines whether or not
great losses and hardship comes
TO those who have made large
loans to buy things for which
they expect to receive higher
prices.
How Panic Affects Nation.
1t is not often that q nation
;ivcn an opportunity to observe, at
instructive time. just ho'
financial panic affects a nation. Th
'alue of such a lesson Is inestimab'
( its teaching is taken to heart. Sue
lesson now Is being presented {
he American people and the world a
arge by the financial panic in Japal
At the outbreak Of the Europea
var Japan was making rapid bu
teady headway in converting he
Whole nation from an archaic and me
ieyal industrial system to a moder
system. Japan was tn
most backward of the powers, indus
rally, having, indeed, had no rels
ions with the outside world up t
title more than half a century ago.
" ITc pC6 Va shN
treat Britain and Germany were CON
'elled to withdraw posthaste fro
he Oriental market. An extraordi
,ary opportunity was accorded Japa
o step in and take the ready-mad
market for the output of an indus
rial, manufacturing nation. With a.
,ossible haste, she accelerated he
ransition into an industrial natioi
Ter people organized new companie:
hey borrowed money, they built fac
ories and bought machinery in tn
-nited States and anywhere else the
ou,d find 1t. They built ships an
hipyards, and strove with ever
inew to attain mastery of tn
oriental market by increasing pro
uction.
japanese Succeeded.
In a truly remarkable degree tn
apanese people succeeded. They sol
,oods all over the Orient, in Australis
n South America, in South Africs
nd even in the United States an
Europe. The most sudden industria
,oom a whole nation ever had see
anne upon Japan. People in the IL
and empire borrowed all the none
hey could in order to invest in tn