The Washington herald., 1921-02-27


reviews the progress which the
business world has so far made in
the return to normal conditions. DR..
Anderson says that the root OF our
American troubles is 70 be found in
Europe. and EuropeSn difficulties
are fully as pressing as they We're
two years ago. Apart from agricul-
ture, the revival of private enter
prise on the continent of Europe
has been hesitating and slow. while
conditions in public finance and in
money have grown steadily worse.
Commodity prices on the Continent
of Europe have risen greatly and.
despite the decline in recent months,
still stand high above the figures
of early 1919. The standing of Eu-
ropean currencies in the foreign ex-
change markets is far lower than
was the case in early 1919. A revival
of American business activity, how
ever, is not dependent upon the
complete solution of European prob
lens.
Our Specific Abnormalities.
The specific abnormalities mani
tested in the United States in 1919
and early 1920 were the following:
"a An export balance averaging
$500, 900, 900 to 100000. 900 a month
and exceeding the export bal
ance during the war itself, de-
spite the fact that as a cred
itor country we should normally
have an import balance. This alb
normaIity remains in large part un-
corrected in the latest published
figures, though signs of a change
are in evidence.
(2) During 1919 and early 1920,
despite our favorable balance OF
trade with the world as a whole, we
were losing gold heavily because Of
our adverse balance of trade with
the non-European world. The clos
ing months of 1920 corrected this.
go AS a consequence of losing
both gold and goods in foreign
trade, we had the awkward combi-
nation of rapidly rising commodity
prices and growing tension in the
money market.
Federal Expenditures Increased.
"a Governmental expenditures
continued after the armistice for
several months at rate OF
81. .0o0, 600. 600 4 month, and since the
armistice the government has spent
practically as much as it did during
the war. Governmental expenditure
has tapered OF but still continues
very great.
go municipalities. able to float
tax exempt securities, made eNces-
sive demands on the money. COM
modify, and labor markets at a
time when the strain was already
too great.
t6) With the return of 1000, ,eo0
men to industry from the army and
navy in 1919, we witnessed a sharp
decline in the physical volume of
goods produced in the United States
in 1919 as compared with 1918.
CD Deterioration in our railroads.
as a consequence of the war strain
and of labor conditions. hampered
the operations of many businesses
More traffic was offered than the
railroads could handle. A shortage
of materials was the result of this
congestion on the railroads. Goods
in transit were tied up with the con-
sequent freezing of bank credits
based on them. The situation was
complicated by the fact that rail-
road rates were lower than they
should have been, which increased
the amount of traffic offered to the
railroads and imposed a heavy bur-
den on the Federal Treasury. Re-
cent months have seen great i'm
provement here.
SG Rising costs of production,
conspired to cut profits and to Gre
ate business embarrassment. In
many important industries profits
declined. or disappeared. Such a sit
uation is a signal for a crisis. Cred
Its are based on earning power, and
as earning power diminishes credI-
tors begin to press for collection,
liquidation is forced, and a crisis
comes.
(s) Idustries with fixed prices
but variable costs, as public utili-
ties, gold mining, railroading. and
the like, were especially hard hit
in 1919 and early 1920. These in
dustries now face better days.
Competition Often Eliminated.
NO) Competition among sellers
was in many cases eliminated in
1919 and early 1920. with a conse-
quent decline in business efficiency
Labor monopolies also grew strong.
Competitive conditions are return
ing.
CID Speculation in commodities
foreign exchange, securities, and
real estate went dangerously far
There has been a radical reversal
here, with the exception of foreign
exchange speculation.
N2) Our export balance with
Europe. financed by the governmen,
down to the middle of 1919, went
on on open account after the middl,
OF 1919, creating an unfunded debt
or Europe to private creditors in
The United States, which we esti.
mated at $4,000, 900. 900 on Septembe,
10, 1920. and which by now sub.
starftially exceeds $4,000 ,Ooo, 900
This caused a tremendous drain or
american banks, which expanded
their loans and Investments owe,
20 per cent from April IL, 1919, to
AprH ?. 1920. This expansion oc.
CURED despite a decline in Govern.
ment borrowing from the banks.
13) The great reduction in tn,
output Of manufactures in Europ,
has broken the worlds equilibrium
among manufacturing, food produc,
tion, and the production Of raw ma.
terials. Raw materials and food
are produced in relative excess
, with the consequent diminution n
the purchasing power of the pro
ducers of foods and raw material,
on SO great a scale that they ar,
unable TO keep even the inadequat,
manufacturing capacity of tn,
world fully employed. The worlc
outside of Europe could discounl
this and by readjustment of iti
activities, increasing its output oi
manufactures and diminishing 1t,