Evening star., 1926-11-25
MEN AND MONEY
BY NJ. S. Rukeyser.
Copyright. 1920

The epithet of being Shylock,
which has recently been applied by
foreigners to the American banker,
will disappear as interest rates on
alien issues return to normal.
The cost Of money, like that OF
commodities. is determined by supply
and demand, and the increasing
Willingness of American investors TO
place Old World corporate and gov
ernment bonds in their strong boxes
Is already substantially reducing in
terest rates on new offerings. The
financial mind on this side of the
ocean Is becoming assured that
Europe will emerge from the dis
turbances of the war as a solvent
and productive continent.
The handwriting on the wall is
revealed in the progressively favor
able treatment which new foreign
borrowers receive. SupeMecially, it
would seeQ that it would Nave been
better for alien borrowers to have
waited, but particularly in the case
of German borrowers waiting would
have been costly. The disappearance
of the old mark and the substitution
Of the new in 1924 had the effect
of Wiping out the working capital of
business establishments. The main
purpose of the great wave of bor-
rowing from Central Europe was to
refill the reservoir which had been
depleted.
Bullish German Stocks.
The willingness with which for
aigners contributed to the renaissance
Of German economic life was q factor
in causing the great bull market In
German industrial securities, which
have risen in excess of 800 per cent
in the last year, recovering from the
subnormal depression which accom-
panied the return to a gold basis.
Nineteen twenty-six will prove a year
of unprecedentedly large dollar loans
10 foreign industrial and public util.
ity corporations. German enterprises
have been the largest borrowers eight
years after fighting ceased on the bat
tlet1eld. Finance does not hold
grudges. Money is international, and
moves to the places which seemingly
o11er the largest opportunities. The
late Henry +. Dawson, partner of j.
+. Morgan, once remarked that senti-
ment counts in business only when an
individual can choose between two
propositions of equal merit.
Is the market right in taking a more
optimistic view of the economic situa-
ton? That is a question for the fu-
ture to answer. My own first-hand
observations in European countries
during the Summer left me of the
opinion that, if Europe can maintain
peace, 1t can satisfactorily work out
its economic problems. The whole sit
uatIon Will be Sounder, however, when
there is more reasonable understand
ing among the nations toward the cut
ting down of armaments.
Sterilization of Franc.
The next important chapter in the
return of the continent to economic
normalcy will be the sterilization of
'he French franc. The immediate eff
iects OF this desirable accomplishment
VIII be disturbing to French business
ana helpful to that of nearby nations
which are already on a gold basis.
But the liquidating of the devastating
effect OF war operations will be ulti-
mately helpful to France. The Poin-
are government is unquestionably
moving in that direction, and is likely
o succeed II 1t can retain political
support while business feels the tenn
oorarily dampening effect of defation
The French government program can
De fac1lltated by substantial external
oan, when and If the Parliament ap-
proves the debt funding agreements
With the British and American treas
lres. The clearing up of the French
situation IS likely to occur in 1927,
and Italy is likely to try to follow
france toward a gold basis.
Donald MacGregor Stern. youthful
New York financier, who is now in Eu-
'ope on an important private mission,
who has been in touch with repre-
sentative European bankers, sends me
his comment on the European set
ing:
AS to general conditions, 1 am
oull on French dollar securities and
Ill dollar securities of Germany and
Izechoslovakia at present prices. Eu-
'ope will be financing itself on a low
interest basis in 18 months or two
years. The situation, l am informed,
s one of competition for issues and
European banking houses for bust
ness. l am still doubtful on Poland,
Hungary and Italy"
Activity Abnormal.
The activity of New York in gather
ng funds for Europe during the last
-hree years has been abnormal and
las been an attempt to meet unusual
Inc volume IS not likely
% keep up when normal conditions
nave ben restored.
Other regions, however, are likely in
the future to be actively in the field
for capital. The most important of
these is Russia. The American rela-
lions with Russia are at present com
pllcated by nonrecognition. The pres
ant government in Russia appears to
be keeping the forms of Sovietism
and adopting the substance of capt
talism. In the more distant future
Asia, Africa and South America will
ook increasingly to New York for
financial succor. At the moment New
York is sitting in the riders seat in
world finance and is learning a tech
nique which will help it to retain it's
place in the more competitive. years
hat lie ahead. London, the pre-War
world financial center, has to a large
extent regained it's leadership in
financing short-term current trade
operations. In view of the handicaps
resulting from the protracted coal
strike and the trade depression, Lon