Milford chronicle. [volume] (Milford, Del.) 1878-1974, 1927-11-25
WILL THE PROSPERITY
OF AMERICA BE
MAINT AIMED?
BY SIR GEORGE PAIsH

BY SIR GEORGE PAIsH
In the fall of 1914 the American
Government and American bankers
definitely decided to make New York
one of the worlds great internatlon-
al money markets. They did so III
order that the nations farmers, cot
ton planters, mine owners and man
ufacturers might continue TO sell
their products in foreign markets
Until then these products had been
sold abroad in order to pay interest
upon the large amount OF capltal
which had been borrowed from Eu-
rome bv the United States in the
davs of her rapid development. Inc
sale of these products enabled Am
erica to pay for foreign goods pur-
chased. to pay for her tourist and
other expenditures in foreign couh-
tries and to pay for the various ser
vices which Europe performed for
her. services which in the aggre-
gate called for large sums. soon
after the war broke out 1t became
evident that foreign countries would
have little power to pay in the nor
NAL way for the products OIL the
limited States, that during the war
there would be practically no Amerl-
can tourist expenditures abroad, that
Europe could not render her Gus
tomarv services and that Europe S
mower to produce for export and TO
nav for goods in goods would be
greatly curtailed. Hence, it became
obvious that unless America were
willing to sell her products against
instruments of credit of one KIND OF
another she would be able to sell but
n very small quantity, and mat
while the war lasted, the American
people would be in great poverty. IL
was the recognition of this fact that
caused the American Government
and bankers to take the decision
thew did and to convert her from a
borrowing into a lending country.
This policy has been most extra
ordinarily successful. In a period
of thirteen years, in which Europe's
mower to pay America, in a normal
manner, for the produce she has
needed to buy has been greatly cur
tailed. the United States has sold at
high prices far more of her products
abroad than ever before. Her pros
neritv has thus been maintained at a
high level in consequence OF her
willingness to accept payment in Sc
curities for her products solo
abroad to the extent of no less than
S25,00O,000,000.
BANKERS CASH RESERVES
RENDERED IMMENSELY
MORE, EFFICIENT
The prosperity engendered by the
sale abroad on credit of so mucn
produce at high prices has been en-
HANGED by the other measures Whlch
the limited States adopted before the
war and in the early months OF Ihe
war. By creating the FederaI ne
serve Banks and greatly reducing
the legal reserves demanded Oh the
national Banks, the American Gov
eminent made it possible for the
nations bankers to grant credit on a
scale never previously wltnesseu'
For banking purposes, bankers cash
reserves were rendered immensely
more efficient than formerly. inns
meant that much more pahKlns
credit could be granted than was
nreviously available without any ao-
dition whatever to the cash reserves.
Of course, such action made 1t pos
sibIe to grant a very large amount
of foreign credit and at the same
time large additional amounts OF
home credit. The, demand for cred
il during the war both on home and
foreign account was, however, SO
great. that it became necessary 10
supplement the pre-war cash re-
serves by gold imports. The result
was that the borrowing nations Will
ingly sent large amounts of gold to
America in order to pay for some OF
their purchases. They did this,
more particularly, to make it pos
sible for American bankers to create
the additional credit that they-the
European countries-needed to en-
able them to buy the American pro-
duce they could not otherwise pur-
chase.
In consequence of these gold i'm
ports the stock of money in Amerl-
ca available for banking purposes
and for circulation has increased by
1870 per cent in comparison with pre-
war days. At the same time the re-
duction in the legal reserves, which
bankers are required to hold, has
given this increased stock much
greater efficiency than it would have
had prior to the creation of the Fed
eral Reserve Banks.
POWER OF AMERICA TO GRANT
CREDIT EXPANDED TO IN
CREDIBLE EXTENT
By reason of the increase in the
total stock of gold in the United
States from about $1,S00,O0O,OOO to
$4,000, 100000 and, by the alteration
of the laws governing banking re-
serves, the power of America to
grant credit has expanded to an in
credible extent. In fact, it has SO
increased that probably one would
not be guilty of exaggeration were
one to calculate that American in
vestment and banking credits have
been granted to home and foreign
borrowers to the extent of upwards
of $50 ,000, 000, 900 over and above the
credits that would have been Great
ed had there been no war, no change
in the law governing American bank
reserves and no exceptional gold