The Indianapolis times. [volume] (Indianapolis [Ind.]) 1922-1965, 1932-05-06

Inc south Sea Bubble and John Laws Missssinni
Bubble OF more than two centuries ago strike us as
among those amazing historical episodes which are
stranger than fiction" We read with an air of
patronzng pity how in those DAYS men we're foolish
enough to buy stock in an enterprise the nature of
which would be revealed later
We assume that today we are far more hardboiIed
much better informed and much more discriminating
IN purchases
Nevertheless, DR.. Max winker's article on The
Foreign Bond Bubble" in the American Mercury
makes the old Bubble period seem trivial compared
to our own late orgy Of swndling gulble investors
in foreign securities. John Law would stand avhast
at our record of mental credulty and financial losses
The South Sea Company was capitalized at only
f5oo00000 and the maximum imitation did not 60 over
s5O00O0000. Not all Of this was lost Today no less
than s3ooOo000oOo in public bonds arc in default of
principal interest, or both Two-thirds of this repre-
sents defaulting on principal.
Back interest is accumuistng at the rate of $780,
100000 each year This means interest in arrears of
s5o0ooOOO each month a sum equal to the total
original capitalization of the South Sea Company
The people of the United States hold securities Of
foreign governments and borrowers to the face value
Of $4,000 100000 Actual value of these securities has
shrunk to about ssOOOOoOOoO. AS Dr. wnkler points
out thus have paid about $4,000 900 900 for the
privilege of being transformed in the last fifteen
years from nation owing $1,000 900 abroad to the
worlds leading creditor-whch is today equivalent
to being the worlds greatest sucker.
This revolution in our financial position was one
Of the most dramatic and tragic-comic episodes in
all human history. DR.. wnkler admirably has char
kcterized its implications:
BY what means did the underwriters of foreign
Issues convert the American investor to whom everv
thing beyond the confines of his own country was
Inferior to whom even today Czecho Sovakia is the
same as Yugo-Slavia: who stin confuses Bucharest
with Budapest; who places Carlsbad in Germany
who regards Porto Allegro suburb of Berlin: and
to whom Santa catharina is former empress Of
Russia, canonzed by poserity because Of her piety
and virtue?
1t is this incomprehensible investor who needed
the call when invited to invest in Albania and Abvs-
snia; to help finance coffee plantations in Colombia
cotton growers in Ceara; banks in Iceland mines in
Yugo-slavia public utilities in the Canary Islands.
power companies in Mallorca: silver mines in Greece
oils in Mesopotamia; railroads in Persia; mortgage
banks in Bulgaria; and rubber plantations in
the Dutch East Indies quebracho Developments in
Paraguay and babassu nuts in Brazil
knowing little nothing about the place in
which he was asked to place mis- funds his curiosity
was aroused His eagerness to buy was in direct
proportion 10 the extent of his ignorance.
1T is. indeed amazing 10 find that to date not
single loan has been sold him on behalf Of a non
existent foresSn borrower In the great days even
such bonds could have been easily disposed Of
The gullible investor lured BY clever prospec-
fuses some formally accurate, but fundamentally
grossly dishonest and others quite demonsrably and
criminaly false. such the assertion that Chile
had defaulted her loans in ninety-nve years
IN some cases the losses we're far more complete
than h the South Sea Bubble and the Law scheme.
Holders Of German mark bonds have nothing to show
for their optimism. Those who bought bonds Of the
Russian loan have volsteadian percentage (onehah
Of one per cent? OF their original investment remain
Ing In addition. they can look at beautiful vase