The Indianapolis times. [volume] (Indianapolis [Ind.]) 1922-1965, 1936-03-20
DETERRENTS TO
EUROPEAN WAR
ARE STRESSED
Chances of Armed Conflict
in Near Future kre
Held Slim.
BY A. L. JACKSON


NEW YORK, March 20.-There is
widespread inquiry as to how bust
ness and the money markets would
be affected should European con-
flict develop. However, since finan-
cial resources are as important as
men and arms, it is doubtful that
such catastrophe will materialize
in the near future.
Germany, which is generally
looked upon as the starting point,
is least of all in a position of f.
nancing a serious conflict Secondly,
it is fact that England does not
want war, and it is unlikely that
France, Belgium, Italy or Germany
will take steps that might draw OPP
position of Great Britain's diplo-
macy and vast resources.
England in Drivers Seat
In the third place, England now
realizes the unbearable economic
strains that have been placed on
Germany. She has also observed
the adverse economic effects of
Germany'S position on herself and
other nations and realizes that I'M
less basic economic conditions in
Germany and Italy are straight
ened out, threatening war condi-
lions will continue in Europe.
Thus, it seems that Great Britain
is now in the drivers seat and we
can expect British diplomacy to be
very effective in the present emer-
gency, her aim being to remove
those economic limitations which
are not conducive to sound social
and political conditions.
But should a European war oc-
cur, the United States will not only
be the safest place in the world for
capital, but it will also be a major
source of supplies for the combat
ants, our neutrality bill notwith-
standing. Although many people
emphasize the possibility that the
governments at war would nation
alize their peoples holdings of
American securities and sell them,
causing a severe decline in United
States securities and an upset in
the money markets, this result does
not seem probable.
Would Need Dollar Balances
The purpose of this selling would
be to establish dollar balances, but
when we consider the fact that the
dollar balances acquired by foreign
governments would stay in the U.
S. to finance war purchases, it is
obvious there would be no effect on
excess reserves. Furthermore, be-
cause foreign governments know
that war would be bullish on
business in this country, their liqui-
dalton of U. S. securities would be
carried out slowly and carefully.
It is unlikely that the dollar bal
ances created by the nationaliza-
ton of foreign-owned American Sc
curities would prove adequate to fl
nance war material purchases in
the United States. The necessity
of acquiring additional dollar eX-
change thus could only be met by
shipments of gold to this country.
Foreign Loans Forbidden
Dollar balances might be obtained
in another manner - that of loans
to warning governments. However,
the johnson act prevents borrowing
by the nations most likely to go to
war and further restraint would be
found in the evidence brought out
in the recent Nye investigation.
War conditions would sharply in
crease the demand for our raw ma
terials and manufactured products.
This would naturally expand credit
sharply on account of business
needs and speculation. Should such
development get under way, in
flated credit conditions would nat
rally result unless the Federal Re-
serve stepped in to control the sit
uation. This could be done through
the raising of reserve requirements
and the sale of government bonds
by the Federal Reserve banks. Such
action is the only factor likely to
cause any change in the present