The position of American securities in Europe was far from satisfactory in 1914, and the outlook for 1915 is necessarily confused. Considering the openings for attack our securities offered, there is nothing astonishing about the unsatisfactory record of 1914. Properly to appreciate the point of view of the European investor, it should be recognized that he is rarely frightened out of his investments simply because of poor earnings, so long as these arise from temporary causes such as cross currents of trade, bad crops, or financial uncertainties of a character which affect at times the economic standing of the richest as well as of the poorest nation. When however poor earnings result from some fundamentally unfavorable cause; when, too, the ultimate payment of principal becomes a matter of speculation, his attitude changes radically, and it needs but the pressure of a straw to move him this way or that.

Effect of Administrative Policies

In considering what reasons the European investor had for selling his "Americans," and why he has been taking a smaller interest in new issues, we find two distinct groups of causes, one operating almost exclusively in the first half, and mingling with the other in the second half of the year.

What had come seriously to disturb the European investor when 1914 was ushered in, was the apparent settled policy of animosity displayed toward large corporate interests by our legislative bodies, from the highest down to the lowest. Had that policy lasted for a few months, or even during the whole of one Administration, it would have been looked upon as a passing phase, and consequently of only temporary importance. When, however, an attitude of hostility was seen to run without intermission into three Administrations, faith in our institutions became seriously impaired, and when it was further seen that dismemberment of several large corporations had been actually accomplished through decisions pronounced by our highest courts, the fear of the investor brought him to the point, of action. The fact that dissolution had not been

accompanied by such colossal losses as had been foretold, dispelled his fears but little. Confidence had been definitely shaken, and the situation was not helped by the seeming pleasure of the public at large in holding up to public pillory many of our men of large affairs.

These conditions would of themselves have formed a good reason for European selling, as well as for discouraging further purchases. If there are those among us who feel that foreigners should not permit themselves to be alarmed by the vaporings of our legislators, or should in any event allow sufficient time to pass to obtain a clear and certain view of the real situation, we may ask ourselves how we should feel if we had large investments in a distant country, and were being regaled every day with dispatches representing a disquieting state of affairs.

The Railroad Rate Case

Apart, however, from these considerations, there was still another which reacted very unfavorably on American securities, namely, the Railroad Rate Case. Through the better part of three years foreigners had watched the attitude of the Interstate Commerce Commission toward the railroads in their demands for higher rates. The scarcely veiled animosity and lack of sympathy toward the roads by the Commission, as also the painful exhibition of sustained decline in net earnings, finally culminated in producing the impression that the heyday of the American railroad had been seen and that its securities were consequently passing from the class of high grade investments. Disclosures in the financial management of the Rock Island, Frisco, and New Haven, only added further strength to this impression. Meanwhile, competition in the field of sound investments became very keen in the chief European markets, and this was equally true in the more or less speculative issues, so that no character of security escaped. In the face of these several conditions, which persisted during the whole of the first half of 1914, and even well into the second half of that year,

it is not to be wondered at that American securities suffered in the eyes of the European investor.

The War and Foreign Holdings

The other major factor which affected the desirability of retaining American securities was, of course, the war. At first it was impossible to measure the duration or limitations of the gigantic struggle, and it was equally impossible to determine even the probable extent of liquidation that might be expected to develop. These questions are still largely undetermined today, and are bound so to continue for an indefinite time. Thus far foreign liquidation has been in much smaller volume than had been generally feared, but the question still retains many potential elements of danger.

An answer at present would fall into two parts: What we do, and what happens abroad. To judge from recent speeches and events, the Administration at Washington seems to have seen a light at last, and to have recognized that largely because of the thousand and one measures of hostile legislation, the business of the country was approaching a point of such general contraction, that a change in 'policy was imperative. Evidences are to hand that this change is being gradually effected, the recent decision of the Interstate Commerce Commission being a case in point. It is still too early to hope that conditions throughout the country will reflect immediate improvement on any large scale because of these two favorable factors. At the same time, there is no longer any fear that our trade will be crippled or our railroads bankrupted. It is, however, to be expected that for an indefinite time to come the volume of our commerce will feel the restrictive effects of war. Such trade as is now noticeably active is almost exclusively concerned, directly or indirectly, with supplying the necessities of the various European governments. Now, too, that cotton may be shipped without fear of seizure, it may be confidently expected that for months to come our export trade will show heavy balances over imports. The decrease in general activity within the country, coupled with the large increase in trade with foreign parts, should place us on an exceptionally sound financial basis; tend to keep money easy, and thus steady the bond market.

Influences Which Discourage Liquidation

In view of these several favorable elements. our bonds should look so safe and attractive as to deter any extensive foreign liquidation. There are, moreover, various other factors at work. For one thing, the destruction of property on the Continent has already assumed such large proportions that alone the freedom from

physical danger of our properties here is a matter which is certain to carry weight with the foreigner. For another, foreign holders of American securities, by lodging them here, may escape the foreign income taxes, which now amount to 10 per cent. and over in most of the European countries, and promise to increase as the war goes on. Further, it may be pointed out that the restrictions in trading imposed both by the New York and London Stock Exchanges prevent arbitraging or sales for forward delivery, and these restrictions to free trading may be logically expected to continue while there remains any lingering fear of extensive liquidation.

These are the main factors operating against these markets being deluged by foreign sales. To this, however, should be added the qualifying words "for the time being," for a crisis may come when European governments, to finance their needs, start offering loans at rates which compare so favorably with the bases on which our securities are selling, that liquidation in volume will be attempted. Thus far patriotism and enthusiasm have permitted these governments to obtain huge sums at relatively low rates, but as the war goes on losses of income or occupation may cast a chill over these admirable traits, and forced loans may became necessary.

There is already an element of this forcing in the Netherlands 5 per cent. loan which has just been issued, in that 4 per cent. bonds would have been forced upon the Dutch people if at least 50 per cent. of the 5 per cent. loan had not been subscribed to. It may readily be seen that inflation is only a step further along such a path. Indeed, criticisms are already being heard that the recent German loan contains seeds of inflation. So long as inflation does not run beyond what economies and new wealth can produce within a period of a few normal years, no great harm may result, but if Europe generally goes on mortgaging her income and productive wealth for years to come, and intends still to remain on a gold basis, instead of changing to an asset basis, the situation may become extremely dangerous. Such a state of affairs would unquestionably reflect itself upon us here.

Be that as it may, it is not necessary at this time to conjure up all the evils that may flow from this war, for there are all kinds of cross currents at work. Balancing the pros and cons in so far as the position of American securities held in Europe is concerned, our large trade balances, the more favorable outlook for the railroads, and the improving political situation in this country, point to a year of less apprehension than had at one time been thought possible.

Even though the tragedy of the world's war is unspeakable, it nevertheless behooves us to draw from it through careful analysis every lesson that would seem to have an effect upon the welfare of man. The United States of America, within its own commercial and political life, has exemplified mental narrowness and selfishness, which has not been exceeded by the point of view of any coterie of men who may have been involved in bringing about the great catastrophe which is at the moment influencing the lives of every man, woman and child upon the face of the earth. Our writers and speakers-and it is commonly supposed that they represent more or less of public opinion-have been teaching us selfishness, and we find that while our country is exalted above the other countries of the world that parts of this country are inflamed against other parts, so we have in natural sequence the feeling often miscalled "patriotism," which leads men to pit their own country unfairly against other countries, their State against other States, their city or town against other cities or towns, their families against other families and themselves against the world.

Humanity demands just the opposite point of view. Man should aim, if he would take his proper place in the world, to spread from himself through his family, his State and his country all that is right and noble. The politicians and newspapers of the baser sort, for their own benefit. according to their standards, keep the people at war with each other, and it is only because the people allow their baser passions to be stirred through such means that the success of the unworthy is possible. To help forward the play upon passions, mis-statement of fact is spread and used as a basis for logical argument, which must of necessity fool those

who have no means of determining the facts. We have a great public forum, and its proper use is as vital to the welfare of our people as any action of man that has been or can be controlled by law. No one can deny that logic based on false statement, if accepted by the people, is detrimental to them, and in this country, due to such methods, our statute books are filled full of laws representing class legislation that have placed an unnecessary tax burden upon our people that is beyond comprehension. The great majority, consisting of the readers and listeners, commonly allow themselves to be led astray through the mis-statement of the minority, consisting of the writers and speakers.

Rights of Majority and the Minority

Have not this majority as great a right to demand truth as the minority to demand free speech? No man should be allowed to place before other men by means of the great public forum that our people have established for the education of the masses the kind of logic based on false statement, and any system which will prevent them from doing SO would not be a curtailment of the right of free speech. Until responsibility is placed upon those who constitute themselves as leaders of the public mind, every country will continue to be at war with itself and all nations with each other, and there will be periodic outbreaks, when the strain of such wars will result in men killing men wilfully and deliberately. The financial condition of our own country before the beginning of the present war was one of strain, and our business life was filled with unnatural problems largely brought about through logic based on false statement, which fooled the multitude and played upon their passions. We are con

stantly being told that the people, the indi vidual persons in our communities, should be able to rule directly, but at the same time those who pamper their personal pride with such statements say nothing about protecting such individuals from false witness, and we are often led to wonder if the popular praise of individual judgment is not the sheep's clothing that covers the wolf of knowledge that such public opinion may be swayed and controlled by logic based on falsehood.

Protection Against Misrepresentation

Let us look this matter squarely in the face and start a campaign aimed to place responsibility upon those who would make use of our public forum, and so protect ourselves from the wolves of misrepresentation. If we do not we shall surely see our people engaged in a war just as bloody and inhuman as that being carried on to-day by peoples with the same education and intelligence, and with longer years of experience in government than we in the United States of America. That some of those who would destroy our institutions are honest, though ignorant, because they have read and believed the false is little in our favor, and we have seen the South played against the North, and the West and South against the East, when all should hold together for our common welfare.

Because of conditions which men cannot control, wheat can be grown in certain States, cotton in others, coal is found in certain places, copper, iron and gold in others; towns and cities are formed at points of vantage to meet these conditions, other cities and towns at other points of vantage to carry on the trade made by these conditions. Each has its place in the great economy of the country, and each, if ailowed to do that which it is best fitted to do, works for the good of the whole. One city on our eastern coast is in a premier position, because of its natural surroundings and geographical situation, to play certain important parts in our commercial life. It has grown not because man wished it to grow, but because the needs of the country demanded that it should grow. To it have been sent representatives from every point of this broad land, selected not by votes obtained from strangers, but because their previous experience seemingly fitted them for the duties that they were called upon to perform. Others not so elected attracted by opportunities offered them followed, and a little United States-or it might even be said a little world-has grown up that contains men of all classes of thought. big business, however, upon which the welfare of this country depends in great measure, is controlled by men who have largely been se

The

lected because it was thought that they were fit. Such fitness required integrity as well as ability. It takes neither integrity nor ability, however, to misrepresent in a manner that is plausible and hard to counteract, the way in which men carry on their life's duties.

War Found This Country Unprepared Because of the political war which had been fought against this city and the industries which center there for economic reasons, when the great world's war broke into action, it found our nation unprepared. The great railroads of the United States were fighting for their very lives, having been taxed and legislated against until bankruptcy stared them in the face. Capital in this country had become fearful and was withdrawing from many fields of endeavor, and business was on a severe decline. The money reserves of Europe had been invested in our securities to a tremendous sum estimated around six billions of dollars. Such investments, because of our legislative action, were gradually being liquidated, and just before the war they were returned to us in millions of dollars, and resulted in shipments of gold from this country of $44,000,000 in July, 1914, and would have resulted in further unknown millions having to be shipped if our stock exchanges had not closed and our greatest Clearing House had not stopped the shipment of gold. If there had been no uneasiness concerning our securities on the part of European investors, it would have been their natural inclination, in so far as they could have done so, to have retained their investments in this country in case of a great European war, for their protection would have been far greater than to have imported gold into a country that might be overrun by an enemy. There would also have seemed a better chance for them to have continued to receive their dividends and interest than might be true if investments were changed into securities of countries at One great financial problem was therefore thrust upon us before the war started, and it found us unprepared to meet it. Unlike many of the other financial war problems, our own legislative and financial history aggravated the situation to a tremendous extent. While this was one of our most serious problems, in general they were caused by the outbreak of the

war.

Inter-dependence Between Nations

war.

The various causes which brought home to us the fact that we are a vital part of the world's commercial organization were as follows:

Moratoria declared by the nations of the world with whom our trade is greatest.

Interrupted communication, both by mail and