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Show ADJUSTMENT PROBLEMS BELIElED READILY SOLVABLE America's Foreign Trade Can Be Greatly Developed Devel-oped With Facilities of Nation; Investment Invest-ment Market Is Strong. By W. S. COUSINS, Editor The American Banker. NKW YORK, Nov. 2Z. Consideration Considera-tion of the problems involved in reconstruction, demobilization, and, in general, the return to normal conditions, had upj.arently developed two distinctive achoola or clashes of economists, one of which announces an-nounces its belief in the continuation of high prices, high wages and similar economic eco-nomic handicaps for a long period to come, Li jo oilier predicting a swift and satiMactory sn,utiun to ail the problems ob the reconstruction period. The latter is b,- far the largest and most prominent group in our citizenship, and their deductions de-ductions are based, nut unlv upon a careful care-ful survey of world-wide financial conditions, condi-tions, hut upon similar experiences following fol-lowing closeiy after the ending of other disastrous wars. In ijcnfcral, their deductions deduc-tions may be briefly summarized as follows fol-lows ; Expects Decline. . A sharp drop in commodity prices will t:iUc place almost immediately, but no ei!L will result. There will also bo a drop in nominal uae.s but. fair play on the part, o! both labor and capital will prevent ii:di1t( rial turmoil.. The United States will adult a generous policy of loaning to the various nat.wns of Kurope, all of which have a sound basis of credit to oi'fe r, and ;i n accustomed to pa ying their debts. They are at present greatly Impoverished, but will '"come back" in tecord time. The wealth and progress of the world is entirely dependent upon the extent of the international reciprocal trade, relationship, and this country is especially fortunate in having unlimited resources and facilities for the cultivation of this trade. It is obvious that the rank and file of American workmen and retail merchants mer-chants must confine, their particular attention at-tention to the solution of home problems, while to wholesalers and financiers will be delegated the cultivation of trade re-intionsiiips re-intionsiiips abroad. Encourage Capital. For tins reason, it will bo extremely untortunate If the seeds of discontent are sowed among our workmen by propagandists propa-gandists who are unfamiliar with conditions con-ditions as viewed from the proper standpoint. stand-point. While general admiration has been accorded to Samuel Gompers for his leadership lead-ership of organized labor during the world wn r, there will be few to commend hbs public, statements concerning tl2 "demands" "de-mands" of labor since the signing of the armistice. It Is inevitable that in the readjustment which will be necessary in all brandies of commerce and industry labor must also seek and find its proper level. To suggest any other course would ho to sow tin; seeds of future discord. It is as important to encourage capital as it is to encourage labor, and many laborers have, during the past few years, been transformed into modest capitalists. Repayment of Bonds. One of our most Important financial problems will be that of the repayment of the war bonds, and it is not premature prema-ture to consider this problem at tiie present pres-ent lime. As long us the war debt is unpaid, un-paid, interest and sinking fund charges must be provided for. On $2.,000. 000,000 of Liberty bonds, tiie annual interest account ac-count will be approximately a billion a year, while a per cent sinking fund which must be provided will call for $1, 2.ii,0uo. 000 more. The interest accounts, sinking fund charges and ordinary government gov-ernment expenditures will now aggregate-?-i.2.-i0,mirunjij annually. To offset this there- will ho neatly a half a billion dollars dol-lars coming: in annually from the allies as interest on, ami liquidation of, their loans, which now amount to $S, 000.000,000 and are iikeiy to run much higher. Of course. ' there will be considerable variation in the- different branches of revenue, but It mav be roughlv calculated that there will be about ?;i,000.000.000 which must be provided by taxation. From this it will be obvious that for some years the annual expenditures of tiie United Stales will he about four times as large as before the war. It Is expected that a government plan for a sinking fund- will be evolved at an early date. Provision is made in the law covering the war bond issues for the use by the government of an amount up to 3 per cent of the rar value of bonds outstanding at the beginning of a fiscal year for the purchase of bonds in tiie open market in that year. But It is obvious ob-vious that for tiie next generation taxes in this country will be higher than at any time in our history. It would be natural to look for activity ac-tivity and enthusiasm in the stock market mar-ket at this time, but Wall street is not living up to form in this respect. Perhaps Per-haps the most important reason for tin-L'loom tin-L'loom and inactivity in Wall street Is tiie severe restriction which is s t i 1 i placed upon tiie money supply. placing stock brokers in tiie embarrassing position posi-tion of being compelled to refu.-'j buying orders even on substantial margins. The money committee lias ruled that no loan accounts must exceed the level of September Sep-tember Id, even though sufficient accounts may have receded from tiiat point to considerably lower the average. Will Relieve Situation. Ir is possible, however, for eostonvrs to f iua nee their own t ransaet ions, either by purchasing for cash outright or by borrowing on their own collateral. This would relieve the situation so, far as ihe broker's loan level was concerned, except that he would i n tha t even t lie ini br-tunate br-tunate enough to forego his commission for borrowing" the funds. Some brokers are Inclined to believe that an entirely new basis of rationing out funds to Wall street should be adopted, namely, tiiat all the loan total to be furnished by New York banks and trust companies secured by stock exchange securities should be arbitrarily decided on and that the borrowings bor-rowings of stock exchange firms should be merely a part of this general plan of restriction. Furthermore,' there are some who argue that tiie establishment of t lie September lii level for loans was in Itself not fair, as It is well known that before that date there had been active speculative movements ' transacted through large houses at a time efforts were being made in the interest of the success of The war loan to prevent activity ac-tivity in speculation. There can be no great activity In the stock market until funds are available to finance it. Conditions Favorable. Most favorable conditions now prevail in the bond market, and those who purchased pur-chased high-grade securities at prices prevailing one month ago have ample rea-son for gratification. During the j last week in September bond prices were at th'e lowest level for the year and tor the whqle war period. Then came mar-I mar-I ket activity carrying bond prices up to the highest level for the year. During tiie past six or eight weeks bond dealers I who had their shelves bare have been j restocking them with securities, some of which prior to last year's general liqui-j liqui-j elation have been out of the market for I years. Bond dealers are confident that there will be an enormous demand for investment invest-ment bonds in the very near future. Today To-day there are 30,000.000 people in the United States who have been educated in bond buying through the Liberty loans, compared with less , than .the nO'i.OOO bond buyers in the country prior to Mav, 1017,-, or the date of the first Uheriv loan campaign. Tho newlv educated bond-buying public will come into the market just as soon as it is learned that the government does not intend to have any more Liberty loan campaigns. The belief fs growing in banking circles that the future financial war requirements of the government will be supplied through the sale of short-term bonds "to the banks. |
