GOOD SIGNS OF PROSPERITY

S

OME of the recent evidences and early results of the coming of good times are interesting. For instance, during the late summer and the early fall there came to New York so many buyers of goods that the hotels were crowded. One big hotel, which a year before had closed up for those months two of its floors, this year turned people away. To fill all the hotels of New York - that requires something akin to a general migration from every part of the country.

And manufacturers, wholesalers, and importers had not for a long time been so rushed with orders for immediate delivery, nor asked for goods of such high grade. Merchants of the West, of the Middle West, and of the South bought especially high priced things for women. The buyer for a drygoods store in a large town of West Virginia announced that he had bought 60 per cent. more than he bought in the fall of 1911. "My inclination," he said, "was to buy even more; but my firm decided to take a conservative course, because present prospects seem to be almost too good to continue." Nor was this an exceptional experience: rather it was typical.

During the month of September there was no able-bodied man of the five million inhabitants of New York, willing to work, who could not have obtained employment for at least $1.60 a day. From all parts of the United States, too, came calls for help. The grain had practically all been harvested, but the farmers were still in need of laborers. Ocean, lake, and river traffic was at a maximum, and men who could and would work were in demand. The danger of a shortage of anthracite coal called men to the mines. The railroads and factories sounded the same cry. So urgent was the demand for able-bodied young men for the United States Army that recruiting officers were instructed to scrutinize less carefully than usual those who would enlist.

A threatened strike in New England made it advisable to organize in New York City a force of two thousand men, most

of them unskilled laborers, with a minimum wage scale of $2.50 per day, with transportation, food, and lodgings. Included in this number were to be one hundred waiters. It required a week to find this number of men and enough waiters were not found at all.

A contractor, who had undertaken to complete a job of railroad grading in one of the South Atlantic states, found himself, in September, threatened with a heavy financial penalty unless he could put on an additional force of twelve hundred able-bodied men to work with shovels. He was forced to pay bonuses in New York and to give transportation to and from the field of labor and a minimum scale of wages of $2 a day, with food and lodging.

New York City itself has seldom presented so many signs of activity and industry. All over the city is heard the rat-tat-tat of automatic riveting machines on the iron work of the new buildings. Iron workers, carpenters, masons, and the better class of unskilled laborers are in such demand that they may command better wages than were ever paid before in the history of the country.

Exports and imports have both exceeded all previous records, and ocean-carrying rates are higher than they have been for many years. The tramp steamers that vainly sought cargoes and went out of commission during the dull years could all find profitable cargoes now. Stocks and bonds are selling more slowly than they were a while ago an indication that money prefers to go into the channels of productive industry.

Yet this is a Presidential year. The forces of nature and of trade are enormouslystronger than the politicians. Man's fears and hesitancy have been swept away by the bounty of the earth, the resumption of industry, and the return of confidence.

now means just the opposite. In one period $10 will buy a lot of clothes and food. At another time it will buy comparatively little. Sometimes we have a big dollar, sometimes we have a little one. The continual variation in its real purchasing power upsets every one's calculations upon the cost of doing business and upon the cost of living and in the wake of these miscalculations, come alternately booms and panics, prosperity, strikes, and bread lines.

In this country and abroad there is a growing interest in keeping the dollar more stable, an interest which is showing itself in a demand for an international congress to discuss its variations and a remedy for them. This has the approval of all three presidential candidates, and many business organizations both here and abroad.

Professor Irving Fisher, of Yale, is chiefly responsible for this agitation. And in speaking before the International Chambers of Commerce at Boston he explained a plan, in part as follows:

I firmly believe that the time must come when business men throughout the world will feel the need of a more stable unit of value. Business men appreciate the necessity of a scientific determination of the yard, the pound, the hour, the horsepower, the kilowatt, etc. Governments have bureaus of standards to make sure that these units are determined to the highest possible degree of precision. Yet our yard-stick of purchasing power, the dollar, the most essential and universal unit employed by the business man, is permitted to change incessantly. The whole world complained when the dollar appreciated and complained when it depreciated. No one will deny that theoretically it ought neither to appreciate nor depreciate, but to remain unchanged. We have at present a dollar of fixed weight but not of fixed purchasing power

Among the more ambitious plans which aim to go to the root of the matter is one of my own. This is similar to a suggestion of Governor Woodrow Wilson that the weight of the gold dollar should be increased enough to restore some of its lost purchasing power. My proposal is not literally but virtually to increase the weight of the gold dollar by increasing the weight of the bullion on which it is based. I have said that my proposal is virtually to increase the weight of the gold dollar. But

this increase in weight would not be added to the coins themselves, but only to the bullion, out of which they are made.

At present the coined dollar weighs the same as the bullion out of which it is made, and the Government makes no charge for putting the bullion through the mint. Professor Fisher's plan is to charge for this so that a miner will have to turn in three or four grains more than the 25.8 that are in a minted dollar. The amount of this extra is not to be fixed for all time. The adjustment of this extra, or "seigniorage" as it is called, would be entirely automatic, dependent on an official index number of the price level. Index numbers are now familiar and welltried devices for measuring changes in the general level of prices. The new official index number could be modeled on the well-known index numbers already in use, such as those of the United States Bureau of Labor, Bradstreet, Gibson, the Canadian Labor Office, the British Board of Trade, the London Economist, or of Sauerbeck, the London wool merchant. The system here proposed is, so far as I know, the only one proposed which is purely self-acting. If the official index number shows a rise of prices in any year, say 1 per cent., it would be mandatory for the mints to add 1 per cent. to the seigniorage. Expressed the other way about, if gold loses 1 per cent. of its value, the mints would pay 1 per cent. less for it. This would tend always to preserve a uniform purchasing power of the monetary unit. As soon as any depreciation occurred the increase of the seigniorage would operate to correct it. The present mint price is fixed; it is £3 175. 10 d. per ounce of gold 11-12 fine in England, or $18.60 per ounce of gold 9-10 fine in the United States. The proposal is simply that instead of always paying the same money price for gold, no matter how much it appreciates or depreciates in purchasing power over goods, we would pay exactly what it is worth. There is no virtue in a fixed mint price for gold, but there is virtue in a fixed purchasing power of money.

the President appointed a commission to study the coöperative credit societies abroad. The University of Wisconsin has sent a man to Europe to investigate. Mr. Yoakum, in his article on "The High Cost of Farming" in this magazine, started the discussion anew, and now comes the report of the President's commission submitted by Mr. Myron T. Herrick, the American ambassador at Paris.

The ambassador's report recommends the adoption of the Raiffeisen system of agricultural coöperative credit societies in this country. This system has been particularly successful in Germany where its operations constitute a large part of the business of the commercial banks.

The report in its recommendations does not give any new facts. Its chief value is in the aid it gives to the spread of knowledge about proper rural credit facilities. The report recommends that persons interested in the welfare of the farmer should form a general committee to direct the movement for providing better credit facilities in the agricultural districts; that the President call the people's attention to the matter; that state conventions be held to discuss the ways and means of promoting the propaganda, to be followed by a national convention. In this way it is hoped that the farmers will come to realize the advantages of forming coöperative credit societies; that the banking fraternity will see a new opportunity and duty; and that the state legislatures will see the necessity of passing suitable laws to encourage these improved methods of farm finance. Practically the only opposition to these methods is the opposition of ignorance. What is particularly needed is some such programme as the ambassador suggests to get the public attention focussed upon this all-important matter.

II

In the meanwhile, four bankers in Joliet, Ill., have made a start. After several years investigations these gentlemen have incorporated the Woodruff Trust Company, the first first state land credit bank to be organized in this country.

Following the custom of its model, the great Credit Foncier of France, the trust company, through its various agencies, will lend money on farms, it is hoped, at less than the present rates of interest. The loans will be for long periods (with no renewal commissions) and not subject to call, but the farmer may pay a small part of the principal with the interest every six months, so that there will never be a large payment to make.

To finance this plan the trust company will issue its collateral mortgage bonds. These bonds will be the direct obligation of the company, secured by its capital of $250,000 and by the farm mortgages deposited with another trust company.

Mr. George Woodruff, the founder of the company, is quoted in American Bankers as saying:

He

This is simply a part of the 'back to the farm' idea. We have been talking about soil conservation, diversified farming, rotation of crops, vocational education, etc., but up to this time we have not made it easy for the farmer to carry his financial burdens. The farmer is the safest borrower in the world. needs money sometimes, but he makes money and he pays his debts. What we intend to do now is to make it more easy for the farmer to carry out his plans for improvement. We will lower his rate of interest and simplify the manner in which he can borrow money on his real estate holdings. This new company is not by any means an experiment. Other countries have companies of this kind and they have become a real necessity. We have studied the approved systems of the Old World and have adapted their good points to a new system for America. Having studied the problem exhaustively we have come to the point of action. We take a little pardonable pride in getting on the ground first, but that is a mere incident. Such institutions will soon be numerous all over the country, and I predict that they will be a most popular financial institution.

gent effort to secure them. The questions which it discussed such as the unification of legislation relating to checks, the institution of an international office of commercial statistics, the question of international bills of lading-important as they are, are not as valuable as the acquaintanceship with America and Ameri⚫ can merchants that was gained by the seven hundred delegates from all the world. The men from Turkey and Belgium met our manufacturers from St. Louis and Detroit as well as Boston and vicinity. The visit of so distinguished and representative a body of men as these business delegates should help materially to break down the barriers of ignorance which are among the greatest deterrents to our foreign trade. More concrete than this, many of the than this, many of the foreign delegates to this conference came with orders for American goods in their pockets, and where these are pioneer orders they will probably start new channels of trade through which many different kinds of our goods may pass to foreign consumers to our profit and to theirs.

HE trust problem has been discussed with more illumination than any other; for this important distinction has been made clear:

One group of people (Mr. Roosevelt is their chief spokesman) would have a Board created by the Federal Government, somewhat parallel to the Interstate Commerce Commission, which should regulate great corporations as the Commission regulates the railroads.

Another group (of which Governor Wilson is the clearest spokesman) would free the Government from the control or the influence of men who profit by special privilege in any form; and they believe that this course would restore competition except in "natural" monopolies. Such freedom of the Government being once established, no more "trusts" that restrict competition would come into being and those that exist would not be able long to maintain the monopolies which they now enjoy.

II

To unhand the Government is the plan that commends itself to the economic

mind. So long as we have laws and customs and governmental activities that invite the restriction of competition, so long shall we suffer from restraint of trade; and it were idle to put into the hands of any board of men the authority to supervise and to "control" the business of the people of the United States. It were idle and impossible.

We have too easily and quickly come to the conclusion that many great trusts are inevitable and necessary. We have accepted the word of their organizers that they necessarily make for economy. and efficiency. This conclusion, in the cases of many of them, is receiving rude shocks. Suppose their tariff privileges were abridged; suppose their private influence in the Senate and in other parts of the Government were abolished; suppose they were all put to it to hold their own against honest and open competition; and suppose they could not, by sheer financial strength, drive smaller competitors from the market by underselling them at a loss in their own territory what would happen? The objectionable

trusts would not all survive.

Suppose, further, that half the wastes. in the conduct of the Government were stopped, such as the continual additions. to the pension-cost, and we should find the Government treasury with a big surplus, inviting the lowering of the tariff - what then?

This much at least is to be said and to be remembered: we have tried the plan of inviting and permitting monopoly and then of trying to draw its teeth. Who shall predict the result? Surely, at the best, we have not solved the difficulty.

III

Even the credit trust, or "money trust," is a condition rather than a conspiracy. Everybody knows that small groups of men in the financial centres - notably in New York - have an undue power in granting or in withholding credit. They