The New Year and Its Financial Possibilities UNDERLYING INFLUENCES WHICH MAY SHAPE THE HISTORY OF 1924IMPENDING EVENTS IN EUROPE-AMERICA IN A PRESIDENTIAL YEAR SOMET In the First BY ALEXANDER DANA NOYES OMETIMES the very first weeks of a new year give a distinct clew to the financial future, perhaps even reversing predictions and expectations with which the old year ended. In a measure this was true of 1923, when the rapid forward surge of finance Month of a and industry, very unusual in midwinter, took Wall Street completely by surprise. It was notably true of 1920, when January's collapsing stock market and extreme money stringency followed immediately after December's excited rise in stocks and the year-end prophecies of easy money. But these were the exceptions. January markets are usually uneventful; the business community will have pasted the year-end forecasts in its scrap-book and have settled down to await their fulfilment. The rather frequent outcome is that the later course of events will give an entirely new direction to financial expectation. The rather long series of mistaken predictions, stretching from the spring of 1919 to the autumn of 1923, provoked occasional inquiry as to whether, in the present altered condition of the economic world, financial prophecy may not have become a lost art. But if the art is lost, it is not for want of practition ers. PERHAPS never in our financial his tory has the future been foretold so continuously as it is to-day, so confidently and with such wealth of detail. The extremely numerous wizards that peep and mutter in Wall Street vary in personnel and Its from high economic experts and established bureaus of information to the "wire service" of Stock Exchange commission houses. Wall Street Their field of prophecy ranges Prophets all the way from prediction that prices of commodities will decline during 1924, or that business will recover in the spring, or that the money market will tighten next month, to information. that a reaction in stocks will begin at 2:15 P. M. to-morrow. But each of them has his own particular opinion, and the result, as might be supposed, is not only surfeit of prophecy but conflict of forecasts which leaves the anxious inquirer more confused than he was before. That is undeniably true of the present efforts to construct the horoscope of 1924. In a very considerable degree, such confusion of judgment as exists is a consequence of divergent interpretation of the past. Reasoning from the deadlock of reparations, the financial collapse of Germany, the strain on the Entente, the Labor party's successes in England and the farmers' agitation in the United States, one group of people with prophetic instinct will perhaps have concluded that, on the whole, matters are worse now than they have been at any time since the armistice. Prophecy based on this view of the past (which is just now more prevalent in Europe than in America) will easily foresee complete and hopeless ruin to Germany in 1924, shaken public credit in France, breakdown of England's foreign trade with Labor and its capital-levy programme in control of the British Parliament, our own State Department putting the screws on foreign debtor governments, and the constructive legislation enacted at Washington since 1918 torn up by the "Radical bloc." THER Reading the Future by the Past HERE will also, however, be another group of prophets, whose view of the future will be governed by exactly opposite interpretation of the past. These people's minds will have been impressed primarily by the fact that the "Bolshevism" which was about to overrun all Europe, five years ago, has faded into the remote political background-in Russia as unmistakably as elsewhere; that even Germany, under the severest test, has shown unimagined cohesive political instinct; that hard work and energetic production, the lack of which in 1919 was declared to be the one obstacle to Europe's economic reconstruction, has since that year so far altered the situation that some of the lately belligerent states are exporting a greater quantity of products than in 1913, and that all of them are now raising such harvests as largely to shut American wheat out of the Continental market. Importance will have been attached by these observers to the fact that, whereas Continental Europe seemed in the first year of peace to be chiefly engaged in evading taxes and running the government with paper money, some of these governments have now increased their tax collections 50 per cent over even 1920, and that, as against the bungled public finances and paper inflation of 1919 and 1920, most of them are reducing public expenditure and many of them have cut down their paper currency 10 to 15 per cent. When, in the view of such observers, these aspects of the foreign situation are deemed to be supplemented and emphasized by fulfilment of the war-time prophecy of the United States emerging from war the most conservative nation in the world, their prediction for 1924 is naturally bound to take a cheerful color. PRUDENT forecast will take account of both sorts of precedent, of good and bad tendencies alike; any prediction which is based on one kind, to the exclusion of the other, is pretty certain to miss Happen in the mark. I shall not undertake to proph- It was at the very opening of 1923-on January 4, to be exact-that the French and English delegations at the Paris conference split apart on the question of the German default and the occupation of the Ruhr. A good many people, chiefly in England, still hold the opinion that this disagreement, and the subsequent seizure of the rich German fuel-producing district by the French, lay at the root of all Europe's financial and industrial disappointments during the rest of 1923. The inference is a pretty broad one. England was actually helped industrially by the Ruhr embargo, to the extent of a 17 per cent increase in her coal exports. France, whose monthly iron production fell from 486,000 tons in January to 306,000 in February, wholly because of lack of Ruhr material, was turning out 514,000 in October, the largest monthly production since the armistice. Absence of the usual Ruhr supplies was undoubtedly a serious loss to the German iron industry, but Germany produced so many other causes for reactionary trade that the Ruhr blockade figured only as incident. Nevertheless, the Ruhr dispute was in other ways an undoubted occasion for financial and political unsettlement. It (Financial Situation, continued on page 61) served, through estranging France and England NO LOSS TO ANY INVESTOR IN 51 YEARS diplomatically, to upset the financial markets and the foreign exchanges. It hastened Germany's economic collapse; not primarily because her mills were cut off from the Ruhr but because the trillions and quadrillions of paper money, put out by the Reichsbank to equip the German Government for supporting the Ruhr population in idleness, drove down the purchasing power of the mark to a level where foreign banks began to refuse to quote it at all in their exchange-market transactions. The present year has begun with at least an altered situation. The Stresemann ministry at $1,430 a Year Berlin abandoned “passive resistance" in the From Savings of $10 a Month Ruhr last autumn; it publicly recognized that reform of the German currency was indispensable; it took the first tentative steps in that direction. It was, however, able to accomplish little while the deficit in public finances continued so enormous that current revenue was still hardly a thousandth part of current expenditure. Stresemann was voted out, the Marx ministry succeeded him, and the new chancellor promptly came forward to beg the League of Nations' help in putting Germany financially on her feet. THIS appeal was itself a notably dramatic turn in the situation; the Chancellor's appeal was framed in language which meant "Rescue us, or we perish"; but it left the details of the plan of relief to be considered. Berlin clearly had in mind a foreign Germany's loan such as rehabilitated Austria. Appeal to the League But it did not commit itself to a plan of drastic supervision of German public finances by a foreign superman such as had proved indispensable in the case of Austria, and it did not even hint at what it would promise regarding reparations. Without the voluntary submission by Vienna to the terms laid down by the League, the international loan to Austria, which was the key to the whole plan of reconstruction, could never have been placed in the Nation's Capital TART as a young man or woman to STAR invest $10 a month at 62% or 7%, reinvest the income regularly at the same rate, and between the vigorous age of 25 and the retirement age of 65 you will have accumulated more than $22,000. At 62% this will pay you an income of $1,430 a year without your investing another dollar. To create this income of $1,430 a year Mail the coupon with foreign investors; much less guaranteed by The F.H.SMITH CO. foreign governments. A similar attitude is an (Financial Situation, continued on page 63) Founded 1873 FIRST MORTGAGE INVESTMENTS SMITH BUILDING, WASHINGTON, D. C. Please send me your Booklet No. 3-L Name Address Time to Increase the THE HERE could be no better time to increase the safety of the investments you hold, than the present. It is even more important to “average up" on safety than on income. STRAUS BONDS, on account of their safety Buy them, and you will increase the average Today our list of investment offerings is exceptionally tiations, it is hardly possible that the coming year should not bring an altered attitude of the outside world toward France. As to whether Poincaré and the Paris ministry have always pursued the wiser course in administration of the Ruhr, outside judgment has differed and will continue to differ. But denunciation of the entire French policy in the matter of the Ruhr-culminating in Lord Curzon's clumsy ineptitude of August in declaring that the occupation was illegal under the treaty has apparently spent its force. The attitude indicated by that note probably never reflected dominant feeling among the British and American people. Baldwin found it necessary to back away from the Curzon doctrine when he faced the British electorate in December. As long ago as last summer, a canvass of American newspapers in the Associated Press for their opinion on the French occupation of the Ruhr developed the somewhat surprising fact that two-thirds of the newspapers distinctly approved that action. PROBABLY the every-day citizen asked him A Human View of France self what his attitude would have been if his own country had been.confronted with the problem of reconstructing provinces maliciously devastated as those of France had been; if it had spent the equivalent of a hundred billion francs for that absolutely necessary work; if, by rejecting the easy German expedient of financing the work through paper-currency inflation, it had been compelled to raise the money through increasing the public debt to huge proportions; if outside markets had thereupon begun to talk of impending financial wreck as a consequence of those borrowings, and if, in the face of all these circumstances, the government which had deliberately wrecked the provinces in question were calmly to have announced that it did not propose to fulfil its promise of contributing toward their reconstruction. This, simply stated, is the quite undeniable case of France. The French economic problem of 1924, therefore, will be of a threefold nature. The year may determine whether Germany can be brought to pay a part of the damages-through the proceeds of a foreign loan, for instance. It may settle the question whether, with or without such German payment, France can provide for meeting the cost of its "reconstruction debt" through increased revenue from its domestic taxes. Finally, and not least important, the year's results may show how far (Financial Situation, continued on page 65) Sixteen Years Investment Protection Uncharted Seas many people the investment of their funds is a venture into unknown seas. They are without a compass, without charts to guide them, trusting only to the reports of some ancient mariner who relates the fabled wealth of the India they are taking passage for. They know little or nothing of the treacherous currents and reefs that may be lying in wait for their cargoes of hope and expectation. India is not reached by haphazard launching into uncharted seas, nor is fortune attained by blind speculation or unsound investment. Safety and profit are found only when the disposition of your funds is guided by thorough knowledge and understanding of security values. The function of our Service is to provide you with compass and chart, making investment a safeguard and not a risk. The principles of sound investment are fully described in a new booklet, "Constructive Investing," which we shall be pleased to send upon request to readers of Scribner's. MOODY'S INVESTORS SERVICE JOHN MOODY, President 35 Nassau Street, New York City Boston Philadelphia Chicago Los Angeles Nothing to Sell But Service |