anticipated marking-up of costs. This plain consumer learned in 1920 that, if he took firm stand against the rise in prices-even to the extent of wearing his old clothes and reducing his scale of household expenditure-prices would cease to rise. If the fear of a "price inflation movement," entertained by many economists last spring, had been translated into fact, we should unquestionably have had in 1923 another "consumers' strike." That did not happen, because the rise of prices ended. Yet even after the subsequent reaction, average prices in December still remained 3 per cent above the same month in 1922 and 15 per cent above 1921. Apparently the every-day citizen, even if he did not consider that advance unreasonable, at least objected to any further rise. The question for 1924, then, is whether the consumer's attitude will be relaxed or will grow still more inflexible. But that he will actually stop buying goods as he did in 1920, there is no reason whatever to expect; for that year's demonstration came along with the sudden discovery that, instead of the imagined scarcity, there was a huge oversupply of merchandise. He will make no such discovery this season. THE HE new year has begun with the outlook for our foreign trade obscure. An "import excess" of $56,000,000 last May had been transformed into a $127,000,000 export surplus in September; almost wholly because of reduction of importations. It is now Export well known that the huge imports Surplus and Import of last spring, which in quantity probably surpassed all monthly records, resulted largely from the season's urgent demand for foreign raw materials and finished goods to meet the requirements of a suddenly expanding home trade. That particular influence may or may not be repeated. Surplus But even after the autumn reaction in home trade activity, imports continued on a scale not matched in value since the high-price period of 1920. European countries in particular are doing their best to stimulate exports, with the obvious view of improving depreciated exchange rates. The United States is naturally the main objective point of such transactions, for the reason that the merchandise sold to us may be made to serve a double purpose in finding a profitable market and in paying interest or principal on the large indebtedness owed by those countries to our own. (Financial Situation, continued on page 70) ESSENTIALS A SOUND INVESTMENT POLICY A Few of the Topics Discussed in this Booklet HOULD funds be invested SHOUL as received, or held in anticipation of lower security prices? How should the investor regard normal fluctuations in bond prices? The difference between buying bonds for safety and for profit. What considerations warrant the exchange of securities? 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Write today for copy. Ask for Booklet 500-S 'HIS movement will unquestionably con THIS tinue during 1924; with what result on the balance of merchandise trade, the magnitude of our exports rather than of our imports will determine. When the war ended and the extraordinary position of the United States in the economic world be- To-day and a Century came visible, it was frequently re- Ago marked that solution of the illbalanced international indebtedness could not occur as it had occurred in England after 1815. England was then manufacturer and exporter for the outside world, but she produced neither the raw materials requisite for her mills nor food in sufficient quantity for her workmen. Therefore the foreign producing countries (including the United States) paid their current indebtedness to England in food and raw materials, and presently a surplus of imports in British foreign trade became invariable, which actually represented the tribute of outside countries to the creditor nation of the world. That anything like this could happen with the United States after 1918 appeared impossible. We were ourselves the foremost producing nation for food and raw materials. During and after the war, Europe was absolutely dependent on American grain and cotton. A century ago, England had to import iron and copper ore in great quantity for her manufacturers. Both are stored in an immense reserve in the mines of Michigan and Arizona. An era of a continuing import surplus seemed inconceivable. FIVE years after return of peace, this consid eration still remains the puzzle of conjecture as to how Europe will settle its debt to the United States. Nevertheless, certain tendencies quite unforeseen in 1918 have since then become distinctly visible, and they are likely to be emphasized in 1924. Problem of Recent experience has shown that Agriculture Europe is in no respect so depen The dent on the United States for its grain-supply as it was in 1918 or, indeed, before the war. Of our wheat, for instance, the outside world bought last year only 60 per cent of its purchases of 1922, 40 per cent of those of 1917, and less even than in 1913; and this was not because our crop was short, since it ran 100,000,ooo bushels beyond the pre-war average. secret of the decreased export was that Europe in reconstruction was devoting its best energies to intensive farming and that Canada was cutting an unprecedented figure among wheatproducing states. To-day the Department of The to reduce wheat production because of the narrowing export market, and the present season's planting of winter wheat in the United States has decreased 5,759,000 acres, or 121⁄2 per cent. What is happening in grain is happening in other exports also. In quantity our yearly export of iron and steel manufactures, largely to Europe, has already fallen to less than half the total of 1920 or 1919. It is impossible to say how far completion of European reconstruction will affect demand either for those or for other American materials; these various changes by no means signify permanent and formidable shrinkage in the American export trade. But they point pretty clearly to change in its direction on the one hand and to change in its character on the other, and they at least suggest a greater increase in imports than in exports. We shall probably learn something during 1924 of the larger tendencies in this matter. No "Presidential year" ever begins in the United States without a feeling that the political campaign will stand in the way of business prosperity. The tradition to that effect is deeply grounded in the American business mind, and the recurrent appeal to Business it is made in spite of the well-known and the fact that it is nearly a quarter of a Presidential Election century since American trade or industry has been visibly upset by a Presidential contest. In 1904, in 1908, in 1912, in 1916, trade recovery was in progress from the date of the nominating conventions to election week. Even the sweeping reaction in the later months of 1920 was ascribed by nobody to the electoral campaign; on the contrary, one explanation of Harding's unprecedented majority was the people's discontent with the oppressively high cost of living which had accompanied what Wall Street then called the "prosperity" preceding the reaction. There have been other Presidential years in the longer past, whose experience with disordered trade during the political contest established the tradition. It will be found on examination of the record, however, that the occasions when business reaction came with the campaign were either years like 1896, when a vital economic issue had been thrown into a closely fought electoral contest, or years like 1892 or 1884 or 1876, when an unsound financial situation had made reaction inevitable in any case, or years like 1900 or 1880, when business activity merely relaxed from its previous high pressure until the electoral results should be absolutely known. (Financial Situation, continued on page 72) FIRST MORTGAGE One of Chicago's Finest Security over twice the amount Income over three times maxi- Building in business center of city and well rented. Construction modern in every respect. Ownership strong. Bonds mature serially from December 20, 1926, to December 20, 1938. 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Washington St., Chicago 7% Bonds Finance All that can be said just now of the drift of things in this regard is, that the American public seems as a whole to be in a state of calmness; that the tentative efforts of fanatics or demagogues to use such means of promoting their own ambitions have fallen rather unexpectedly flat; that some of the agitators have appeared to come perilously near to making themselves ridiculous, and that even in Congress the self-styled "radical bloc" has thus far proved itself able neither to construct nor to destroy, but only to obstruct. We shall be better able to judge all these considerations two or three months from now. THE The American Hoard of Gold HERE is a possibility-though at the moment no signs of it are in sight-that the present year may mark the beginning of the long-predicted "redistribution" of our superfluous hoard of gold. The question, what will eventually happen to this huge heap of treasure accumulated during and since the war, in quantity far beyond the needs of the United States and in face of urgent need of it by Europe, is one of the most remarkable in economic history. The position actually created by it is so entirely abnormal that its indefinite continuance is pronounced impossible by every competent economist and financier. To say that the stock of gold in the United States is now greater by $300,000,000 than a year ago, by $600,000,000 than at this time in 1922, and by $2,350,000,000 than in August, 1914-that, in fact, it has increased 125 per cent since the outbreak of the war-by no means tells all the story. When the war began, our country held, according to the United States Mint reports, barely one-seventh of the world's whole monetary stock of gold. In 1917 we held one-third, in 1920 about three-eighths. To-day we probably possess considerably more than one-half. We have been importing, ever since 1920, production of the period. Directly or indirectly, the United States has received and stored in the government vaults at Washington, since 1918, practically all the gold reserve of the old Imperial Bank of Russia; practically all of the $250,000,000 gold drawn by the Reichsbank from German citizens in 1914; most of the gold similarly withdrawn from circulation by France and England, and virtually all the period's output of the Transvaal mines. Yet, so far from endeavoring to stimulate this inflow of gold in its later stages, American bankers and economists, including the Federal Reserve Board, have concurred in warning against it as a potential factor in dangerous credit inflation, have expressed hope of its redistribution to the outside world. The Reserve Banks themselves, instead of keeping all this gold in hand to build up reserves against their liabilities, paid out more than $200,000,000 in 1923 for use as pocket-money by the American people. QUT how is it to be "redistributed"? That BUT result might be effected, so far as past economic experience indicates, by one or all of three separate influences: through recurrence of a "merchandise import surplus," larger than that of a year ago; through resumpMachinery tion of the purchase of European of "Redistribution" securities by American investors on a greater scale even than that of 1922, or through outright purchase of American gold by European governments planning resumption of gold payments. The "import surplus," as we have seen, is a matter of conjecture. Large-scale investment of American capital in European stocks and bonds or European industrial enterprises would in all probability follow practicable settlement of the Ruhr dispute and the reparations. Such settlement, although by no means yet in sight, is an absolute political certainty of the near or distant future; its occurrence in 1924 is at least conceivable. But as yet, the efforts of various European states to reform their depreciated currencies have in no instance reached the stage at which foreign gold was bought for a currency redemption fund. In the past history of finance and currency, however, no operation has been more familiar. During the period between 1865 and 1877 our own currency depreciation had been forcing out gold uninterruptedly on export, at the rate of $30,000,000 to $66,000,000 annuallyimmense sums for those days. The whole annual product of our own mines was being (Financial Situation, continued on page 74) |