complete resumption of tax collections from the reconstructed districts (which in 1913 contributed nearly 20 per cent of the total public revenue, but from which only 4 per cent was drawn in 1920) will automatically solve the fiscal problem.

JHAT 1924 has in store for England is a different question. That a settlement. which would save Germany from the economic precipice, over which her government has been pushing her, would help to solve the problem

England's Problems of 1924

of British unemployment is probable. A reconstructed Germany might be expected to buy more foreign goods. But that such a settlement would solve the problem immediately and finally does not follow. Renewed expansion in Great Britain's foreign trade, and with it the waning of the Labor party's political agitation, will occur when the purchasing power of the outside world at large has made such recovery as comes in due course after the hard readjustment following a world-wide war. The first steps toward the regaining of her old economic prestige have already been taken by England. Her government has been collecting in annual taxes £102,000,000 more than its expenditure, and in five years has redeemed £450,000,000 of its war debt, whereas in ten years after the Napoleonic wars it had retired only £53,000,ooo. The other steps in financial recuperation ought to follow; perhaps more slowly than had been hoped a year ago, perhaps more rapidly than the despondent London financial markets imagined at the end of 1923.

But that much of England's political as well as economic history in 1924 will be determined by the course of British trade and industry, it is impossible to doubt. The danger-point this year, as in the year which preceded it, will not be primarily the possibilities of a "Labor government"-although those are troublesome enough-but the chance that the Keyneses and McKennas may get a hearing for their programme to halt that reconstruction of British financial prestige which can come only through retracing the steps taken in the war-time inflation period.

No doubt this difficult period needs enlightened public leadership such as it did not have during the greater part of 1923. But the determining factor in the problem is a sound public instinct, and that the December election | showed the British electorate still to possess. The discussion of England's political or economic outlook gets nowhere when it is made (Financial Situation, continued on page 67)

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up, after the fashion very popular in the past few months, of lamentation over the decline of statesmanship, the lack of Chathams and Gladstones, the era of small men in the British Government. Readers of history are under no illusion as to the caliber of the Grenvilles, the Portlands, and the Percevals who headed the ministries which had to deal with England's large economic war problems of a hundred years ago. They will not recall the presence of political supermen in Congress or at the White House during our own reconstruction period of the sixties. Possibly they will conclude that, in those older periods of political and economic reconstruction, the people's own common sense saved them from the blunders of their public leaders.

To foresee the immediate future of the

The

Forces in Our Own Situation

United States is not very difficult. But men who look below the surface of the financial and industrial movement in this country always have in mind the existence of powerful economic forces which work slowly, whose influence is often quite inUnderlying visible, yet which are certain in the long run to shape the course of the country's economic history, perhaps in a different direction from that which visible indications seem to foreshadow. These forces have their origin in an economic situation, national and international, such as has never before existed in history; a situation which is wholly abnormal in the light of economic experience, which cannot possibly be permanent, yet whose outcome is all the more difficult to predict because of the unfamiliar phenomena which surround it.

The United States, all thoughtful economists agree, cannot continue indefinitely to pile up at Washington all the gold of the outside world. It cannot indefinitely maintain a surplus of exports while the rest of the world is laboring to pay interest or principal on an enormous war debt to our government and people. It cannot pursue the policy of withholding American capital from European investments when America is the one reservoir of capital from which the resources must be drawn for Europe's financial reconstruction. All this is recognized.

But as

to how the change in all three directions will be effected and with what result on home industry and home finance, nobody ventures to prophesy.

The markets obtained some light on the problem in the "import surplus months" of 1923; some in our foreign-security investment (Financial Situation, continued on page 68)

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movement of 1922; some, perhaps, even in the lavish advances to foreign merchants and the heavy export of gold in 1920 and 1919. More light may be obtained during 1924; probably in quite unexpected ways. There are several considerations which should go some distance toward determining the year's later economic history, and which may come into sight very early in the year. All of them have to do with more or less perplexing problems of the existing financial situation. The probable course of prices for commodities is one of them. The movement of foreign trade, of the monthly export or import surplus, is another. The extremely puzzling question of our accumulating hoard of gold is a third. The fourth is the as yet necessarily unsettled question, to what extent the speculative markets and the plans of trade will be influenced by the Presidential campaign.

THE

Course of

Prices in

1924

HE gradual fall of prices since last spring could not in any respect have resulted, as has sometimes been the case in other years, from overstrained credit, high money rates, decreased money supply, or excessive stocks of merchandise. Throughout the autumn and at the present moment the credit position has been visibly sound, money rates normal, the country's money supply increasing continuously, the amount of unsold goods in merchants' hands no greater than the normal. A decline of prices, then, had to be explained either by increase of actual production, or by decrease of actual consumption, or by the slackening, for whatever reason, of competitive bidding for merchandise. But the reports from industry have for months shown that production was decreasing. Practically all merchants agreed that buying of goods by the final consumer was fully up to normal, always provided prices were satisfactory.

The consumer has, however, clearly had his own idea about prices. When comparison of 1923 with 1920 was recently so much in vogue, people who objected to the analogy found much to say of the fact that bankers and merchants learned their lesson during 1920 and were not now subject to the illusions of that unlucky year. Less has been said of the lessons which plain consumers learned from 1920. But that also is a consideration in the present business situation, when the every-day purchaser of goods at retail is no longer subject to the illusion, which prevailed in the earlier period, that nothing could stop the rise of prices and that the only safe policy was to buy at once as