Vol. XXII

T

HERE is something inscrutable-beyond the ken of human mind-in 'the fortuitous march of events and combination of mighty forces which make sport of political, social and economic alignments of this war-tossed old world. It may seem futile to try and reconcile the many conflicting opinions and predictions as to what the business situation in this country will be after the guns have been finally unlimbered in Europe. Although we find scant comfort in the scriptural assurance that “in the multitude of counsellors there is safety," there must be some safe middle path for American men of business and banking to traverse which shall mitigate the shock of peace. It is true that fine-spun and plausible theories, based on past experience or the teachings of history, count for little at a time like this when there are such baffling and only partly understood influences at work which must affect neutral as well as warring nations to varying degrees. Indeed, all conjectures as to future readjustments must be largely indefinite because no one can tell when the war will end how far it will be carried to the point of exhaustion on either side, or which is to be the victor. Nor can we assume with absolute certainty that the peaceful status quo of this country will be preserved or that the punitive expedition into Mexican territory will put an end to troubles along the Southwestern border. Happily, at this stage, there appears no reasonable ground for apprehension that the United States will be called

upon to take a hand in the European war game or fail to work in accord with the de facto Carranza government.

Despite the confusion of counsel and prophecy, it is at least reasonably certain that post-bellum readjustments will not be of a catastrophic nature, so far as this country is concerned. Anxiety as to what may happen when peace returns is largely due to morbid thought and a superabundance of "nerves." Many are the 'bogies" which have come and gone since the war began. First there was the dread of an assault upon our unprotected gold supply and that this country would fail to meet maturing indebtedness abroad. Today we are suffering from too much gold, and there is more money in New York than anywhere else in the world, while Europe is hard put to it to meet debts for supplies contracted in this country. Then followed the phantom of "European liquidation" of American securities. Over a billion and a half of " Americans "have been absorbed without causing a collapse in values or interfering with the domestic supply of capital.

"War stock" speculation also belongs now to the category of "bogies." When the movement in industrials reached the danger point, the responsible banking and financial interests stepped in. Despite sporadic attempts to boost the market they remain firmly in the saddle. Then came along the politicians, gum-shoeing for ammunition on the eve of another presidential campaign. They discovered that this country is in danger of an

avalanche of cheap-made foreign products unless the Underwood law is repealed and a protective tariff wall is again established. Just now the popular obsession is that of "inflation," due to the large influx of gold, reduced bank reserves, increased circulating media and high prices. As soon as one of these symptoms passes away another rises and is nourished by uncertainty as to the future.

DIVERSE VIEWS AND THEORIES AS TO WAR'S AFTERMATH

HE banker or business man who tries to

Tform some approximate idea as to the

future is confronted with a great variety of plausible and picturesque theories which must convince him that horse-sense of the common, every-day variety is best. One group of learned professors of economics, will tell you that money rates and the price of capital will rule low after the war. They cite as proof the experiences after the Napoleonic, the Civil and Franco-Prussian wars. They argue that due to economies, hoarded gold and savings, together with renewed confidence, an enormous amount of liquid capital will be released. This view is flatly contradicted by other "authorities" who insist that money rates will be high because of the requirements of revived industry and business, intensified commercial rivalry, the need of funding huge war debts and additional credit to European producers. When gold was pouring into this country from Europe at an average rate of a million and a half a day, we were warned that too much of the precious metal would be a menace and incentive to speculation and inflated prices. Others hailed this tribute of gold as evidence that this country has become in fact a creditor nation; that it provided us with the needed sinews to dictate economic terms after the war and offset countermovements."

Wise men, who are supposed to rise above narrow, parochial considerations and have ready command of the lessons of history, are equally at loggerheads as to whether American prosperity will survive at the end of the war or suffer a sudden collapse. The proponents of "breakers ahead" say that our prosperity is a bubble which will be pricked as soon as cancellations for "war orders" come in; that industrial and trade activity is chiefly fostered by an abnormal foreign demand for munitions and supplies which will be cut off when articles of

peace are signed; that drastic readjustment will take place owing to excessive premiums paid to wage-earners and the high prices for commodities. They also place stress upon the theory that a war of such dimensions which has already piled up war debts of 32 billions of dollars and cost incalculable loss in life and property, cannot fail to exert a baneful influence on the economic position of the whole world.

No such gloomy prospects are entertained by those who confidently predict that American prosperity is the genuine article and has become independent of war business. They argue that the war has served as a fillip to re-awaken the spirit of initiative and enterprise which had been held in check while the “muckraker ” galloped through the land and “ New Freedom" policies were being exploited at Washington. They hold that quickened home demand and renewed confidence will quickly fill the breach to keep business going at full speed; that Europe will be too busy with its own grave problems of reconstruction and deflation to think of competing in American markets. Finally, they point to the exceptional opportunities for expansion of our foreign trade in South America and elsewhere; that England, France, Germany, Russia and other countries will have to draw on us for raw material and foodstuffs for years to come. We also find extreme division of opinion as to how American foreign trade will fare after the war; one side taking the view that we have no mercantile marine to follow up our opportunities, and the other dwelling upon the progress made in establishing foreign branch banks, in making loans to South American and other countries and in the prestige acquired by Dollar exchange as well as the development of an acceptance market. The subject may be pursued into a variety of phases, but enough has been shown to prove that little faith can be placed in positive predictions at this stage.

THE BASELESS FEAR OF "DUMPING" AND FOREIGN COMPETITION

IN an address by Professor O. M.W.Sprague of Harvard University at the recent dinner of the Massachusetts Trust Company Association, he presented views as to how American business will fare after the war, which appealed to his hearers as both rational and reassuring. He expressed the conclusion that, although readjustment would be painful

able to make any serious breach in our gold holdings. Unlike previous periods of expansion, the new wealth created is due to consumption and not to undue extension of credit for enterprises or undertakings of unproved merit. Europe has suffered too much and has too many serious problems of taxation, contraction of credit and physical disablement to solve, to render competition from that direction a menace. There will doubtless be a decline in foreign trade, but the effect will not be serious when we realize how small a fraction this involves as compared with the vast volume of domestic business. Railroads and corporations will come into the market for supplies when the artificial strain of foreign bidding is removed. How great the demand will be from railroads may be surmised when we remember that less new construction of mileage was reported last year than for any twelve months since the Civil War.

Bankers have cut the Gordian knot of uncertainty by meeting their problems from day to day in an ultra-conservative way. Despite the enormous expansion of deposits and loans in New York, the credit situation is well in hand with an ample margin of surplus reserves and over $600,000,000 of possible credits available in the Federal Reserve banks. It may also be stated that the repurchase of securities from abroad has proceeded in a manner which properly distributes the burden. Corporations which are profiting from the manufacture of munitions are putting aside earnings for surplus account and permanent improvements. It may be true that before New York can expect to become the permanent world center of finance we must have a more centralized and scientific banking system. The fact is, however, that the machinery is being rapidly supplied for permanent expansion of foreign trade and credit facilities.

EIGHT AND A HALF BILLIONS TRUST FUNDS HELD BY TRUST COMPANIES

HE volume of trust funds and total value of property confided to the care of the trust companies of the United States as executors or trustees under will and as administrators of estates cannot be precisely stated because official reports of such holdings are required in only a few States. An approximate figure, however, can be arrived at by compiling

available information from various sources, based on official and direct individual returns. Such a compilation shows that the combined trust holdings of the trust companies of the United States approximate $8,500,000,000, exclusive of corporate trusts, the face value of mortgages executed by corporations as security for issues of bonds and mortgages, deposit of securities as pledge for the redemption of collateral trust bonds, sinking funds and other escrow assignments. As trustees under corporate mortgages, fiscal agent, custodian of sinking funds, depositary under reorganizations, assignee, receiver, registrar and transfer agent the trust companies are said to exercise stewardship over a wealth, roughly speaking, of $33,000,000,000. This may be taken as a conservative estimate when we bear in mind the great volume of bonds and stocks, especially of railroad securities, now subject to reorganization.

The reliable data available affords proof that these astonishing totals are not exaggerated but may, in fact, be considerably below the actual holdings of trust companies. Take, for example, the trust companies of Philadelphia alone. The trust companies of that city held on January 12, 1916, not less than $950,409,611 individual trusts and an aggregate of over three billion in corporate trusts. As compared with total deposits in the banking departments of the Philadelphia trust companies amounting to $305,195,611, it will be seen that the proportion of bank deposits to trust funds is about 32 per cent. In view of the fact that trust companies in Philadelphia have developed their fiduciary operations to an unusually successful stage and, as a whole, have been more successful than trust companies in other cities in this respect, their proportion of trust funds to deposits cannot be used as a reliable basis of calculation for the entire country. When it is considered, however, that the deposits of the trust companies of the United States on last June 30, 1915, aggregated $5,010,051,217, the estimate of $8,500,000,000 individual trusts may be accepted as a conservative figure and as allowing for the relatively smaller proportion of trust funds held by trust companies in other cities. The total is furthermore based upon individual and direct returns from a number of trust companies in New York, Chicago, St. Louis, Boston and other leading cities which voluntarily state the amount of individual and corporate trust holdings in their annual published reports. In New York City alone the