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This treaty was construed as giving German prizes brought to American ports the right to come and go. The British Government contested the German claim by demanding the release of the Appam under The Hague Convention of 1907. This international treaty provided that a merchantman prize could only be taken to a neutral port under certain circumstances of distress, injury, or lack of food, and if she did not depart within a stipulated time the vessel could not be interned, but must be restored to her original owners with all her cargo. Were the Appam thus forcibly released she would at once have been recaptured by British cruisers waiting off the Virginia Capes. The view which prevailed officially was that the case must be governed by the Prussian treaty, a liberal construction of which appeared to permit the Appam to remain indefinitely at Newport News. This was what happened, but not through any acquiescence of the State Department in the German contention. The Appam owners, the British and African Steam Navigation Company, brought suit in the Federal Courts for the possession of the vessel, on the ground that, having been brought into a neutral port, she lost her character as a German prize, and must be returned to her owners. Pending a determination of this action, the Appam was seized by Federal marshals under instructions from the United States District Court, under whose jurisdiction the vessel remained.

After twelve months of war Great Britain became seriously concerned over the changed conditions of her trade with the United States. Before the war the United States, despite its vast resources and commerce, bought more than it sold abroad, and was thus always a debtor nation, that is, permanently owing money to Europe. In the stress of war Great Britain's exports to the United States, like those of her Allies, declined and her imports enormously increased. She sold but little of her products to her American customers and bought heavily of American foodstuffs, cotton, and munitions. The result was that Great Britain owed a great deal more to the United States than the latter owed her. The unparalleled situation enabled the United States to pay off her old standing indebtedness to Europe and became a creditor nation. American firms were exporting to the allied powers, whose almoner Great Britain was, commodities of a value of $100,000,000 a month in excess of the amount they were buying abroad. Hence what gold was sent from London, at the rate of $15,000,000 to $40,000,000 monthly, to pay for these huge purchases was wholly insufficient to meet the accumulating balance of indebtedness against England.

The effect of this reversal of Anglo-American trade balance was a decline in the exchange value of the pound sterling, which was normally worth $4.861/2 in American money, to the unprecedented level of $4.50. This decline in sterling was reflected in different degrees in the other European money markets, and the American press was jubilant over the power of the dollar to buy more foreign money than ever before. Because Europe bought much more merchandise than she sold the demand in London for dollar credit at New York was far greater than the demand in New York for pound credit at London. Hence the premium on dollars and the discount on pounds. It was not a premium upon American gold over European gold, but a premium on the means of settling debts in dollars without the use of gold. Europe preferred to pay the premium rather than send sufficient gold, because, for one reason, shipping gold was costly and more than hazardous in war time, and, for another, all the belligerents wanted to retain their gold as long as they could afford to do so.

An adjustment of the exchange situation and a reestablishment of the credit relations between the United States and the allied powers on a more equitable footing was imperative. The British and French Governments accordingly sent a commission to the United States, composed of some of their most distinguished financiers-government officials and bankers—to arrange a loan in the form of a credit with American bankers to restore exchange values and to meet the cost of war munitions and other supplies. After lengthy negotiations a loan of $500,000,000 was agreed upon, at 5 per cent interest, for a term of five years, the bonds being purchasable at 98 in denominations as low as $100. The principal and interest were payable in New York City-in gold dollars. The proceeds of the loan were to be employed exclusively in the United States to cover the Allies' trade obligations.

The loan was an attractive one to the American investor, yielding as it did a fraction over 542 per cent. It was the only external loan of Great Britain and France, for the repayment of which the two countries pledged severally and together their credit, faith, and resources. No such an investment had before been offered in the United States.

Strong opposition to the loan came from German-American interests. Dr. Charles Hexamer, president of the GermanAmerican Alliance, made a country-wide appeal urging American citizens to "thwart the loan" by protesting to the President and the Secretary of State. Threats were likewise made by German depositors to withdraw their deposits from banks which participated in the loan. The Government, after being consulted, had given assurances that it would not oppose the transaction as a possible violation of neutrality—if a straight credit, not as actual loan, was negotiated. Conformity to this condition made all opposition fruitless.

Toward the close of 1915 an ambitious peace crusade to Europe was initiated by Henry Ford, the automobile manufacturer. Accompanied by 148 pacifists, he sailed on the ScandinavianAmerican liner, Oscar II, early in December, 1915, with the avowed purpose of ending the war before Christmas. The expedition was viewed dubiously by the allied powers, who discerned pro-German propaganda in the presence of Teutonic sympathizers among the delegates. They also suspected a design to accelerate a peace movement while the gains of the war were all on Germany's side, thus placing the onus of continuing hostilities on the Allies if they declined to recognize the Ford peace party as mediators. The American Government, regardful of the obligations of neutrality, notified the several European Governments concerned that the United States had no connection with the expedition, and assumed no responsibility for any activities the persons comprising it might undertake in the promotion of peace.




THE Ford peace mission, lightly regarded though it was, never

of tomatic of a state of mind prevailing among a proportion of the American people. It might almost be said to be a manifestation of the pacifist sentiment of the country. This spirit found a channel for expression in the Ford project, bent on hurling its protesting voice at the chancellories of Europe, and heedless of the disadvantage its efforts labored under in not receiving the countenance of the Administration.

"The mission of America in the world," said President Wilson in one of his speeches, “is essentially a mission of peace and good will among men. She has become the home and asylum of men of all creeds and races. America has been made up out of the nations of the world, and is the friend of the nations of the world.”

But Europe was deaf alike to official and unofficial overtures of the United States as a peacemaker. The Ford expedition was foredoomed to failure, not because it was unofficial_official proposals of mediation would have been as coldly received—but more because the pacifist movement it represented was a home growth of American soil. The European belligerents, inured and case-hardened as they were to a militarist environment, had not been sufficiently chastened by their self-slaughter.

The American pacifists, with a scattered but wide sentiment behind them, consecrated to promoting an abiding world peace, and espousing the internationalism of the Socialists to that end, and President Wilson, standing aloof from popular manifestations, a solitary watchman on the tower, had perforce to wait until the dawning of the great day when Europe had accomplished the devastating achievement of bleeding herself before she could extend beckoning hands to American mediation.

In the autumn of 1915 the President inaugurated his campaign for national defense, or “preparedness," bred by the dangers more or less imminent while the European War lasted. “We never know what to-morrow might bring forth," he warned. In a series of speeches throughout the country he impressed these views on the people:

The United States had no aggressive purposes, but must be prepared to defend itself and retain its full liberty and selfdevelopment. It should have the fullest freedom for national growth. It should be prepared to enforce its right to unmolested action. For this purpose a citizen army of 400,000 was needed to be raised in three years, and a strengthened navy as the first and chief line of defense for safeguarding at all costs the good faith and honor of the nation. The nonpartisan support of all citizens for effecting a condition of preparedness, coupled with the revival and renewal of national allegiance, he said, was also imperative, and Americans of alien sympathies who were not responsive to such a call on their patriotism should be called to account.

This, in brief, constituted the President's plea for preparedness. But such a policy did not involve nor contemplate the conquest of other lands or peoples, nor the accomplishment of any purpose by force beyond the defense of American territory, nor plans for an aggressive war, military training that would interfere unduly with civil pursuits, nor panicky haste in defense preparations.

The President took a midway stand. He stood between the pacifists and the extremists, who advocated the militarism of Europe as the inevitable policy for the United States to adopt to meet the dangers they fancied.

The country's position, as the President saw it, was stated by him in a speech delivered in New York City:

"Our thought is now inevitably of new things about which formerly we gave ourselves little concern. We are thinking now chiefly of our relations with the rest of the world, not our commercial relations, about those we have thought and planned always, but about our political relations, our duties as an indi

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