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UNIVERSITY OF CALIFORNIA
AT LOS ANGELES





SOUTH!

univer:



KY.



61st CONGRESS : : 2d SESSION

1909-1910



SENATE DOCUMENTS



Vol, 32



WASHINGTON : : GOVERNMENT PRINTING OFFICE : : 1910



61ST Congress 1 SENATE ^ Document

2d Session / ( No. 579



NATIONAL MONETARY COMMISSION



The Credit of Nations



BY

FRANCIS W. HIRST

Editor of The Economist



The Trade Balance of
the United States



GEORGE PAISH

Editor of The Statist



Washinj^ton : Government Printing Office : 1910



^"^ ^ r^ I \ i-\



NATIONAL MONETARY COMMISSION.



Nelson W. Aldrich, Rhode Island. Chairman.

Edward B. Vreeland, New York. V ice-Chairman.
Julius C. Burrows, Michigan. John W. Weeks. Massachusetts

Eugene Hale, Maine. Robert W. Bonynge. Colorado-

Philander C. Knox. Pennsylvania. Sylvester C. Smith. California.

Theodore E. Burton, Ohio. Lemuel P. Padgett, Tennessee.

Henry M. Teller, Colorado. George F. Burgess, Texas.

Hernando D. Mo.ney, Mississippi. Ars^ne P. Pujo. Louisiana.

Joseph W. Bailev, Texas. Arthur B. Shelton, Secretary

A. Piatt Andrew, Special Assistant to Commission.

II



V\3



o



TABLE OF CONTENTS



THE CREDIT OF NATIONS

By Francis W. Hirst, Editor of The Economist.



Page.

Introduction 3

The debt and credit op Great Britain:

I. Origin and growth of the national debt 13

II. Schemes of conversion 26

III. The history of the sinking fund 32

IV. The local debt of England and Wales 39

The debt and credit of Germany:

I. The German imperial debt 51

; A) The funded debt of the German Empire 57

' B) Principles governing imperial loan expenditures . . 59

C) The unfunded debt of the German Empire 63

II. Debts of the German States 67

III. The local loans of Germany 72

The debt and credit of France:

I. History of debt 77

(A) Prerevolution 77

(B) The revolution to the end of the first empire,

1789-1814 8i

(C) The Bourbon and Orleanist governments and the

second republic, 1814-1852 82

(D) The second empire, 1852-1870 85

(E) The war of 1870 86

(F) Recent history of the French debt, 1878-1908. ... 87
II. Methods of issue — Redemption, conversion 91

III. Local indebtedness in France 94

The debt and credit of the United States:

I. History of the national debt loi

(A) 1775-1789: The continental congress loi

(B) 1790-181 2 103

(C) Thewarofi8i2 107

(D) 1816-1846 109

(E) 1846-1848: The Mexican war 1 1 1

(F) 1848-1860 Ill

(G) 1861-1866: The civil war—

a) Federal finance 112

(b) Confederate finance 118

III



National Monetary Commission

The debt and credit of the United States — Continued* page.
I. History of the national debt — Continued.

H) 1865-1890: The funding of the debt 120

(I) 1 890-1 898 124

(J) 1898: The finances of the Spanish war 126

(K) 1899-1909 127

II. Sinking fund and debt reduction 131

III. Debts of the States, cities, and other local bodies 134

(A) Restrictions on municipal borrowing 144

(B) Amount and growth of the debt 144

(C) Issue and sale of bonds — Prices and rates of in-

terest 146

(D) Municipal sinking funds 149



THE TRADE BALANCE OF THE UNITED STATES

Uy George Paish, Editor oj The Statist



Page.

I. — On trade balances 153

II. — Capital investments and trade balances 155

III. — Effect of capital investments upon trade 159

IV. — The new countries and imports of capital 161

V. — Foreign trade and the precious metals 163

VI. — The precious metals and capital investments 165

VII. — Services and trade balances 166

VIII. — Lending and borrowing countries 169

IX. — Europe's capital investments in the United States 172

X. — The value to the United States of loans of capital by

other lands 176

XI. — Tourist and other expenditures 178

XII. — Expenditures of immigrants and emigrants 180

XIII. — Remittances to friends 182

XIV.— Freights '. 186

XV. — Insurance 190

XVI. — Summary of remittances for interest, tourist expendi-
tures, gifts to friends, and freight charges 191

XVII. — Effect upon United States trade balance of imports and

exports of capital 192

XVIII. — Imports and exports 197

XIX. — The import and export of gold 207

XX. — The trade balance and gold imports 210



The Credit of Nations

With special reference to the debts of

Great Britain, Germany, France,

and the United States



FRANXIS W. HIRST

Editor of The Economist



THE CREDIT OF NATIONS.



A COMPARATIVE STUDY OF RECENT DEVELOPMENTS
IN EUROPE AND THE UNITED STATES.



INTRODUCTION



Many and diverse are the causes affecting the international
money market. Local conditions still account for strong vari-
ations and cross currents; but the tendency is always toward
sameness or parallelism, for the money markets of the world
under the influence of the telegraph and the telephone are
taking on a more and more international character. By com-
mon admission when trade is good, when speculation and
enterprise are active and prices rising, a higher rate of interest
is obtainable for loans, whereas when trade is declining and
prices falling lenders of money have to be content (other things
being equal) with lower rates of interest. But among those
who actually deal in money — bankers, brokers, etc.— and
especially among speculators on the stock exchange many
peculiar notions and superstitions are entertained on this sub-
ject, more particularly as regards the influence of gold move-
ments and gold production upon the money market. Even
in the ranks of those who make a scientific study of the problem
room has been found for many differences of opinion. One
fact generally admitted both by practical and theoretical finan-
ciers is that the money market and the loan market have impor-
tant bearings upon one another. The most propitious time
for issuing a new loan is when the money market is easy, and
financial anglers with a big flotation in hand will watch and
wait anxiously for the psychological moment to strike. On the

3



National Monetary Commission

other hand the rates for "short money" and for "long money"
may frequently diverge. Their fluctuations are mutually
influential without being strictly parallel, for demand and sup-
ply may differ widely according as they are concerned with
days or years. Supplies of money for weekly or monthly loans
and for the discounting of bills which mature in two or three
months may be abundant at times when there is very little
capital available for investment in new issues of government
loans, railroads, or industrial stocks.

These general questions it is not the writer's purpose to
investigate. His object is the much humbler and narrower one
of examining the different degrees of credit which attach to a
number of different nations or governments, and of measuring
some striking alterations in the relationship between national
securities which have occurred in recent times and are brought
to light by statistical comparisons carried over a series of years.
For this purpose there is at hand a mass of material recently
accumulated by the treasury officials of the German Govern-
ment in 1908 for the purpose of forwarding a project of
financial reform. The statistics cover a period of thirty years
from 1877 to 1907.

It may be remarked first of all that the debt of any
important government can usually be bought on all the leading
stock exchanges at pretty much the same price. But some
governments — Russia and Brazil, for example — do not like the
market for their securities to be too international or the prices
to be too fluid. They fear that the whole level of their credit
may be unduly lowered by a sudden panic or prejudice occur-
ring in a single market. Hence, while allowing the coupons
to be cashed anywhere they will divide an issue between per-
haps Paris, London, Berlin, and New York, making the bonds
issued for French or German consumption nontransferable to
England or New York, and vice versa. In other words, for-



The Credit of Nations

eign loans are often international as to the coupons but local
as to the scrip. Thus it happened that at one time, when the
revolutionary movement in Russia was regarded in London
with great apprehension but with comparative composure in
Paris, the market price of Russian bonds fell in London some
lo per cent below the market price for the parallel issue in Paris.
This no doubt was an extraordinary occurrence; but it may be
important, and is always useful, in comparing the credit of
different countries to state in each case the stock exchange or
bourse from which the quotations are taken. The following
list shows the nature of the stocks compared and the stock
exchange from which the quotations are taken for the twenty

years, 1887- 1907:

1. British consols — 3 per cent to April 6, 1889; 2^ per cent
to April 6, 1903; and 2)-^ per cent since that time; London Stock
Exchange.

2. French rentes — 3 per cents; Paris Bourse.

3. German 3^^ per cents; Berlin Bourse.

4. United States bonds — 1887 to 1894, 4 per cent bonds falling
due in 1907; and 1895 to 1907, 4 per cent bonds falling due in
1925; New York Stock Exchange.

5. Dutch 3^ per cent loan 1887 to 1896 and 3 per cent since;
Amsterdam Stock Exchange.

6. Swedish 4 per cents 1887 to 1895; 3^ per cents from 1895;
Hamburg Bourse.

7. Austrian 4.2 per cent note rentes; Vienna Bourse.

8. Russian fives 1887 to 1889; fours from 1889; Paris Bourse.

9. Italian 5 per cent rentes subject to an income tax of 13.2
per cent up to 1894 and of 20 per cent from July i, 1894, t^^
December, 1906; 3^ per cent rentes from January i, 1907, to
December, 191 1, and 3>^ per cent (tax free) after 191 1; Paris
Bourse.

10. Spanish exterior 4 per cents; Paris Bourse.



National M o ri e t a ?' y Commission

Average price of the public loans of Great Britain, France, Germany, United
Stales, and Holland from 1887 to 1907.



Year.



I Britain
I (3^ percent,
I bill 1902).



1887.
1888.
1889.
1890.
1891.
1893.
1893
1894.
189s
1896.

1897
1898.
1899
1900.
1901.
1902
1903
1904
1905.
1906.
1907.



95 S

99- o
98.0
96.4
95- 7
96.6
98.3
lor . o

106. 2

110.8

112. 4

iio. 9

107. I
99 6
94. 2
94-3

C90. 7
88.2
89.8
88.3
84. 1



France 1 Germany
(3 per cent). .(3 J4 per cent),



80. I
8i.6
84.9
90. 7
94 2
97-3

97. 2
100. o
102. o

102. I

I03-3
102. 8
loi. 2
100. 6
loi. 2
100. 6

98. I

97. S

99. 2
97. 6
94.8



United

States

(4 per cent).



Holland

(3 J4 percent,

bill 1896).



99-7

103. 4 I
103 7
100. 4

98.3

99 9

100.3

102. 3

104. 4

104.5



127. 2
126. 7
127.8
123. 7
118,6

115- 6
I II. 9
114. o
121. s

116. 2



103- 5


124-5


102. 6


125.3


99- 7


129. 7


95- 8


134- 5


99.5


138.3


102.


136. 7


102.3


135-3


lOI. 9


132-0


loi. 3


132-4


99-5


130-3


94.6


126. 6



98.8

100. s
102.3
loi . 6
loi . 4

101 . 4
loi . 6

102 4
loi. 3

o 100. 6

699. 7

98,9

97-5

94 3
90. 7
93 7
96.3
95-7

95 2
94, I
93 o
89-8



o January to February, 3 J^ per cent.
*> March to December, 3 per cent.


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Online LibraryFrancis Wrigley HirstThe credit of nations → online text (page 1 of 16)