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clients to the attractive yields afforded by the loans of the
United States Federal Government, by the state loans
of Alabama, Indiana, Illinois, Kentucky, Louisiana,
Maryland, Massachusetts, New York, Ohio, Pennsyl-
vania, South Carolina, Tennessee, Virginia, and Georgia,
as well as by the loans of the cities of Boston and of New
York, all of which bore interest at the rate of from 5 per
cent to 6 per cent. No mention was made in the cir-
culars issued in the early fifties of railroad bonds or
stocks. In the fifties, sixties, and early seventies large
sums of capital were invested by Europe, mainly by
Great Britain and Holland, in the federal and state gov-
ernment loans, in municipal securities, in railroad bonds
and stocks, and in the shares of land, mining, and other
ventures. But the chief borrowers were railways. By
1883 the amount of American railway securities quoted
in London amounted to the large total of $1,535,000,000.
Since the early eighties the accumulation of capital in the
United States itself has been on a great scale, and the
federal and state governments have been able to borrow
at home at lower rates of interest than the rates
at which they could obtain capital from the investors of
Europe. But the amounts of capital needed by Ameri-
can railways have been beyond the power of the American
people to supply, and large amounts of capital have been
invested by Europe in American railway and other securi-
ties. At the end of 1908 the securities of American rail-
ways quoted in the London Stock Exchange "official
list" were of the nominal value of $7,500,000,000.

82300" — 10 12 173

National Monetary Commission

Further, there are a large number of American industrial
and other securities quoted in London which raises the
total to over $9,000,000,000. Only a portion of this
vast amount of securities quoted in London is owned
by British investors. Great Britain possesses about
$3,500,000,000 of American securities. To this sum has
to be added the considerable amounts invested by the
Continent. Large amounts of German, Dutch, and
French capital are embarked in American undertakings,
principally railways. A statement drawn up in 1902
at the instance of the French Minister of Finance from
reports supplied by French diplomatic agents and con-
suls in various parts of the world placed the total amount
of French capital invested at that time in the LTnited
States at 600,000,000 francs, or $120,000,000, but this
figure appears to have been an underestimate. It is
true that few issues of American securities are publicly
quoted on the Paris Bourse, but relatively large amounts
have been purchased privately by French investors in
London and in New York. The French investments
in the United States, including the Pennsylvania Rail-
road and other loans placed in Paris since 1902, amount
to nearly 2,500,000,000 francs, or $500,000,000.

Estimates of the amount of capital invested by Germany
in the United States were made in 1905 by the German
Admiralty and published in a work entitled "Die Ent-
wicklung der Deutschen Seeinteressen im letzten Jahr-
zehnt." These estimates placed the amount of German,
capital in the United States and Canada in 1904 at
from 2,500,000,000 marks to 3,000,000,000 marks, say.


Trade Balance of United States

$625,000,000 to $750,000,000. Since 1904 considerable
additional sums of German capital have been invested
in the United States. German bankers place the amomit
of the German investments in American securities at
about $1,000,000,000. The amount of Dutch capital in
the United States is about $750,000,000. American
securities are also held in Belgium, Switzerland, and
in other countries. In the aggregate the amount of
European capital invested in "permanent" securities in
the United States is approximately $6,000,000,000.

Beyond the fixed capital invested by Europe in the
United States account has to be taken of the flo^ingj)
loans made by Europe to America. These floating loans
are mainly incurred in the spring and summer months
in anticipation of the produce shipments from the
States in the fall months and they are then largely
liquidated. The amount of the floating debt of the
United States to Europe in the form of produce bills,
finance bills, loans against securities, overdrafts, etc.,
averages about $400,000,000, reaching a larger sum in
July and early August and falling to a much lower
sum at the end of December. The rate of interest paid
upon this floating debt insofar as it consists of produce
bills is a very low one, the rate of interest charged
on this class of loan being less than that on any other
kind of security.

Including both the fixed investments and the floating
loans, the amount of capital borrowed by the United
States from other countries is about $6,500,000,000, the
annual interest charge upon which is about $300,000,000.


National Monetary Commission

An offset to the large amount of capital invested in
the United States is the capital invested by American
citizens in other countries, more especially in Mexico,
Canada, in the South American States, in the Philippines,
in Cuba, etc. It is true that a portion of the capital
of these foreign undertakings in which American cap-
ital is invested has been provided by European in-
vestors; nevertheless, as these corporations are Amer-
ican and the amounts invested in the United States by
Europe include investments in these foreign companies,
it is necessary to place the interest received from these
foreign investments by American corporations against the
interest paid to Europe. Beyond the capital of public
corporations which have been formed under state laws
in America the capital invested privately by American
citizens in other lands reaches to a considerable total.
The amount of American capital invested in other lands
in this manner both publicly and privately is probably
$1,500,000,000, yielding an income of about $75,000,000
a year. By deducting the interest — $75 ,000,000 — received
upon American capital placed abroad from the interest —
$300,000,000 — which the United States pay upon capital
supplied to them by other lands, I arrive at a net pay-
ment of $225,000,000 by the United States to other coun-
tries for interest and dividends upon capital. This sum
the United States has to remit each year by exports of

X. — The Value to the United States of Loans of
Capital by Other Lands.

I have dealt in a general way with the effect of capital
investments by the older countries in the newer lands; I


Trade Balance of United States

will now refer in somewhat greater detail to the effect of
the imports of capital from the older countries upon the
growth of trade and of prosperity of the United States.
The capital obtained by America from other lands, mainly
from Great Britain, was chiefly for the purpose of extend-
ing and improving the railway system of the country.
No one can survey the remarkable growth in the produc-
tion, wealth, and population of the United States without
expressing his appreciation of the great part played by
railway extensions in bringing about that growth. The
extension of railways alone made it possible to bring into
cultivation the vast tracts of virgin lands that are now
under the plough. Without railways the United States
could not now produce annually agricultural wealth of the
value of about $8,000,000,000. Again the extension of
railways alone made it possible to reach and to develop
upward of $2,000,000,000 of mineral wealth per annum.
It is the railways that enable the people of the United
States to reach and to obtain for their use the vast quan-
tity of lumber annually cut from the forests. Lastly, the
immense manufacturing industries of the States which
now distribute over $3,000,000,000 in wages could never
have been built up but for the construction of railways.

The provision of some $6,500,000,000 of capital to the
United States by older countries, mainly for railway
construction, has enabled the American people to devote
their rapidly growing savings to the building and furnish-
ing of homes, to the equipment of manufactories, to fitting
out retail establishments, and to other purposes to a nuich


National Monetary Commission

greater extent than otherwise would have been possible,
and in this way the foreign capital has greatly accelerated
the growth of population, production, and wealth. By the
use of the $6,500,000,000 of capital obtained from other
countries the annual production of wealth by the United
States has, I calculate, been increased to a nearly corre-
sponding extent and the accumulated wealth of the country
has been increased by many times the amount of the capi-
tal borrowed. The additional value given to land alone
by the construction of railways is so vast and so apparent
that it needs no demonstration. The increase in the
annual production of wealth by the United States ren-
dered possible by the importation of capital has been at
least twenty times greater than the sum paid for interest.
The investment of this capital by the older countries in
the United States has thus brought advantages which
cannot easily be exaggerated.

XI. — Tourist and Other Expenditures.

Their great prosperity permits a large number of Amer-
ican citizens to visit other countries each year and to
expend for this purpose a large aggregate sum. No sta-
tistics are kept of the number of American citizens leaving
the shores of the United States for other lands, but com-
plete figures are available of the number of citizens that
return to their country from these visits. The number
of American citizens who make visits to other lands is
steadily increasing. In the year to June 30, 1908, the
number returning was 200,447. The numbers in recent
years have been as follows:


Trade Balance of United States

Number of United States citizens returning to the United States from other


Year to June 30 — 1898 93, 602

1899 95, 196

1900 : 1 20, 477

1901 157.050

1902 142, 058

1903 140, 669

1904 147.974

1905 167, 227

1906 177, 488

1907 191, 797

1908 200, 447

Thus, the number of American citizens visiting other
lands in the course of the year is now upward of 200,000.
The data I have been able to obtain as to the expenditures
of these tourists shows that the sum expended by them
approximates to $i, cooper person. This sum includes
merely the passage money and the sums expended in
other countries for food, transportation, and other mis-
cellaneous expenditures. It does not include the sums
expended upon works of art, jewelry, clothing, etc., which
are declared at the customs and are included in the value
of the goods imported into the United States. In the
aggregate, tourist expenditures for the purpose I have
mentioned reach a total of about $200,000,000. On the
other hand, a number of foreign tourists visit the United
States and their expenditures should be placed against those
of American citizens. In 1907-8 the number of persons
arriving in the States who were neither American citizens
nor immigrants reached 142,000, but a large portion of
these were immigrants destined for Canada who expended
but a very small sum of money per person for transporta-
tion on their way to destination. Apparently the number


National Monetary Commission

of visitors, other than immigrants passing through to
Canada, was about 30,000. The expenditures of visitors
to the United States may be taken at about $1,000 per
person, excluding all shipping transportation, or an aggre-
gate sum of visitors' expenditures in the United States of
$30,000,000. On balance, therefore, the United States
has to pay to other countries a sum of about $1 70,000,000
a year to cover tourist expenditures.

XII. — Expenditures of Immigrants and Emigrants.

There is another movement of population which creates
large debit and credit items in the American trade bal-
ance. Each year a considerable number of persons, who
previously had migrated to the United States, return to
take up their residence in Europe. The numbers of these
persons greatly fluctuate. In periods of trade depression
the numbers of wage-earners that return Lo Europe rise
to great figures. Indeed, in the trade depression of
1907-8 the number of persons that left the United States
of the wage-earning classes was nearly as great as the num-
ber of immigrants — 637,905 left the United States and
782,870 arrived. For the period from October, 1907, to
October, 1908, the number of persons that left the United
States of the wage-earning class largely exceeded the
number that arrived. In calculating a trade balance it is
necessary to deal with a normal rather than with an
abnormal situation. Probably such a movement as that
witnessed in 1907-8 will not recur for a great number of
years. Therefore in my calculation I propose to take the
average number of persons of the wage-earning class that


Trade Balance of United States

leave the United States. In the four years to 1907 they
averaged somewhat over 300,000 a year. But the whole
of this number did not consist of persons who had made a
modest fortune and who desired to return to Europe to
enjoy the fruits of their labors. Large numbers of the
working classes visit their friends in Europe from time to
time and travel in the steerage because of its cheapness.
Persons traveling for this purpose and intending to return
to the United States do not carry with them nearly as
much money as others who are returning to live in Europe
after having accumulated what is to them a fortune.
Again a certain number of immigrants are unable to find
congenial occupations in the country and return to Europe
with practically no resources. Thus the average amount of
money carried by the 300,000 "emigrants" who leave the
United States each year is not a very large sum, on the
average it was probably not more than $200 per head, or a
total sum of about $60,000,000. On the other hand, ac-
count has to be taken of the money brought in by immi-
grants from other lands. In 1908-9 the number of
immigrants into the United States was about i ,000,000 in
comparison with 783,000 in the previous twelve months
and 1,285,000 in 1906-7. The number of immigrants
arriving in the States in the last eleven years are as follows :

Year to June 30 — 1898 229, 299

1899 311,715

1900 448,572

1 901 487, 918

1902 648,743

1903 857,046

1904 812, 870

1905 I, 026, 499

1906 I, 100, 735

1907 1,285,349

1908 782, 870


National Monetary Commission

The average sum brought into the eountry is about $50
per head. In the aggregate the money brought into the
country by immigrants probably reaches $50,000,000 per

For all practical purposes J. calculate that the money
brought into the country by immigrants about counter-
balances the money taken out of the country by emigrants
returning to their native lands and by "other than cabin
passengers" visiting other countries.

XIII. — Remittances to Friends.

The great prosperity of the United States enables many
of its citizens who have come from other lands to make
gifts of large sums of money in the aggregate to friends
in the old countries. Tlie remittance of this money
means that the United States have to send considerable
quantities of produce abroad for which there is no corre-
sponding item on the import side of the account, as the
produce goes for the purpose of providing the funds nec-
essary to cash .the postal money orders and other drafts
remitted to friends. The amount of these remittances is
exceedingly difficult to calculate, but that it is large
everyone admits. I have endeavored to make an inde-
pendent calculation of the amount of these remittances,
but unfortunately there is a controversy between the
l)anks and the express companies as to the sale of these
drafts and neither the hanks nor the express companies
are willing to furnish the necessary information to enable
an estimate to be made of the situation at the present time.


Trade Balance of United States

However, the bankers have referred me to a paper written
by Mr. Charles F. Speare and pubHshed in the North
American Review of January, 1908, in which Mr. Speare
calculates the total amount of money remitted to friends
in Europe by immigrants. Mr. Speare estimates that out
of the savings of the foreign bom in America $250,000,000
a year are going abroad and that the annual rate of increase
is about 10 per cent. The annual distribution of this great
sum throughout Europe is, he says, in the following pro-
portions :

Italy S70, 000, 000

Austria-Hungary 65, 000, 000

Great Britain 25,cxx5, 000

Norway and Sweden 25, 000, 000

Russia 25, 000, 000

Germany 15, 000, 000

Greece 5, 000, 000

All others, including France, Switzerland, Belgium, and

Denmark 10, 000, 000

The foreign-born population of the United States
numbers about 15,000,000 and the remittances per head
were estimated as follows:


Per capita

2, 300. 000
2, 250, 000
I. 600,000
I, 700, 000
3, 700, 000
100, 000

S30. 00

28. 10

British - -

7. 14

IS- 00

14. 50




o In 1906 these remittances included about Sio, 000,000 to Ireland alone — $5,500,000
through banks and over $4,000,000 by the post-oflSce.


National Monetary Commission

The amounts of foreign money orders issued by the post-
office of the United States to all countries in the world in
1Q06-7 and in previous years were as follows:

Year to June 30 — 1885 $6,840,358

1890 13, 230, 135

1895 12,890,744

1900 16, 749, 018

1905 47, 5 16, 028

1906 63, 047, 867

1 907 71, 000, 000

Beyond the post-office all sorts of outside agencies are
employed. The greater portion of the remittances are
made through bankers of the nationality of those remitting.
There are nearly i ,000 Italian bankers in the United States,
several hundred Hungarian bankers, and numerous small
Russian bankers. Beyond these private bankers there
are many large banking institutions which remit large
, sums of money for account of immigrants. The express
companies also do a large business, calculated at from
$20,000,000 to $25,000,000. Considerable sums are also
remitted in other ways. That there is this large sum sent
abroad by small remittances, as calculated by Mr. Speare,
cannot, I think, be questioned. American citizens
undoubtedly are very liberal and generous to their friends
in Europe. I have personal knowledge of large sums of
money remitted by individuals to friends. Nevertheless,
from the data I have been able to obtain, I can not con-
firm the calculation that the remittances to friends are as
much as $250,000,000 a year. In the first place, a portion
of this money is remitted by persons returning to live in
Europe whose remittances I have already allowed for in


Trade Balance of United States

Chapter XII. Secondly, many of the money orders and
drafts are sent to Europe to pay for goods pm-chased.
Very large numbers of small parcels of goods are imported
and figure in the imports of produce. These small parcels
are usualUy paid for by small drafts or by postal money
orders. It is impossible to determine if a small remittance
is for the purpose of purchasing articles of attire, presents,
books, etc., or is merely a gratuity, against which no pro-
duce is received. The amount of the remittances for the
purchase of small articles imported through express com.-
panies and others undoubtedly reaches a large sum. That
all foreign postal money orders are not gratuities is evident
from an examination of the foreign money orders issued by
other countries. In comparison with the $63,000,000 of
foreign money orders sold by the United States post-
office in 1905-6, Austria remitted $50,854,000 to other
countries in this manner, Hungary $45,251,000, Germany
$33,233,000, France $13,074,000, the United Kingdom
$9,664,000, and Switzerland $9,265,000. Certainly the
remittances of Austria-Hungary, Germany, France, the
United Kingdom, and Switzerland were not in the nature
of gratuities — they were mainly remittances for value
received. With the data at my disposal I do not feel justi-
fied in placing the amount of money remitted by Ameri-
can citizens to friends in other countries at a larger figure
than $150,000,000. This is still a very large sum, and
is a factor of great importance in calculating the trade
balance of the United States and the amount of produce
which has to be remitted for various purposes other than
to pay for goods imported.


National Monetary Commission

Although I am unable to accept Mr. Speare's conclu-
sions that America remits each year $250,000,000 in gifts
to friends in other lands and have reduced the sum to
$150,000,000, I wish to express my indebtedness to Mr.
Speare for the assistance he has afforded me and my
appreciation of the work he has done in compiling the
total of the small foreign drafts sold by bankers, by the
express companies, and by the post-ofhce.

XIV. — Freights.

The United States possesses a mercantile marine large
enough to convey but a small portion of the produce they
export and import, and considerable payments have to be
made for shipping services. In 1907-8 the imports into
the United States by sea were valued at $1,123,000,000.
Of this amount $152,000,000, or 13.5 per cent, was carried
in American vessels and $971,000,000, or 86.5 per cent,
in foreign vessels. In the same year the exports from the
United States were valued at $1,670,000,000, of which
amount the produce conveyed in American vessels was
valued at $120,000,000, representing a proportion of only
7.2 per cent and the balance of $1,550,000,000, or 93.8
per cent, was conveyed in foreign vessels. The sum
which the United States had to pay to other lands for
marine transportation is much smaller than is usually
calculated. In the first place, other countries have to
pay the cost of transporting the produce they purchase
from the United States, and there is no burden upon
America for freight upon goods shipped to other lands.
Indeed, there is a credit item on goods exported, inasmuch


Trade Balance of United States

as $120,000,000 worth of produce, or 7.2 per cent, of the
whole of the goods exported in 1907-8 was conveyed in
American vessels. The freight which the United States
has to pay for is that upon the $971,000,000 of imports
conveyed in foreign vessels less the freight earned by
American vessels in conveying $120,000,000 of exports.
Thus the net amount of freight payable is in respect of
goods amounting in value to about $850,000,000. That
was the amount in 1907-8. In 1908-9 the imports have
shown large expansion, and it is probable that the value
of the freight imported in foreign vessels has been about
$1,150,000,000, and that after allowing for the credit item
in respect of exports conveyed in American vessels, the net
amount of goods upon which freight was payable was about
$1,000,000,000. There are, however, other credit items
to be taken into consideration. The foreign vessels
carrying goods from the United States to other countries
are usually coaled and provisioned for the outgoing
voyage in American ports, and the value of the coal and
provisions supplied to them must be deducted from the
payments which the United States has to make for freight
brought into the country in foreign vessels. After taking
all these factors into consideration I calculate that the
net sum which the United States pays to other countries
for the transportation of merchandise is about $25,000,000
per annum. Payment of this sum has also to be remit-
ted to other lands by exports of produce.

The values of the exports from and imports into the
United States carried in American vessels and in foreign
vessels, respectively, since 1890 are shown in the tables


National Monetary Commission

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Online LibraryFrancis Wrigley HirstThe credit of nations → online text (page 13 of 16)