Page:EB1922 - Volume 30.djvu/902

852

emphasized by the fact that in spite of the large amounts of securities purchased and deposited a still more drastic step had to be taken.

On Jan. 24 1917, a regulation issued under the Defence of the Realm Act came into force, by which the Treasury was given power to requisition securities. The first order under this regula- tion was issued on Feb. 17 1917, and required owners or custo- dians of specified securities to deliver them up in return for an amount of compensation based on the current market values. Holders of securities not ordinarily resident in the United King- dom and certain other holders were exempted from the terms of the order. The compensation was payable within seven days of the transfer, and power was given to reduce its amount in case of late delivery. Altogether four such orders were issued, the number of securities included being 1,076. On March i 1918 deposit scheme B was closed to new deposits, except in regard to securities subject to the extra zs. tax and which had not pre- viously been included in the list of requisitioned securities. A little later, when the securities under scheme A began to fall due for return, depositors were given the option to extend the term to five years. Nearly all such depositors availed them- selves of this offer.

In addition to the purchase and loan schemes which have been described above, the American Dollar Securities Committee under- took various operations for the purpose of placing dollars at the disposal of the Treasury in America. In this connexion may be instanced arrangements with various Canadian provincial and muni- cipal authorities for the purchase of their sterling securities in Lon- don for cancellation and the issue, in place thereof, of Canadian dollar securities for sale in America. Similar plans were adopted in the case of certain American industrial companies. Further, arrangements were made with certain British corporations to issue their own loans in America and place the dollars obtained at the disposal of the Treasury, the latter looking after the American loan and providing the English company with sterling in London. As an instance, reference may be made to the issue by the Central Argen- tine railway of a $ 15, 000,000 loan in America.

The labour involved in connexion with the operations and more particularly with the loan scheme, was of considerable magnitude, and it was necessary to adopt every device in order to lessen the work, which in the main had to be carried out by a staff collected in a time of emergency. In the early days an agreement was entered into with the agents of over 100,000,000 bearer securities, the coupons of which had to be encashed in London, to pay the coupons on deposited securities, plus the additional ^% per annum, and for this purpose they were supplied with schedules giving such information as would permit of the calculations and payments being made. In Sept. 1917 this procedure was discontinued, and thereafter the work was taken over by the National Debt Office.

With regard to the registered stocks on deposit, much duplica- tion of work was avoided by the railway companies and other paying agents undertaking to keep the Treasury register and pay the increased interest as it fell due. By this means it is estimated that the authorities were relieved from the prepara- tion, etc., of about 350,000 dividend warrants each year. Fur- ther, certain approved agents were appointed to accept deposits of amounts of less than $5,000 each, the securities being handed over in bulk to the Committee ; payment of interest on the aggre- gate amounts was made to such agents, who in turn distributed the sums received amongst the individual depositors.

The United States of America was naturally the chief source of supply, both for munitions of war and for goods, and there- fore the financial arrangements already referred to were mainly directed to the provision of dollars in order to effect the necessary payments. In a smaller degree, however, payments had to be made to other countries, and certain of the securities obtained by the Committee were used to meet these obligations.

The United Kingdom was, of course, preeminent as the holder of foreign securities, and she therefore played by far the greater part in the efforts made towards mobilization in the Allied inter- ests. But France also held a considerable amount and had a deposit scheme of her own, though on nothing like the same scale as that of the United Kingdom. In her scheme no purchases of securities were made, but a considerable volume of private sales to the United

States of America was effected, both direct and through London, and to a certain extent purchases of French holdings were made by the American Dollar Securities Committee through the medium of the banks of France and England.

The total amount of securities dealt with under the British mobili- zation scheme, including those bought by the Bank of England prior to the appointment of the American Dollar Securities Com- mittee, was as follows:

Purchases 216,000,000

Deposits 406,000,000

Total 622,000,000

These particulars may be to some extent amplified. Thus, the purchases consisted of :

$680,000,000 . . Dollar bonds

$241,300,000 . . Dollar shares

27,800,000 . . Sterling bonds and shares

4,100,000 . . Registered stocks

Fl. 5,400,000. . Florin bonds and shares Similarly the deposited securities were made up of :

$197.800.000 . . Dollar bonds

$303,600,000 . . Dollar shares

115,100,000 . . Sterling bonds

172,000,000 . . Registered stocks

17,500,000 . . Home Railway debentures

Fr. 8,500,000. . Franc bonds

Kr.8, 100,000. . Kroner bonds

Fl. 4,400,000. . Florin bonds The total number of different securities dealt with was 2,027.

The total amount of American dollar securities which passed through the hands of the Committee was thus approximately 285,000,000. In addition securities to the value of probably 100,- 000,000 were sold direct to America through the ordinary channels, making in all, say, about 400,000,000. Various estimates have been made from time to time of the amount of American securities held in Great Britain before the war. The data available on which to base any such estimate are very vague and uncertain in their nature, and the present writer is inclined to believe that any such estimates can only be regarded as more or less intelligent guessing. In his opinion the total amount of American securities held in Great Britain before the commencement of hostilities was certainly not greater than 600,000,000 and probably nearer 500,000,000.

The operations of the Committee undoubtedly achieved the pur- pose for which it was formed, as during its existence the rate of exchange practically remained constant at about 4.76^ dollars to the i. Although securities were purchased and taken on loan after the Americans came into the war the amounts obtained were not great, and it is believed that practically all available American securities suitable for sale or collateral for loans had been dealt with. It is difficult to see what course could have been taken in order to obtain the necessary credits abroad in sufficient amount when these securities had been exhausted, but speculation on this point would be idle since the necessary credits became available after and on account of the entry of the Americans into the war. (G. E. M.)

DOLLAR STABILIZATION. Under the existing currency system, the so-called " level of prices " is largely at the mercy of monetary and credit conditions. The tide of prices will rise or fall with the flood or ebb of gold or of paper money or of bank credit. Evidently a rise in the level of prices is a fall in the pur- chasing power of the dollar or other monetary unit, and vice versa. The purchasing power of money has always been unstable because a unit of money, as at present determined, is not a unit of purchasing power, but only a unit of weight. It is the one inconstant unit of measurement left in civilization. Other units the yard, pound, bushel, etc. were once as unstable and crude as the dollar, sovereign or franc still are; but, one after another, the other units have all been stabilized or standardized. Short weights and measures cheat the buyer; long weights, the seller. So a unit of money which changes in value or purchasing power is always playing havoc between contracting parties. When prices are rising in other words, when the purchasing power of the dollar is falling the creditor and the creditor-like classes suffer injustice. The sufferers include savings-bank depositors, bond- holders, salaried classes and wage-earners. In the great upheaval of prices i.e. in the United States, depreciation of the dollar which took place between 1896 and 1921 such injustice amounted to over a hundred billion dollars. On the other hand, when prices fall, as they did between 1873 and 1896, it is other classes- debtors, stockholders, farmers and independent business men generally which suffer the injustice. The indirect effects of falling or rising prices i.e. of a rising or falling dollar are equally bad. These indirect effects include industrial discontent