FUTURE BANKING PROBLEMS 399 



this must be redeemed upon demand, no matter what sacrifices this 

 would entaiL The essential characteristic of paper money is that it 

 shall be redeemed without question upon demand, but paper money and 

 securities are entirely different. The first is a call for a standard dollar 

 — that is gold; the second is a certificate of proportionate interest in 

 either the mortgage on a property, or in the ownership of that property, 

 as the case may be. 



JSTo one would ask that an American householder should repay the 

 mortgage upon his home, which, by its terms, was not due for some 

 years, simply because the English holder of the mortgage suddenly 

 decided that he wanted his money to assist his government in prosecuting 

 the war. No one would contend that it was the duty of the ranch 

 owners of Texas, for example, to repurchase a ranch owned by British 

 interests, solely because of the problems which the war brought to the 

 foreign owners, and yet this is exactly the position which they take with 

 reference to the stocks and bonds of our American corporations. The 

 foreign security holder is either a creditor or a partner in our enter- 

 prises. He has gone into them with the expectation of profit and with 

 the assurance that liis money is safe. We have done nothing to en- 

 danger the safety of his investment, and whatever unfavorable features 

 may have developed concerning the profits of the enterprise arise largely 

 out of the war, which we have not caused and from which we are an 

 innocent sufferer. 



There is no moral obligation on our part to repurchase these secur- 

 ities. Such a contention proceeds upon the assumption that we have 

 made an enormous call loan in Europe, and that it is understood upon 

 both sides that Europe may and will call for its repayment whenever 

 home conditions make it advisable. Such a contention is utter folly. 

 American financiers would never have entered into such an- arrange- 

 ment, and had they been so foolish as to make such enormous call loans, 

 they would have demanded the rate of interest which properly attaches 

 to such a class of loans. The plain trutji of the matter is, that Europe 

 has never regarded these investments as call loans. They were made 

 because of the attractive rates of interest which they offered — from 50 

 to 100 per cent, higher than the rates which could be commanded for 

 call loans. Our European friends have made the extra profit of a 

 permanent investment, and they must now abide by their choice and 

 convert their investment into liquid funds at our pleasure and not theirs. 



If we agree as to the ideal and purpose which should be followed with 

 reference to our financial relations with Europe, let us see to what extent 

 this ideal can be achieved. In the beginning there is nothing mysterious 

 or magical about the entire situation. So long as Europe does business 

 according to the terms of her contracts with us rather than postponing 

 pa}Tnent by moratoria, most of which have now happily ended, there is 

 . no reason to fear a further and considerable exportation of gold, in so far 



