40 2 THE POPULAR SCIENCE MONTHLY 



The refunding of outstanding loans sliould provide a considerable 

 activity in securities during the year 1915. If we act intelligently and 

 set our face against foreign liquidation of American securities there is 

 no reason to presume that a fairly good security market will not exist. 

 The most salable securities will be short, time obligations of munic- 

 ipalities, and of corporations whose earning power has been tested and 

 found satisfactory. I refer not only to short-time notes, but bonds with 

 five- to fifteen-year maturities. If our mvmicipalities will borrow only 

 for productive purposes, or where the need for additional public facilities 

 is really existent, if they will put out short-time securities, or are will- 

 ing to pay higher rates of interest, it is altogether likely that the munic- 

 ipal bond market will show considerable activity. 



If it were possible at this time to cut out the sale of wild-cat and 

 relatively worthless securities, the extermination of which is the aim of 

 all blue-sky legislation, we should, to a large degree, solve our immediate 

 problem as regards new capital. Xo one can tell the enormous aggregate 

 capital which is lost every year through the sale of securities promising 

 large returns, which are never achieved. The problem of the security 

 market consists largely in the weeding out of these undesirable " secur- 

 ities." In other words, in making good the loss of our foreign clientele, 

 practically all of whom go into our better-class securities, we must turn 

 the stream of money now wasted in worthless schemes into this channel. 

 Perhaps one of the few permanent benefits of the war may be that it 

 will bring about a conservation of investment funds. 



It may be remarked in conclusion that as the war progresses and the 

 financial exhaustion of the belligerents becomes more marked the danger 

 of liquidation will steadily increase. As some one said, the belligerents 

 of Europe have passed through the honeymoon stage of their war financ- 

 ing. The Bank of France, without any increase in its gold reserve, has 

 expanded its note issue 3,300,000,000 francs — roughly the amount of its 

 advances to the French government. There has been a tremendous ex- 

 pansion both in note issues and in the deposit credit structure of the 

 Bank of England, the Imperial Bank of Germany, in Eussia and in the 

 Netherlands. The situation is feverish to say the least. It behooves 

 us to proceed with caution, to maintain our insular position, not only in 

 a political, but in a financial sense; to keep our o-^vn needs and interests 

 always in the forefront. The longer the struggle, the greater the tend- 

 ency of a financial cataclysm, and even though the world succeeds in 

 aA^oiding this added misfortune, while the war continues, the financial 

 problems of peace have many times proved more difficult of solution 

 that those of financing the struggle. 



