TWENTY-FIRST ANNUAL YEAR BOOK— PART VII 583 



denly we struck the down air current of decreased foreign demands for 

 our food products. Up to a short time before we had been exporting in 

 value approximately 15 per cent of our total production, and a large part 

 of this was more recently represented by agricultural products. This 

 large export came along as a result of the starving necessities of Euro- 

 pean consumers rather than because we were really trying to supply them 

 with food products cheaper than they could get them anywhere else, in 

 the world. But our European customers had no money with which to 

 pay for the goods received, therefore every time we sent over a shipload 

 of wheat or pork, somebody in this country had to take a promissory 

 note from somebody in Europe. Up to the first few months of this year 

 we were being paid for our goods out of the proceeds of loans which our 

 government had made to the governments of Europe, taking bonds of the 

 European governments as their promise to pay. With the close of the 

 war, over two years ago, our government quit making any further loans 

 to European governments, but, of course, there was still quite a large 

 amount of these funds not yet used, but which became exhausted early 

 this year. 



In the meantime, Europe had been selling back to this country a 

 great many bonds and other securities which they had formerly pur- 

 chased in the United States, such as bonds of American railways and 

 other corporations. In selling these bonds back to us, they, of course, 

 realized funds with which to pay for some of our wheat and pork, but 

 atter a while Europe practically ran out of our securities, and therefore 

 our banks proceeded to finance some of these foreign shipments on what 

 was supposed to be a short-time credit basis. The credit engine, mainly 

 represented by the banks, seemed to be functioning properly, and we 

 were soon out of the bad down air current represented by decreased for- 

 eign demand for our food products. 



But Europe could not and would not pay for our wheat and corn 

 within a few months, and our larger banks and other financial institu- 

 tions then found that they had on hand from $3,500,000 to $4,000,000 of 

 long-time obligations instead of short-time paper, and therefore found 

 themselves unable to proceed further in the financing of current ship- 

 ments. 



In the meantime, under the stimulus of war production, we had 

 greatly increased the amount of crops produced, and, thanks to a kind 

 Providence and good weather, we have an unusual surplus of wheat and 

 corn in Iowa and generally thruout the middle west. 



In other words, the credit engine began to show signs of misfiring, 

 and the good ship of business began to show signs of losing speed and 

 singing. Evidently something was wrong with the banks and the char- 

 acter of their resources. Then there began the most precipitate down- 

 ward flight of the price plane which history has ever witnessed. We 

 seemed to be headed straight for destruction. There was apparently 

 DO control over markets; in fact, there was no market. The ship of 

 business seemed to have its nose headed straight for ruin, but the bal- 

 ance of the rigging of the ship, as embodied in the Federal Reserve 

 System, was holding staunch and firm, and the pilot, in the person of 

 the Hon. Wm. P. G. Harding, Governor of the Federal Reserve Board, 



