tinguished from a similar flow of American securities when it is caused, not by any trouble among our creditors, but by their fear that we intend to commit an act detrimental to their interests. In 1890 and in 1891 many sales of securities for shipment to America were made because the owners needed money, and many, doubtless, were made because the owners expected that pro-silver legislation here would be "discounted" by a fall in our stock market and by a decline in the activity of most of our industries. In European eyes, free silver coinage would be supreme folly; therefore the wisdom of selling American securities long before such an act could be passed,-in common parlance, the wisdom. of "discounting" the future. And at the same time that foreign holders of American securities are frightened into selling, wouldbe foreign investors in American securities are deterred from buying, for if a European wish to sell stock now because he can obtain $10,000 in gold, and because he thinks he may be able to obtain in the future only $10,000 in silver, gold money

then to be worth thirty per cent. more than silver money;' so, in the same manner, a would-be investor in American stock could reason that by holding $10,000 in gold until the American gold money shall be worth thirty per cent. more than the American silver money, he will be able first to give $10,000 in gold for $13,000 in silver, then use $10,000 of the silver in purchasing the stock, and be able to retain $3,000 as a profit for waiting. In the first half of the year 1891 we exported about $73,000,000 in gold, coin and bars, and in the second half of the same year we imported only about $38,000,000, in spite of the fact that in the second half of the year the natural return movement was assisted by a phenomenal circumstance, viz.: crops were very short abroad and were very abundant here. The general expectation in the summer of 1891 that most of the $73,000,000 would come back, was disappointed, I believe, because European owners of American securities and European would-be investors had imbibed a fear of American pro-silver legislation. Lack of

1 Say ninety per cent. in 1896.

accurate knowledge in Europe of our affairs results in great weight being given to the speeches of American Senators and Representatives. Without doubt, I think we may say that in the year 1891 abnor mal conditions kept foreign exchange up to the gold-exporting point for a much longer time than it otherwise would have remained there; and I think the principal abnormal condition was the absence of desire in Europe to hold or to buy American securities. If we are bent upon free coinage, Europe would best await the result, and most assuredly it would be best for Europe to allow us to carry our own stocks, for stocks are representative of legal money only, whatever that may be. Many European capitalists fully believe that, do what we will, we have now gone so far in the direction of the silver basis that we cannot avoid arriving there; and naturally these capitalists, at least, can see no advantage in holding American stocks.' I confess to some sympathy with my countrymen who in

answer to all this would say: Let Americans hold their own stocks and bonds

1 In 1894, '95, '96, the actual arrival at the silver basis was avoided only by bond issuing.

and we shall be free from this troublesome indebtedness to foreigners. It certainly would be better if we could hold them, but unfortunately we cannot. Our position is like that of a man who has a special partner. The special partner draws a share of the profits, but does no work, and the man who does the work feels a desire to keep all the profits. If, however, he be a sensible fellow, he will not act in a way that shall lead to the special partner's refusing to remain in the business, the only sensible course to pursue being to accumulate so much money that the special partner shall not be needed. As a nation, our sensible course is to use whatever sum of foreign capital we need and can get in the development of our industries, and to treat the owners of this capital as we should treat assistants, not as we should treat enemies. We can hope for the good time when we shall have accumulated a sufficiency of capital of our own for all of our wants, but until we do obtain this ownership, braggadocio is unwarranted. Our true interest lies in so acting that foreigners

will buy American securities and will keep them until we want them. No true American interest can be served by teaching foreigners that our securities are not good securities, that the appearance of gold value may turn into the reality of silver value.

an

The abnormal factor in foreign exchange, the home-coming of American securities, is connected with another abnormal factor, the forcible holding of the rate of interest below the proper rate. Profits and wages in this country are higher, on the average, than they are in Europe, and, as naturally, interest should be higher too. When, therefore, Congress tries to make money plentiful it is apt to create abnormal factor in foreign exchange, and when Congress succeeds in its efforts this abnormal factor in foreign exchange operates to send gold out of the country. In our present state of development, the use of money here ought to be valued more highly than the use of money abroad, and we have seen that the rate of foreign exchange is forced down toward the goldimporting point and away from the gold

1 The surplus of money in 1894 was the principal factor in foreign exchange at that time.