War Finance for Beginners

Elementary Lessons in Getting the Financial Situation under Control

STEPHEN LEACOCK

I WAS pained to observe last month that the Italian lira was falling again. She fell from 8.60 to 8.70, and then from 8.70 to 8.80. If she goes on falling like that she will soon fall to 10 or even higher. She may fall up to a hundred.

On the other hand if the Austrians keep on getting drowned in the Piave, the lira is bound to rise. She may rise up from 8.60 to 8.40 and perhaps get as high as 7.30. These are things that set sober men thinking. And there are sober men to be found everywhere to-day.

But while the lira has been undergoing this sharp rise, roubles, I have been gratified to see, are holding their own, and the Spanish peseta is very quiet. These are cheering statements.

I know of nothing more stimulating than the thought of a Russian rouble holding its own, with its feet braced, and nothing more soothing than that of a Spanish peseta drowsing in a hammock.

IN fact, take it all in all, we had last month, JL in financial circles, a quiet time. There was a little rise, perhaps, in Portuguese fours, —but really nothing; there was an erratic movement in rupees that jolted us for a day or two. Mexicans were up for a while and rails were down; there was a nasty undercurrent in steel which may have been the cause of the slight sag in Panama two's,—though I hardly think it;—but all of these were minor disturbances, due probably to inflation,—or perhaps to infusion or distillation.

At any rate, so I was glad to read, the tone of the market was quiet, with a distinct feeling of strength amounting almost to buoyancy and even verging towards hilarity.

Now to those of us who are as familiar with Wall Street as with the pews in our own church, or even more so, or perhaps both, these items of war finance are as simple as A. B. C. We refer to them quite casually, with perfect ease and with no mental effort or calculation. We pass them back and forward across the breakfast table of the club, from one side of the coffee pot to the other.

"I notice," I say to Robinson, the man opposite, "that sterling exchange is still very dull." I always say this with a slight sigh.

"Very depressed," he answers, gloomily.

Robinson is the head of a trust company and understands international finance as well, or even better—if it is not an exaggeration to say so,—than I do. Sterling exchange has been our chief topic at breakfast for nearly four years. Robinson told me one day, not long ago, that he feared sterling might never reach the mint par again. This was awful news. There was a sob in his voice as he said it. I turned away, the tears streaming down my face. I asked him what he thought to be the matter with it and he answered, controlling his voice as best he could, "Inflation." I think so, too.

BUT when I speak of myself as an authority on war finance, I don't mean to say that I occupy any financial or official position in regard to it. But I watch it. I follow it in • the papers. When the war began, I knew nothing about it. But I pick up a little bit here and a little bit there until now I feel that I have a grasp on it not easily shaken off.

It is a simple matter, anyway. lake the case of the rouble. It rises and it falls. But the reason is always perfectly obvious. It runs, as I get it in my newspapers, like this:—

"M. Touchusoff, the new financial secretary of the Soviet, has declared that Russia will repay her utmost liabilities. Roubles rose."

"M. Touchusoff, the late financial secretary of the Soviet, was thrown into the Neva last evening. Roubles fell."

"M. Gorky, speaking in London last night, said that Russia was a great country. Roubles rose."

"A Dutch correspondent, who has just beat his way out of Russia, reports that nothing will induce him to go back. Roubles fell."

"Mr. Arthur Balfour, speaking in the House of Commons last night, paid a glowing tribute to the memory of Peter the Great. Roubles rose."

"The local Bolsheviki of New York City at the Pan-Russian Congress held in Murphy's Rooms, Fourth Avenue, voted unanimously in favor of a Free Russia. Roubles never budged."

WITH these examples in view, anybody, VV I think, can grasp the central principles of Russian finance. All that one needs to know is what M. Touchusoff and such people are going to say, and who will be thrown into the Neva, and the rise and fall of the rouble can be foreseen to a kopeck. In speculation by shrewd people with proper judgment as to when to buy and when to sell the rouble, large fortunes can be made, or even lost, in a day.

I may add, for the benefit of those who are less well-informed, that there are two kinds of Russian loans, the internal and the external loan. The internal will be paid by Russia only when she sees fit. The external will be paid by Russia when she feels ready to. I might add, also, that there are a hundred kopecks in a rouble. But should I do so, it would exhaust my knowledge of Russian finance.

But after all, Russian finance is simple. That of our German enemies is highly technical and complicated. Even the German investor hardly knows where his money has gone to. But there is no doubt of the extraordinary, the colossal success of the German war finance. This at least I gather from the little items that are quoted from time to time from the Berlin press. Thus:—

"The first Imperial War Loan of four billion marks, to be known as the Kaiser's War Loan, was oversubscribed to-day in five minutes. Investors thronged the banks, with tears in their eyes, bringing with them everything that they had. The bank managers, themselves stained with tears, took everything that was offered. Each investor received a button proudly displayed by the too-happy-for-words out-of-the-bank-hustling recipient."

"The-second great Imperial War Loan, to be called the Kaiser's Loan, was oversubscribed yesterday in two minutes and a half. The investors, standing in massed groups, had to be driven back from the wickets of the banks by the themselves-deeply-moved tellers. Each investor carried away with him a button, a smile being on the henceforth-proudly-elated face."

After the second loan, so it is to be understood, the investors had to be chased away from the banks with sticks.

AUSTRIAN finance, it seems, is less comTA plicated than the German. Even an outsider may get some little idea of it from press quotations such as the following:

"Baron Fullup von Sedlitz, the Austrian prime minister, yesterday found fifty cents under a sofa in the Emperor Karl's sitting room. It will be used to float a new Austrian loan."

It is all very well, however, to gibe at the war finance of our enemies. It cannot be denied that we of the English-speaking countries have troubles of our own in the financing of the war. In the first place as one hears pointed out a hundred times, the Germans make it a fixed principle to borrow only at home. They refuse to accept money from any of the great outside markets, such as Patagonia, Costa Rica, and Dutch Guiana. Hence, as is often remarked, they owe their debt only to themselves. This is a tremendous source of strength. We in America and England, on the other hand, are being hampered by having the whole world to borrow from. This is a severe handicap. It has brought about, as a result, the peculiar if disturbing situation of our finances to-day. For those who have found themselves perplexed in trying to understand war finance, I will say a few words to make the situation clear, following strictly along the lines of the explanations supplied to me by Robinson and other financial friends and by the financial pages of the morning paper.

TO begin with, our currency, so I am given A to understand, is seriously inflated. T his is bad. Who did it, I do not know. It has been said that it is largely the work of German spies who went up and down the country, years before the war, quietly inflating the currency. But I doubt this. The simple and more workable theory current among our bankers is that the inflation of the currency is due to the enormous expansion of credit occasioned by the absorption of the great loans, leading, it seems, to a sort of general buoyancy, or gaiety amounting almost to hysteria.

As a consequence, money has become, so I am told, singularly easy. I understand that those who want it and are wiling to carry it away, can have all they can absorb. But the demand for it, I read, is sluggish. It needs a little kicking to make it stand up. Money, in short, is so easy that it is said to be piling up in the treasury where they are having to throw it out of the windows in shovelfuls. So I gather.

This is a very dangerous situation. It is bringing about an alarming rise in wages together with a distressing increase in salaries, coupled with a nasty-looking rise in the standard of living and an ugly-looking spread of comfort and luxury.

But after all, who cares? What was that last vote for air service? A billion dollars? Let's make her two.