Is the End of the War in Sight?
AGNES C. LAUT
FIRST of all, get the decks of your mind clear, so to speak, of the idea that all war orders from the United States are for the Allies. Up to the end of May, just as great war orders in proportion went to Germany and Austria and Turkey from the United States. During the month of February, 148 ships loaded with munitions and provisions blocked the harbor of Genoa en route from the United States to Germany and Austria. Even as late as June, cargoes of cotton and copper and chlorine and explosives left Atlantic ports for Malmo, Sweden, to be transshipped across the Baltic to Germany. When the British blockade tightened round Sweden and Denmark, a dozen tramp steamship lines and countless old tub sailing hulks loaded American cargoes for Greece and Roumania.
One of the things that puzzled the financial districts in New York last fall was what became of the gold realized from the enormous selling of American securities held by Berlin investors for a month preceding the open declaration of war. Berlin held great quantities of American securities and they were sold—“dumped” before the war. The gold was never transmitted to Europe. Yet it is not on record with the banks in New York acting as agents for Berlin. What became of it? Long before the Allies had awakened to the fact they would need war supplies from the United States, early as midAugust, these German funds were used buying great quantities of supplies all through the United States for Germany —supplies from as far West as St. Louis and Omaha and Kansas City and the Texas Panhandle.
This explains why Mr. Bryan used his influence in Washington to have the ships’ manifests outbound from American ports kept secret. These ship manifests were
suppressed till February, when Sir Edward Grey’s protest about contraband to neutral countries induced President Wilson to overrule his Secretary of State and make public all outbound manifests.
Even to-day, when the British blockade has drawn a wall of steel round Germany’s ports, certain commodities on the American market—-suchas--picric acid, spelter, etc.—have been cornered by German buyers. How the purchases are smuggled out of the United States without falsifying ship manifests, which is criminal, o»* running openly into the arms
of British cruisers—is one of the great secrets of the war that will never be told; but shipments for Germany are going out of the United States to-day. It is, of course, just as lawful for Germany to buy munitions as for the Allies; but because the Allies control the seas, the difficulty for Germany is to put her purpurchases across. At time of writing — mid-July — one of the largest powder concerns in the United States is manufacturing an explosive according to a formula used only in Germany. The firm and the firm’s bankers declare publicly they are not shipping to Germany. Of course not! If they are, they are doing it secretly; and to falsify ship manifests is a criminal offence in U.S. law. All the same, if you happen to know personally the chemists of this great firm, they tell you they have just as much right to manufacture for one side as the other; and that they are doing it. Dummies make the purchases. Dummies make payment. It is none of the manufacturer’s business who gets what. He knows nothing of the shipment from the time it leaves his factory.
So first of all, get clear in your mind that in spite of the Allies’ effort to stop shipments to Germany, and in spite of Germany’s efforts to stop shipments to the Allies, war supplies are going from the United States to both sides.
As early as January, 1914, a curious underclutch suddenly tightened almost to the breaking point financial affairs in the United States. Berlin began calling in American loans. Paris began calling in American loans. London began calling American loans. It is a fact that literally nobody in financial America knew why. We know why now. We didn’t then; but the effect was that American debtors were suddenly forced to sell securities to pay their loans; and the slump that became a landslide clear to the bottom of the pit
by July 29 began in January. I know a firm that called in $4,000,000 of loans on bonds, put the proceeds in their strong box and sat tight; and they didn’t know why they did it. They only felt danger in the air and got under cover. A dozen futile explanations were given—“the Balkans,” “the New Haven,” “the Claflin failure,” “over-production,” “slowing up,” “house-cleaning financially.” Every one was afraid and no one knew why.
The why, we know now. Those on the inside, who knew, were preparing for the explosion they felt in the air.
AN undercurrent exactly the reverse is now at work in the woi'ld. Nobody knows why. Nobody knows where it came from or where it is leading. It is simply here—a great wave of optimism.
Business reflects it.
America is literally—as the Statist puts it—
“swimming in gold.” The banks are bulging with money to loan. Industry from the depths of midwinter depression has bounded to the very top peak of humming speed.
In spite of cotton tied by the blockade and more railroads in receiver’s hands than since ’93,
Wall Street has gone on a drunk of wild speculation from which it may presently awaken with a bad financial headache.
It doesn’t necessarily spell peace. In fact, the country is sitting on a volcano; and the country knows it is sitting on a volcano. Before these words are in print, diplomatic relations may be broken off between the United States and Germany; and Uncle Sam’s ship of state may be headed straight for the vortex. But the point is —in spite of an atmosphere so combustible that it needs only a fool with a bomb to blow up international relations — the wave of optimism is here.
Because finance may give Uncle Sam the whiphandle to compel peace.
At the drop of the hat, or the firing of the first gun, he may jump into the arena and force peace, though force and peace are contradictory terms to use together. This does not mean there certainly will be early peace. It is in no sense a prophecy. It is only a chronicling of the facts that have played the cards of Destiny into Uncle Sam’s hands. Wilson knows these facts and has his personal observers on the ground to signal the exact psychological moment for Uncle Sam to act; and it is because that psychological moment is rising over the blood-red, smoking slaughter grounds of Europe like a Star of Hope that a wave of unexplained and
unexplainable optimism has run through the financial world.
It does not necessarily mean peace.
The nations of Europe may fight on for five, for ten, for twenty years till the furrows of war plow the plains of the Old World into blood-soaked trenches. Some one may blunder tragically, as some one blundered when the war broke loose. But, the chance is coming to stop war. Wilson knows this. He is watching. For the first time since July 29, 1914, Destiny shows one ray of hope above the carnage.
Let us analyze the situation.
This is in no sense a prophecy. It is in no sense a statement of opinions. It is simply a chronicling of facts marshaled on the chess boards of Destiny by a Power
beyond the control of Emperors or Presidents.
TWO other false ideas should be cleared from the mind.
Wilson has been implored by the Germans, masking behind peace societies financed by German-American bankers, to stop the shipments of munitions from the United States to the Allies. War orders for the allies amounted to almost $200,000,000 in Januax-yGermany’s submarine attacks have been directed, not against England’s blockade as she professes, but against these war supplies in transit. Well, since Germany began her
submarine attacks against munition shipments, war orders to the United States had increased to $500,000,000 by June. If the war continues, war orders for the Allies will total a billion dollars by Christmas. This has been described by the peace societies as “blood money” and Wilson has been implored to stop the manufacture and shipment of munitions.
Now get it clear in your head; Wilson can’t! That is—he can’t without the authority of Congress, which does not convene again till December. Suppose he prepared a special law for Congress to enact giving him authority to stop the war orders! It would be received with frantic huzzas by the members representing ten million Germans and Austrians living in the United States and the ten million more Americans born of German and Austrian parents; but how about tlie members representing the people, who sympathize with the Allies? By them, such a law would be received with hoots and maledictions. Such a proposal would split the United States into an armed camp. Wilson backed by the shades of Lincoln could not put such a law over in Congress.
On the other hand, the Allies and especially my own compatriots—Canadians—have felt a secret reproach that Uncle Sam has not joined them in this war. How could he stand back and see the Declaration of the Hague torn to tatters and the rights of little Belgium stamped into a gutter of obscene outrage? What Uncle Sam thought of Belgium, he has testified in the hundreds of millions of relief funds sent to the woe-stricken people. Uncle Sam’s real opinions on German violation of international law could be better appreciated by walking along the streets of New York after the sinking of the Lusitania than by reading the official American letters of protest. An immense throng had gathered round the bulletin boards of a great newspaper. Some fool in the crowd had shouted, “Hurrah for Germany.” Nobody an-
swered. There was not even that slight manifestation of a mob’s mood—a growl. Instantaneously and simultaneously the fool was hit six times in six different spots by six different fists. Not a word was said. The President had asked the people to remain neutral. The public remained neutral. The fool was picked up insensible and bundled into an ambulance; and the silence was more ominous than the wild shouts of the rabble when a half-witted
youth assassinated a grand duke in Austria.
Americans have been the most long-suffering and patient people on earth in this war. If Pierpont Morgan had been a German and had been shot by an American fanatic in Berlin, the assassin would have been torn to pieces and diplomatic relations would have snapped between the two countries. The affair hardly made a ripple in Wall Street. Morgan’s butler knocked the murderer on the head with a piece of coal, and the country gaoler was so careless where the prisoner was lodged that the State was saved the expense of a trial by letting the culprit suicide.
All the same, in the back of Canada’s head is the thought— “How about your old Monroe Doctrine protecting Canada from attack? And here we are protecting Uncle Sam from attack—fighting the battle for freedom against tyranny, for democracy against militarism! How about that, Uncle Sam? Why don’t you come
'T'HERE are a lot of reasons why Uncle Sam can’t come in.
To fight, a great nation has to have an army. It has to have a navy. It has to have a merchant fleet. Uncle Sam has not one of the three. His army is a farce with battalions where there are more officers than rank and file. If you want to know details of that, read Homer Lea’s “Valor of Ignorance,” or Maxim’s recent work on “Unpreparedness.” As to the navy, he has big ships enough; but they are 18,000 short in men. Also the advent of the submarine with its torpedoes has discounted the strength of all big ships. Of submarines, at the time the war broke out, Uncle Sam had only a baker’s dozen, and they so faulty in construction that one dived in Hawaii never to come up again, and two more succeeded in colliding under water in Atlantic coast practice. All this will presently be remedied ; and Uncle Sam will have hundreds of submarines ; but the point is when the war broke out, he had neither army nor navy. As to his merchant fleet, before the war, it consisted exactly of six ships on the Atlantic and about eight on the Pacific. Since the foolish Seaman’s Bill was passed, the eight on the Pacific have begun going out of commission. Six are to be sold to China.
So no matter how much Uncle Sam wanted to strike a blow for democracy, he had no usable navy, next to no army, and almost no merchant fleet.
To take sides would mean civil war in the United States.
Besides, if Uncle Sam were to take sides, who would arbitrate when the conflict works to the final terrible catastrophe? Can’t he do most for humanity by keeping out of the fight in order to jump in and stop it when the time comes?
We Canadians sometimes speak as though Uncle Same were keeping out of
the fight in order to reap a harvest of profits in “the blood money” of war orders. That is what the peace people say. Let us see what is in that! Granted that with war orders, flour, wheat and meat supplies, and cash loans to the allies, Uncle Sam’s war account totals one billion by January. Who gets those profits?
As to finance, the big banks— Morgans, the National City Bank, the First National Bank, the Guaranty Trust, the Chase National, the Mechanics—in other words, an inner group of the big fellows.
As to manufacturers—another inner group of big fellows—U.S. Steel, Bethlehem Steel, Crucible Steel, Carnegie Steel, two boat companies, the big Powder Trust, rifle manufacturers, the big car and foundry companies, the shoe and leather men of the Middle West, the textile manufacturers of the East, two or three of the big motor companies, two big electric combines. I don’t need to explain—do I?—that an underground financial understanding holds these big fellows together. It has been the howl of the little fellow that he could not get a “look in“ on the orders.
As to commissariat—three big packing companies and two big grain companies have handled the most of the orders; and the packing companies have lost as much in delayed delivery on what they shipped to Germany as they have gained on what they shipped to England. Remember, two or three of these big companies are German; and for seven months $14,000,000 of packed meats consigned to Germany has been held up by the British cruisers. Haven’t heard much about it either, have you? It has been dead loss to Uncle Sam. Likewise of copper, of spelter, of zinc, of wire cargoes sent out for Germany. The detention of copper shipments from July to February reduced some of the b i g smelter people almost to ruin. Germany buys $75,000,000 of copper a year from Uncle Sam. This was cut off. Since war orders have come in, stocks and dividends in metal concerns have jumped; but of the loss for six months, you have heard very little.
WHEAT exports totaled almost 300,000,000 bushels; and on this the war gave Uncle Sam clear going of almost 40 cents a bushel or $120,000,000. Against this, set the losses to Uncle Sam in cotton.
Depending on cotton are twenty million people in the South. It is practically the only crop ; and there is no use telling them, as kid glove theorists do, to go in for other crops. The climate of half the cotton belt does not raise nutritious grasses for stock and does not produce and cannot produce six bushels of grain to the acre. There are many sections in the South where it costs the cotton planter more to raise oats than to buy them. Nature designed certain sections of the South for cotton; and on cotton twenty million people depend for existence. Now when cotton goes below 8 and 9 cents a pound, it does not pay the farmer profits that will feed his mule, let alone feed his children. Cotton brings 30 cents a pound in Germany. Because the British blockade hedges off exports to Germany, American cotton can’t reach German buyers. When there is no war and the lanes of the sea are clear cotton fluctuates in price from 11 cents to 14 cents. Since the blockade, cotton has fallen back to 9 cents in New York, 8 to 6 cents in the South. That is—the blockade is costing the South 5 cents a pound on cotton or $25 a bale. Now in 1914 the South had one of the largest cotton crops in its history—over 16,000,000 bales, almost 17,000,000 bales. The chances are for a 14,000,000-bale crop in 1915. Before the war, cotton was selling at eleven and three-quarter cents in July with prospects of a rise as exports began to move out. By October, it was down to 6 cents in the South—a sheer loss of at least 5 cents a pound or $25 a bale, or $400,000,000 loss to the South in 1914 and a prospect of $350,000,000 for 1915. Now wheat had dropped when war was declared; but wheat jumped up again. Why didn’t cotton? Because England could buy all American wheat; but England could not buy all American cotton. Germany and Austria are two of Uncle Sam’s best customers for cotton; and the English blockade cut off those markets for Uncle Sam. To be sure, England has paid $3,500,000 on cargoes of cotton that have been seized; but that does not compensate the knock-out blow to the market by cutting off Austria and Germany as buyers. The loss of three-quarters of a billion on cotton spread over twenty million people hardly compensates the gain of a billion in war orders concentrated in the hands of a few big bankers and big industrial concerns; but if Uncle Sam broke with the allies over the cotton blockade, he would strike his market a still heavier blow ; for Russia, France and England buy more cotton than Germany and Austria.
Yet you hear very little of angry protest f rom Uncle Sam about the Brit-
ish blockade costing him these widespread losses. That is his neutral contribution to the fight for freedom. It is also a cardinal motive for him to seize the opportunity when it comes to force peace.
HOW is the opportunity coming?
Through finance, or what the bankers call “automatic exhaustion.” Exactly what does that mean in terms of people, who think in dollars and cents, not millions and billions?
There is a lot of crafty and disingenuous and highly misleading secrecy about the financing of the war. There is also a lot of inspired publicity fed out to see how the public investors will swallow a fool’s bait. It would require a good-sized encyclopædia to state and rebut these lies; but a few facts may be picked out and stated. These are facts, not predictions as to the future.
Russia undoubtedly has almost a billion of gold in her cellars as a war chest. Fact one; but fact two discounts it.
Fact two—when Russia offered a $150,000,000 munitions contract to a big electric company, the company, which has special secret agents all over the world and in close connection with Russian officialdom, refused to accept the contract till Russia’s note or bond or whatever it was had been endorsed and guaranteed by the British Government.
Inference—the billion in Russia’s war chest must be already pledged. Danger signal—possible financial exhaustion.
As to France—to be sure loans to France are safe as long as they are secured by the deposit of American securities as collateral with American bankers ; but at the rate the war is costing, the American securities held by French investors will soon all be pledged to American bankers.
Next as to France—a fact! When some French notes were floated on the American money market without the endorsation of the big banks and without the collateral security of U.S. stocks, more than half that French loan failed “to go.” It had to be taken up by the underwriters.
Inference—the American investor is afraid to load up too heavily with “the paper” of the warring nations, when it is unendorsed.
As to England, the richest nation on earth—take facts again—
While the cash loans, “credits” and “acceptances” to the Allies through American bankers total only $125,000,000, a mere “flea bite”—as one of the bankers making the loan described it to me—the fact remains that plans are under way for another hundred millions; and if the war continues, loans of many such hundred millions must be made. Now the amount of American securities held abroad, which can be pledged as collateral against these loans, has been very carefully estimated not to exceed three billion dollars. It is closer to two billions than to three billions.
Do you glimpse what the banker means when he says “stoppage of war by automatic exhaustion?” However, generous Uncle Sam may be, however keen for the high rate of interest bound to come all over the world, however anxious he is to become “the hub of finance” in the world, to make the dollar the standard of exchange, Uncle Sam when it comes to finance is the keenest, sharpest money-lender in the world. When he can obtain no more collateral security, he will stop lending. An English financier has declared openly in the House of Lords that a few years of such war will reduce the world to bankruptcy.
Take Germany next—Germany is in a different position in that she could not float loans abroad. Only $10,000,000 of German paper has been floated in the United States since the war began; and that had to run the gauntlet of subterranean opposition. A German banker described the proceedings attending that loan as a case of “crafty crucifixion.” If England the richest nation on earth, is strained to carry the financial burden of the war, what must Germany’s position be? When the collapse comes, the blight will not react on other nations; for she has borrowed little from other nations. She must bear the burden unaided. She cannot repudiate her debts ; for her debts are on her own shoulders. When the German Emperor asked for his last war loan, he had to assure the banks that the war would be over by October.
What if it isn’t?
The war has gone on for a year and it has resulted in the bloodiest and most bootless deadlock known to history. Four million men lie dead in the trenches, and the slaughter sways impotently back and forward, losing to-day what was gained yesterday; gaining to-morrow what was lost to-day.
That is what the bankers mean by “automatic exhaustion.”
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Is the End of the War in Sight?
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A i ' AKE a look at the labor situation Strikes in the munition plants of America ! Strikes in the munition plants of Germany!
It is folly to ascribe all this to the German spy. It is the Socialist, whose yeasty doctrines are at work. The Socialist sees that labor will have to carry the burden after the war ; and the Socialist is for spiking the wheels of war’s chariot.
TT was about last January that German
funds were used to finance some American peace organizations. I do not say German “official” funds, but the funds of rich German-Americans.
Dismiss from your mind the Bryan fiasco, likewise, the Fowler-Bartholdi and Company publicity campaign at Washington to stop munition shipments ! These movements are both so much political hot air for 1916; but the peace societies are deeply sincere. Taft, Schiff, Strauss, Kuhn Loeb, J ane Addams are some of the names behind the peace societies. These people shun the cheap-jack politicians now capering for votes in the platform limelight.
Let me relate a personal episode! It is purely unofficial but very significant. I had been invited to meet some German officials who know the inside of the bank-
ing situation. I wanted to know that banking situation; for it struck me as portentous with danger to America. They refused to talk “bank.” The subject was too dangerous. Any “leak“ in banking is punished by prompt “financial crucifixion” in this land of the free; but a man high in the confidence of the Emperor turned suddenly and asked me: “But why don’t you writers advocate the United States demanding a truce so that peace could be arbitrated on fair terms to all?”
I was so amazed that, in good Canadian vernacular, I nearly fell off my chair.
My first thought was: “There is a jack in the box; and I’ll wait for the jack to jump out.”
My second was: “Yes, a truce to stop munitions going to the Allies while you take them at a disadvantage; but this man is a diplomat and no fool. He knows Wilson cannot stop shipment of munitions without the authority of Congress, and in the present inflamed state of public feeling, the President could not ask Congress for such authority.”
My next thought was : “Germany must be weaker than we think.” But the campaign in the East shows Germany isn’t.
So I came back to the banking explanation, “automatic financial exhaustion.”
The war has resolved itself into—
Which side has the most men to be killed.
Which side has the most shells to do the killing.
Which side has the most money to buy the shells.
And on all three factors “automatic financial exhaustion” is at work. In that, lies Uncle Sam’s chance to force peace.