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to the growing German navy always arouse irritation. "Our navy is our own affair," the German papers reply in substance, with some signs of petulance, "and if you will be good enough to mind your own business we shall be much obliged." In replying to English discussion of naval affairs, the German newspapers have often said that the German navy is not to be construed as a menace to England; and the United States has been told that a powerful German navy does not mean a desire to test the validity of the Monroe Doctrine. What, then, is it for? Why should Germany spend millions in enlarging her navy when the expense of a huge military establishment is a heavy drain upon the pockets of her people? Germany has no colonies needing protection; and unless she provokes a war of aggression she is not in danger of being attacked by a naval power. She does not need a navy for defence; she does need a navy if she is determined to extend her "Kolonialpolitik" and to acquire those oversea possessions that she has long craved.

If Germany understood American institutions better, she would not make the egregious error of regarding American diplomacy as mere bluff with no strong purpose behind it. The American Secretary of State is circumscribed and narrowed by more limitations and has less freedom of action than any other minister of foreign affairs, owing to the restrictions placed upon the executive by the Constitution. Where Lord Lansdowne or Count Bülow, for example, can conclude a treaty, Mr. Hay must content himself with a "note" to which he invites the adherence of other Powers, because he is never certain that the Senate will sanction any treaty he makes or will not so materially modify it that its purpose will be defeated. Not fully comprehending that, it is not surprising that Germans are led to believe that American diplomacy is timorous and that the American Government thinks it has done all that

is required of it when it writes a note. And yet it ought not to escape the attention of Germany that the United States has steadfastly maintained the Monroe Doctrine as the cardinal principle of its diplomacy; that it secured the consent of all the Powers to a declaration recognizing the principle of the "open door" in China; that it took the initiative requiring both Russia and Japan to respect the administrative entity and neutrality of China; and that it has been foremost in preserving the integrity of China.

It is quite true that, during the last few years, the United States and Great Britain have been in accord in their diplomacy in the Far East; but that comes not from the influence exercised by England over

the control of American diplomacy-a charge so ridiculous that it is not worthy of serious consideration but because both nations have identical interests, and those interests are antagonistic to Germany. Germany has given her moral support to Russia, and would be glad to see China partitioned and divided into spheres of influence, so as to be able to enjoy advantages not possessed by other Powers; while the United States, having no desire for territorial extension and simply looking for the development of her trade, seeks to preserve China as an open market to free competition in which the most successful trader may reap the greatest profit.

The fact that Japan is standing for "equal opportunity "is one of the reasons why the sympathies of a majority of the American people are with Japan. In Germany, as well as in other European countries, occult reasons have been assigned for the existence of this sympathy, and imaginative ingenuity has been given free rein. There is nothing mysterious or surprising. It is not even due to sentiment. It is largely, almost entirely, due to enlightened self-interest. The United States is as much opposed to China being dominated by Russia as it is to a large portion of South America being dominated by Germany, and for the same reason. In each case the material interests of the United States would be threatened. Those interests the United States must safeguard, even at the risk of incurring the dislike of Germany and of being accused of playing second fiddle to England.

A. MAURICE LOW.

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FINANCE.

IN some rather striking ways the last quarter has borne a resemblance to the opening three months of 1901, when the wild outburst of speculation of the spring was in incubation. In others, it seems to have paralleled more closely the year which followed; for although in the enormous expansion of credit, the "record-breaking " exchange of checks at banks, and the activity — equally unparalleled for the season — on the stock exchanges, the opening months of 1905 have closely duplicated 1901, yet the participation of an excited public, the engagement of great banking houses in immensely large transactions, and the successive floating of industrial companies of unheard-of magnitude — all of which marked out the early weeks of 1901 - have not been repeated this season. Speaking generally, it may be said that the period under review has been marked by undoubted trade prosperity, by a flow of investment money into high-grade securities — notably bonds and by such easy credit that speculators have not only been enabled to stir up the financial markets into a condition of violent excitement, but they have been all but teased to take advantage of the idle bank fund for such purposes.

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This showing of strength and confidence has not resulted from novel or startling events. The last three months have comprised some interesting developments, which we shall have occasion to consider; but the problems involved in them were exactly the problems under review three months ago. To state them briefly, it may be said that the notable episodes of the last three months, from a financial point of view, have been the extremely easy credit obtainable on this country's markets, and the consequent renewal of stock speculation on an extended scale; the threatened collapse of the Russian social system, with its bearing on European finance, both directly and through the resultant probability of Eastern peace; the outpour of gold from the United States; the high price of wheat at American distributing points; and the progressive fall of our exports of the cereal to negligible proportions. It has been curiously distinguished, too, by a succession of eager contro

versies over the extent to which great fiduciary institutions are being used for selfish purposes by certain classes of financiers. On this topic we shall find considerable matter for discussion during the course of this article.

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Not in nine years with the single exception of 1901 - have Wall Street money rates stood as low in March as they have this year. Yet these low rates have prevailed with New York bank loans $135,000,000 above the same date last year, and with remarkably heavy export gold withdrawals. Indeed, the first, and in some ways the most significant, incident of the period has been this continuance, on an extraordinary scale, of the gold export movement from the United States. This is one of the phenomena which called for particular examination three months ago; and its continuance into the present quarter has emphasized its unusual character. In very recent years, it has been the habit of this market and of others to regard a heavy gold export movement except at the time of year, such as the early summer months, when natural remittances were being made on trade account - as an index to unfavorable conditions in the exporting country. On the English market, to say that "the foreign exchanges were moving against London " was equivalent to saying that something was wrong in Lombard Street. The high exchange and the unseasonable gold exports from the United States in 1892 were witness to the disorders of our currency; those of 1894, to paralyzed industry; those of 1895, to perverted trade activity; those of 1896, to acute fear of a vote against the gold standard. Even the abnormal autumn shipments of 1901 and 1902 were ascribed to withdrawal of foreign capital, alarmed by the excesses of our industrial promoters. So far as last spring was concerned, the $40,000,000 payment made to France for the Panama Canal was enough to create conditions of its own.

But no such conditions are apparent in the case of this season's shipments. To sum up the movement briefly, it may be said that the gold export of last November was the largest ever made in that month during our history; that in December we shipped more gold than in any corresponding period since 1895, when the gold export was plainly a sign of distress; and that in January this same record was achieved, the amount sent out never having been paralleled since the days of Treasury note inflation and collapse of American industry. The following table will give some idea of how the movement of this season has compared with these other years:

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This gold movement around the opening of 1905 was certainly not an index to a bad condition of our finances. As we shall see, evidence of prosperity in American trade was multiplying during the period when this gold was going out. As regards our merchandise export trade, it is undoubtedly true that the credits created by our surplus exports have been much reduced in the season past from what they were last year. In the seven months ending with January, for example, our exports of merchandise decreased $28,000,000 from 1904, while our imports increased $60,500,000, and, therefore, the excess of exports for the period was smaller by $88,600,000 than in the same seven months of the previous year. As compared with the seven months ending with January, 1903, our export excess increased, but with that exception it has been much the smallest of any corresponding period since 1896. ures give some notion of the comparison:

MERCHANDISE TRADE.
Seven Months, Ending January 31.

Exports.

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But, as every one is aware, the export and import of merchandise do not finally control the question of gold exports. They influence it very powerfully, as was shown in the autumn of 1903, when the sudden rush of cotton exports from our ports to Europe, in volume quite unprece

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