Page images
PDF
EPUB

luxury of militarism, as Professor Veblen has put it. Add to this a colossal national ambition and the cause of the war is given. It was this dominating spirit which guided the use of the new wealth into the channels of conquest.

In the second chapter, Professor Laughlin recapitulates briefly his theory of credit, and describes its functions in time of war. Credit is based on goods. When the war began there was a sudden stoppage of trade or exchange of goods. Multitudes of persons had demand liabilities falling due, to meet which they depended upon payment by their debtors. 'If not able to pay in cash, because they cannot collect, can they offer an acceptable means of payment? Here we find the crux of the whole crisis in credit brought on by the war' (p. 65). The methods used in England, France, and Germany to provide these "acceptable means of payment," to transmute uncollectible credits into immediate means of payment, are described in the next three chapters, and constitute the main thesis of the volume.

In no country was the crisis more acute than in England. Indeed, Professor Laughlin finds in her financial unpreparedness clear proof that she did not anticipate war. While the Bank of England responded gallantly to the needs of the occasion, the joint stock banks showed the white feather and curtailed their loans instead of expanding them. They had a mass of unliquid bills and tried to protect themselves. Accordingly the government suspended the bank act, proclaimed a moratorium, and authorized the issue of currency notes. Professor Laughlin concludes that neither of the last two measures was necessary and that the last was a mistake. It was not more money that was needed, but a setting in motion again of the machinery of credit. On the other hand, the means taken to maintain the gold standard, to stabilize foreign exchange, and to guarantee the Bank of England against loss from bills discounted by it (involving a possible ultimate loss to the government of $150,000,000) are all approved, as well as the policy of taxation and loans. As to the ability of Great Britain to carry the enormous indebtedness created by the war, the author entertains no doubt. Indeed

he believes the country will emerge from the conflict strengthened and awakened.

A study of conditions in France throws doubt, Professor Laughlin thinks, upon the widely heralded organization of credit in that country. Owing to the great centralization of banking in the Bank of France the responsibility of providing the necessary credit, of liquefying the assets frozen by the outbreak of war, was thrown upon that institution. This need it met by increasing its discounts and advances, both to private businesses and to the state. But the establishment of a moratorium, the suspension of specie payments, and the great increase of bank notes are held to have been unnecessary and ill-advised. There is in France a confusion of monetary and fiscal functions which contrasts strikingly with the English system and offers a warning to our country against money inflation and especially of an inconvertible paper currency. As to the ability of the French people to carry the prodigious war debt and the heavy taxation involved, Professor Laughlin concludes that they can do so "if nearly all the margin of goods produced by an energetic people over and above the necessaries of life are devoted to this purpose.

[ocr errors]

Germany, however, offers the abschreckendes Beispiel in the domain of credit. Through the Reichsbank which is under strong imperial control, the joint stock banks, the loan bureaus, the municipal bureaus, and the war credit banks, it was planned to mobilize credit so as to provide every one with "cash" and avoid a moratorium. Taxation was not to be resorted to, but the necessary funds for financing the war were to be obtained by temporary loans which would be repaid ultimately from the heavy indemnities collected from the conquered nations. Both the military and financial plans have miscarried. Germany is now saddled with an enormous debt, an inconvertible paper money, a tremendous inflation of her credit, and a 50 per cent depreciation in the purchasing power of the mark. Professor Laughlin concludes that even now Germany is not solvent and that the real values behind the credits have shrunk in many instances so as to render the latter worthless. As to her ability to carry the staggering

burden of the war, he concludes that her racial characteristics will enable her to pull through and even to regain her former commercial position.

In the last chapter are described the events in the United States which preceded our entry into the war. The movements of foreign exchange, the changes in our foreign trade, our loans to Europe, and the ensuing effects upon our credit institutions are clearly set forth. Warm approval is given the Federal Reserve system and the services it was able to render.

Professor Laughlin has embodied in this volume a vast amount of careful research and has brought together in scholarly fashion a mass of scattered material. It is the more to be regretted therefore that he has thought it necessary to introduce so much that is polemical. He never loses a chance to belabor the "obsolete," the "archaic and fallacious" quantity theory of money. His interpretations of the workings of credit are colored throughout by his own theory of credit and money. But if allowance be made for the personal factor the book will be found to be the most valuable exposition of principles and repository of information which has yet been produced in the domain of war finance.

E. L. BOGART.

UNIVERSITY OF ILLINOIS.

ADAMS' AMERICAN RAILWAY ACCOUNTING1

THE author states in the preface that this book is a simple analysis of a standardized system of business records, and that it is designed to be helpful to three classes: (1) those who are coming to see that the truthful keeping of records is a solvent for current industrial problems; (2) accounting experts from foreign lands who may desire to learn American methods and apply them to their local problems; and (3) practical accountants, particularly the younger railroad accountants who did not take part in that nation-wide symposium of 1907 to

1 American Railway Accounting. By Henry C. Adams. Henry Holt & Company, 1918. pp. 465.

he believes the country will emerge from the conflict strengthened and awakened.

A study of conditions in France throws doubt, Professor Laughlin thinks, upon the widely heralded organization of credit in that country. Owing to the great centralization of banking in the Bank of France the responsibility of providing the necessary credit, of liquefying the assets frozen by the outbreak of war, was thrown upon that institution. This need it met by increasing its discounts and advances, both to private businesses and to the state. But the establishment of a moratorium, the suspension of specie payments, and the great increase of bank notes are held to have been unnecessary and ill-advised. There is in France a confusion of monetary and fiscal functions which contrasts strikingly with the English system and offers a warning to our country against money inflation and especially of an inconvertible paper currency. As to the ability of the French people to carry the prodigious war debt and the heavy taxation involved, Professor Laughlin concludes that they can do so "if nearly all the margin of goods produced by an energetic people over and above the necessaries of life " are devoted to this purpose.

Germany, however, offers the abschreckendes Beispiel in the domain of credit. Through the Reichsbank which is under strong imperial control, the joint stock banks, the loan bureaus, the municipal bureaus, and the war credit banks, it was planned to mobilize credit so as to provide every one with "cash" and avoid a moratorium. Taxation was not to be resorted to, but the necessary funds for financing the war were to be obtained by temporary loans which would be repaid ultimately from the heavy indemnities collected from the conquered nations. Both the military and financial plans have miscarried. Germany is now saddled with an enormous debt, an inconvertible paper money, a tremendous inflation of her credit, and a 50 per cent depreciation in the purchasing power of the mark. Professor Laughlin concludes that even now Germany is not solvent and that the real values behind the credits have shrunk in many instances so as to render the latter worthless. As to her ability to carry the staggering

burden of the war, he concludes that her racial characteristics will enable her to pull through and even to regain her former commercial position.

In the last chapter are described the events in the United States which preceded our entry into the war. The movements of foreign exchange, the changes in our foreign trade, our loans to Europe, and the ensuing effects upon our credit institutions are clearly set forth. Warm approval is given the Federal Reserve system and the services it was able to render.

Professor Laughlin has embodied in this volume a vast amount of careful research and has brought together in scholarly fashion a mass of scattered material. It is the more to be regretted therefore that he has thought it necessary to introduce so much that is polemical. He never loses a chance to belabor the "obsolete," the "archaic and fallacious " quantity theory of money. His interpretations of the workings of credit are colored throughout by his own theory of credit and money. But if allowance be made for the personal factor the book will be found to be the most valuable exposition of principles and repository of information which has yet been produced in the domain of war finance.

E. L. BOGART.

UNIVERSITY OF ILLINOIS.

ADAMS' AMERICAN RAILWAY ACCOUNTING1

THE author states in the preface that this book is a simple analysis of a standardized system of business records, and that it is designed to be helpful to three classes: (1) those who are coming to see that the truthful keeping of records is a solvent for current industrial problems; (2) accounting experts from foreign lands who may desire to learn American methods and apply them to their local problems; and (3) practical accountants, particularly the younger railroad accountants who did not take part in that nation-wide symposium of 1907 to

1 American Railway Accounting. By Henry C. Adams. Henry Holt & Company, 1918. pp. 465.

« PreviousContinue »