We then have to deal with foreign obligations of about $14,000,000,000, all privately owned, which cannot be got rid of through cancellation. How are the holders of these obligations going to receive their interest in years to come? Under a goods-exclusion policy, the holders of foreign bonds may get some of their interest payments in the form of duty-free raw materials which do not compete with our own products. They may also get payments in the form of foreign services. For example, the countries in which our tourists travel and spend their money are rendering us a service. The same is true of those countries which receive remittances from our immigrant population, which carry our ocean freight, or which insure our cargoes. The more we spend for foreign services and noncompeting raw materials, the easier it will be for the holders of foreign bonds to collect their interest. Will these items be large enough to balance the international account and provide cash for the interest coupons? We are gambling that they will be. Who knows whether we shall win or lose in this particular gamble? Mathematically, the chances are all against us. If we put on one side of the scales the rate at which the yearly interest bill of foreign debtors is accumulating, and on the other side the greatest conceivable rate of increase in the importation of services and duty-free raw materials, there is not the remotest possibility of getting a balanced relationship. Only through 'an act of God,' as the lawyers say, could the scales be balanced. VI Having created the problem of international payments, we alone can solve it. We can approach the problem in the spirit that we are dealing with a purely personal matter of business, affecting only ourselves; or, as befits our newly acquired status as a great creditor country, we can take the broader view that we have certain responsibilities to our debtors. What are we going to do about it? There are at least three ways of dealing with the problem. One way is to ignore it, 'sit tight,' and 'let Europe stew in its own juice.' Under this plan we should manage our trade and monetary affairs for our own immediate advantage. Although continuing to lend freely on the outside, we should have no concern whatever for the rest of the world. Eventually we should find that the countries and foreign industries to which we had made loans and sold goods could not meet their interest charges. The principal of the loans, too, would be wiped out. The problem would then be solved. Many of the proposals which have been put forward from time to time for credit restriction or goods exclusion could lead to no other result. As a means of balancing the international account a solution of this kind would be effective, but it is surely not the kind of solution anybody wants. A second method of dealing with the problem would be to remove its principal cause- that is, reduce the tariff and allow a greater quantity of foreign goods to be sold in our markets. It is beginning to seem clear to the writer that our post-war tariff legislation was a mistake. There was no emergency at the time requiring emergency treatment. We were not being flooded with foreign goods. In the psychology of the moment we let our fears get the better of our judgment. Moreover, we should have realized that it is one of the easiest things in the world to put up the tariff and one of the most difficult things to get it lowered. Once 7 high tariff duties have been imposed, industry promptly adjusts itself to the situation; but when the same duties are taken away, the stimulus to activity the stimulus to activity is gone, industry languishes, and men are thrown out of employment. The mere uncertainty caused by an agitation for tariff reduction has a depressing effect upon business. Who shall say that because our post-war tariff legislation was a mistake we should now rectify it and deliberately plunge business into depression, as a means of solving the problem of international payments? The alternative plan is to leave the tariff where it is, utilize more of our gold, and take the consequences. The consequences would consist of credit expansion and inflation, which should eventually lead to a decline in our export balance. Under the influence of rising costs and prices in this country, foreign industries would revive, their goods would find new openings in our tariff wall, and our export trade would encounter fresh obstacles. Sooner or later we should have an import balance sufficiently large to provide the cash for our interest coupons. The consequences might not all be pleasant in the long run, but they would seem to be preferable to the consequences of any other plan. There is a hopeful inference to be drawn from the events of the past year that we have already embarked, in a limited way at least, upon a programme of this kind. Beginning in July 1927, we made an astounding reversal in our monetary policy. Over the preceding period of seven years we had tried, with varying degrees of success, to hold credit expansion in check; now we proceeded to release credit on a grand scale we began to utilize for credit purposes some of the gold we had sterilized prior to 1924. unexpected move was that we were trying to do something to assist the European situation and to facilitate the exportation of our products. The whole explanation might just as easily have been put in terms of self-interest. Self-interest demanded that we make a change. The continued inflow of gold was, or should have been, a matter of the greatest concern. It must have seemed clear that gold was becoming scarce in the world and that foreign currencies could not be restored to a sound basis so long as we continued to import gold. What should we gain if we absorbed so much of the world's gold that other countries were unable to restore their currencies to a gold basis and, in desperation, were forced to seek a new standard of value? Instead of being better off we should be worse off. We should find that our vast stock of yellow gold had become a white elephant on our hands. It was also clear that as fast as we received foreign gold it automatically gave rise to credit expansion. The gold which had been pouring into our overflowing reservoir during the preceding three and one-half years could not be controlled. The moment it flowed over the top it went into use as a basis for credit. We must have been forced at last to recognize that, while credit expansion could not be checked, the further inflow of gold could be stopped. The only effective way of doing this was to get our interest rates down to a point where gold would no longer be attracted. The new monetary policy quickly accomplished spectacular results. It raised the value of foreign currencies, checked the fall in world prices, and stopped the flow of gold to this country. Incidentally, it provoked a storm of opposition from those who saw in our mounting volume of credit expansion The semiofficial explanation for this inflationary tendencies. It is true that the policy produced great credit expansion, on top of an expansion which had already reached phenomenal proportions. It promptly set up new high records in the volume of bank loans and investments, in stockmarket prices and brokers' loans, and in new capital flotations. But great as the expansion in credit has been, it must go much further yet if it is to create a situation where goods can come in over the tariff wall and provide cash for the interest coupons on foreign bonds. Will our antipathy to inflation dictate our future policy? Shall we stand in the way of a credit solution to the problem of international payments? There is always the risk that we may. There is still another danger to be faced. When we once reach the stage where we begin to get a substantial import balance, it is probable that we shall want to superimpose new tariff duties. Such action would be strictly in line with our basic theory of tariff making, which is that the duty on a given product should be approximately equal to the difference in the cost of production at home and abroad. From day to day we are endeavoring to apply this theory to individual products under the 'flexible provisions' of the Fordney Act. We have in actual operation the machinery which could thus effect a general increase in tariff duties without any new legislation on the subject, merely by singling out for consideration seriatim those products which persisted in scaling the tariff wall. It may be that the flexible provisions of the tariff law have proved a failure thus far, but our questionable tariff theory goes on. It is time that we gave serious consideration to our situation. We are no longer a nation in isolation. Our commerce and finance have become international. The industrial and financial hegemony of the world has been thrust upon us. We cannot 'sit tight' and ignore the responsibilities of this new position without suffering the consequences. We prosper in proportion as we go with the tide, not as we go against it. The occasion is not one which calls for philanthropic considerations. It is enough that we make sure what selfinterest is, and then let ourselves be guided accordingly. If in the course of our business dealings with the outside world we are motivated by a genuine desire to better our position, we shall protect the equity of our investors in foreign bonds by keeping our policies in tune with inexorable economic forces; we shall recognize the commercial advantages of an import as well as of an export trade; and, finally, we shall show a disposition to do our part, in an economic way at least, in bridging the gulf between ourselves and foreign countries a gulf in the making of which our trade and monetary policies have been mighty factors. BY WILLIAM BEEBE I HAD dived deep beneath the waters of Haiti; I had climbed her mountains, horseback and afoot; but I had not stopped halfway and looked with any attention at the shore. I doubt if there is really any more dramatic place in the world than 'tween tides. We usually pass it by with a comment on high or low water, but if we will lie flat on our backs just above high tide (because of our unamphibian infirmity) we may see miracles. I picked out a clump of trees above a white beach half a mile from the schooner and rowed thither. They were my old friends the mangroves, the red kind, Avicennia, whose roots by the thousand forever keep saying 'thumbs up. Behind a sandy strip of beach I found an old boat sinking into the elements of all boats, and, climbing in, I waited. In five seconds a great cuckoo fell into my lap, thrashed out again, leaving two tail feathers, and flopped up into the branches overhead. Over all the world cuckoos are remarkable for two things- the astounding quality and diversity of their food, and the difficulty they have in making their wings and tail behave. This was the great lizard-eating cuckoo of Haiti, and in his pursuit of saurians was as regardless of direction and feathers and ultimate balance as his ebony cousins, the black witch cuckoos, who at this very moment 'whaleeped' in an adjoining thicket. While he preened his remaining feathers, I stuck my mementos in my helmet and waited for my next Haitian adventure. Solitude is impossible in this humanridden land, and I could hear the soft French patois of blacks working in the sugar cane behind, while on the reef before me two men bailed their leaky boats almost all the time, and in brief intervals of safety examined their wicker fish traps and stabbed sea-urchin bait with nails on long poles. The right of present possession and force of concentrated interest having made this my very own beach, I leaned back with a feeling of contented ownership and watched for all comers. The first was a slender beauty, a shadowthin Louisiana heron which paced slowly past in the shallows, eyeing my boat with suspicion, but paying me the compliment of not distinguishing me from the surrounding rotting boards and lichened roots. Once he stooped and snatched a tiny, flickering fish, and again pecked vainly at a dark spot which I knew was a live conch. Then he spread his wings and left my beach without sound or track. My next visitor was a trespasser, a Haitian, half clad in a garb of filthy rags, unwashed and unpleasant. Shining through these was most beautiful copper-mahogany skin, perfectly tempered to this tropic sun and air, infinitely more modest and sane than his hopeless attempts at conventional dress. Clad as I was only in abbreviated swimming trunks, my fair skin would have been an offense beside his were it not that in two months of constant exposure I had attained the hue of a dark mulatto. My Haitian also stopped at the conch shell, picked it up, and, disentangling a rusty knife from his shreds of civilization, cut out a section of the mollusk and ate it. It was so natural a use of the beach and so skillfully done that I felt like withdrawing the stigma of trespasser and classing him with the native heron. A mocking bird began to sing directly behind me, and for many minutes drowned out the sound of human voices in the distance. My cuckoo croaked overhead and spat down berry pits into my landlocked boat. Then magic began in the boat itself. The bottom boards had long since rotted away, and I sat on a mat of dry mangrove leaves. As if at a signal these leaves began to shift and lift and rub noisily against one another like recently crumpled papers in a wastebasket. The morning breeze had not yet sprung up, and I sat waiting for the elves which haunt old boats. In half a minute a dozen fiddler crabs bustled forth and, with one impulse, immediately vanished. I was comfortably frozen and had not frightened them, but the actual cause was as satisfying as the sight of the crabs themselves. A small green cockroach flew into the farther end, and after it, pell-mell, two fellow country folk, a parula warbler and a Maryland yellowthroat. They sensed me and, in spite of our common nationality, fled headlong, with only a single chirp between them. The tide was going down my sloping sand, and on the uppermost ten feet I could read in the deep ripple marks the record of the strong wind which had whistled around our schooner tents at midnight. When I reached the five o'clock zone of calm, the sand's surface was smooth as paper. Nothing in the world seemed more certain than that in a few hours the returning tide would wipe out every ripple mark, and yet I recalled many fossilized beaches, some over a mile above the present sea, where the tide had never returned, when by some velvet convulsion of Mother Earth the delicate furrows of shifting grains had become solid stone. Everywhere on the smooth sand were records, as clear as tracks on snow, of watery beings who were compromising or pioneering in this ribbon kingdom of dual elements dual elements-forever fought for by water and by air. The fiddlers were high upshore, pretending that they were land folk, yet never daring wholly to desert the dampness. On mid-beach a few fiddlers were working like fury, digging tunnels and throwing up breastworks, piling pellets of sand with as perfect confidence as the foolish man in the Bible. Below them were scores of parallel lines drawn by terrified little black snails, all of whose bravado about the land had evaporated with the water, and they were following their ancestral element with all the speed of their tiny, muscled foot. One giant, a half inch in length, ploughed the distance of his stature in half a minute, and had therefore covered the eight feet of his back trail in an hour and a half, hardly the speed of the retreating tide. These jet-black handsome beaded turrets speeding over the sand were only a few of their kind— those which had been caught in the' blazing sun far from shelter. Wherever a depression promised dampness during low tide, or where the cool, mossy mangrove rootlets raised their spikes, thousands of the ebony spires gathered, spun a moisture-proof varnish across their front vestibule, and slept or dreamed or thought, or perhaps, being merely mollusks, only existed until the returning water awoke them to the joys and sorrows of snail life. |