Scribner's Magazine

ANXIETY

About Your Money is a Poor Traveling Companion Leave the Anxiety Behind You PROVIDE yourself with K. N. & K. Travel Checks and safeguard your funds against loss.

If the checks are lost, they may be replaced.

K. N. & K. Travel Checks pass as currency everywhere. Banks cash them. Hotels and shops accept them. Railroad and steamship lines take them in payment for transportation.

Issued in denominations of $10, $20, $50 and $100. Buy them from your own bank or from

Knauth Nachod & Kuhne

Equitable Building

NEW YORK

An Attractive Preferred Stock

THE

HE 8% Cumulative Preferred Stock of Standard Gas and Electric Company is non-callable and is listed on the Chicago Stock Exchange. Par value of shares is $50. It may be purchased for cash or on the 10Payment Plan.

This well-known Preferred Stock is backed by investments in modern, growing properties supplying necessary services for 578 cities and towns with a total population of approximately 2,250,000, in sixteen states. Operated properties have 30,000 home shareholders.

Dividends payable quarterly. Earnings more than twice Preferred Stock dividend requireAsk for Circular S-11

ments.

market for merchants' loans went to 8 per cent in 1920. Its basis then, as in the present assertion by the German bankers, was the fact that prices were rising and that higher prices call for a larger circulating medium to provide for payrolls, till-money, and personal pocket-money.

But the slightest consideration shows that such an argument, in the case of Germany, mistakes effect for cause; for if progressive inflation of the currency drives prices proportionately higher, the same situation is certain to recur in still more aggravated form. Actual capital cannot be indefinitely accumulated at a corresponding rate. Even the proceeds of very large stock and bond issues by strong manufacturing companies, which would have met the season's business needs at last month's costs of materials and labor, will be wholly inadequate with prices and wages marked up 20 or 30 or 50 per cent. The company is driven into the money market, where its bids compete with an increasing body of other borrowers in the same position, and meantime the capital and surplus of the lending institutions to which the borrowers apply is correspondingly less able to meet even the former requisitions.

FUR

Credit and Capital in Currency Inflation

CURTHERMORE, at that very moment transfer of German capital to foreign markets was reducing the home supply. In spite of all the government's efforts to get possession, in exchange for new paper marks, of drafts on foreign banks received by German exporters in payment of their foreign sales, the heaping up of these private foreign credits continued. It was possible for a German capitalist who had sold German securities in western Europe or America to remit the bills to a bank of Switzerland, instruct that bank to make collection, and thereby create a credit balance of his own in Zurich or Geneva, where its value would not shrink with the further fall in the German mark. But necessarily, all such export of capital from the country must equivalently reduce the loanable resources of German banks. The outgo of real capital from Germany on that account cannot be accurately measured; the total foreign accumulations of the kind to date have been variously estimated all the way from $500,000,000 to $2,000,000,000.

In the closing weeks of August, when it was not known what action the Allies or the Reparations Committee would take regarding Germany's declaration of inability to continue making reparations payments, and the mark's decline became more rapid than on any pre

e seized with a panicky impulse to turn their aper money, or the bank deposits payable in uch paper, into other currencies with a reasonbly stable value. The transaction could be effected on the German stock exchanges. The oreign market called it "throwing over of marks by Germans"; the Germans called it buying dollars, or British pounds sterling, or Dutch florins, or Swedish crowns.

Sometimes the foreign currencies thus bought were physically hoarded by the German buyer, sometimes a bank deposit was established to his credit at New York or London or Amsterdam or Stockholm. In either case that much of available capital went out of Germany, and in either case the pressure of German sales of the paper mark forced its value to still a lower figure. The lower it fell, the greater for the moment became the contagious excitement over getting rid of the paper money before it should sink to absolute worthlessness. It must be remembered that the German people had before their eyes across the eastern border one country in which the paper ruble had lost all buying power whatever, and across the southern border another country whose paper crown, worth nominally 20% American cents, had fallen in August to barely one-thousandth part of a cent, and where the complete insolvency of the Austrian Government had become a matter of common talk.

WITH or without a formal respite on reparations payments or reduction in the total sum to be paid, Germany's economic problem will remain. Like all past episodes in the history of depreciated paper, it admits of solution-if only by such outright reGermany's pudiation of the paper money, with

Economic Outlook

substitution of another medium, as brought France to her feet again after the assignat experiment of the revolution. It certainly does not follow that the present dilemma means the "economic ruin" of Germany; the country's real wealth, its actual producing power, its capacity to make and sell goods that are needed by its own people and by foreign countries, are not destroyed by depreciation of the currency. The machinery of trade will be badly dislocated. Importations will become more difficult to manage because of the increasing obstacles to the regular payment for them on exchange; export arrangements will be impeded by the rapid and violent day-to-day changes in domestic prices.

Yet commercial ingenuity may be trusted to find expedients whereby even these handi

(Financial Situation, continued on page 72)

Nine
Investors

Out of Ten

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Reputation of the car is typical of the investment qualities of Franklin securities. On Franklin Common Stock an average yearly cash dividend of $13.14 per share has been paid on each $100 of such stock outstanding each year during the past 20 years. Two previous issues of Preferred have netted 9% % and 11%, respectively.

We offer new 7% Cumulative Sinking Fund Preferred Stock and new Common Stock as a desirable investment for individuals-proceeds to be used for manufacturing the new Franklin Four. Our circular gives interesting details. Please send for it. Partial Payments

F. A. Barton, Treasurer H.H.FRANKLIN MANUFACTURING COMPANY Syracuse, N. Y.

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Established 1818

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Let us send you the booklet "Idaho Farm Mortgages" so you can investigate. It puts you under no obligation and will help you get better returns on your money. 7% and 8% bonds and mortgages in amounts of $100 up.

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caps may be in large measure overcome. Dur ing 1921 the mark declined from 134 cents to 1⁄2 a cent; at the lower figure it was depreciated 98 per cent from normal parity; but Germany's imports from the United States during that year were $372,000,000, as against $311,000,000 in 1920. A further fall of 50 per cent in the mark's foreign value occurred in the first six months of 1922, yet Germany imported slightly more goods from the United States than in the corresponding period of the year before.

Nevertheless, the continued depreciation, almost to the point of worthlessness, means that the task of considering the problem of drastic change in policy cannot be very much longer deferred. The longer economic consequences in Germany itself remain obscure, the longer political consequences are no more easy to forecast. But the social consequences of this unprecedented rise in living costs are most disturbing, the political consequences not easy to foresee, and the discouraging consideration, from the economic view-point, is the fact that the progressive fall in the currency's value has carried the situation past one point after another, at which recourse to a given remedial measure would have have been practicable. Whether even the foreign loan, which was seriously discussed two or three months before, would have been possible at the end of August, was entirely doubtful. Even the half-way expedient of currency "revaluation" presented a totally different aspect with the mark at onetwentieth of a cent from that which it might have borne with the price above one full cent.