The figures indicate a high degree of stability. The shift in investments is easily accounted for by the complete recovery in Government securities and their lower average yield as compared with other securities. The expansion in time and demand deposits at the end of the year parallels the slight slackening in production and especially the reduction of stocks of goods. The sharp reduction from $775,000,000 to $350,000,000 during the year in rediscounts at the Federal reserve banks is partly due to this accumulation of capital and partly to the continued import of gold. Rates on prime commercial paper declined from 52 per cent in October, 1923. to 334 per cent in June, 1924. The yield on short-term Treasury obligations declined from 41⁄44 to about 23% per cent, and Federal reserve discount rates in New York declined from 41⁄2 to 32. These changes during the year all reflected the abundance of loanable capital. The total volume of money in circulation on July 1, 1924, was practically the same as one year before, but its component elements had changed markedly. Federal reserve notes and Federal reserve bank notes declined from $2,254,000,000 to $1,853,000,000, but the circulation of gold and gold certificates increased from $791,000,000 to $1,198,000,000. The increase in gold and gold certificates in circulation was almost equal to the net imports of gold from abroad, and was about $6,000,000 greater than the volume of Federal reserve notes and Federal reserve bank notes retired from circulation. This process makes for stability and minimizes dangers from inflation due to superabundant gold holdings. One of the encouraging features of the exchange situation was the greater stability during the first half of 1924 in the values of the currencies of countries that have undertaken currency reforms. This was true not only of the rentenmark, the currency unit adopted in Germany after the collapse of the Reichsmark in the closing months of 1923, and of the chervonetz of Russia, but also of the currencies of Austria, Czechoslovakia, Poland, Finland, Esthonia, Latvia, and Lithuania. The foreign capital issues (exclusive of refunding loans) brought out in the United States during the fiscal year aggregated about $450,000,000, a moderate increase over the preceding year. The new issues included $150,000,000 for the Government of Japan for purchase of supplies in the United States, $25,000,000 for the Dutch East Indies, $40,000,000 for the Netherlands, $50,000,000 for Switzerland, and $20,000,000 for Norway. In addition to these issues large amounts of short-term dollar credits were placed at the disposal of several European countries for the purpose of exchange stabiliza tion. DAWES PLAN A most important event in the field of world finance was the formulation of the plan of the first committee of experts, commonly called the Dawes plan, which was finally ratified by the London conference on August 17, 1924. The plan provides that German financial and currency stabilization is to be brought about by an internationally controlled gold-reserve bank of issue. During the period necessary for economic rehabilitation, an international loan of about 800,000,000 gold marks is to be floated, proceeds of which are to be placed in this bank and to be used for rehabilitation purposes for the continuance of essential deliveries in kind, and certain prereparation costs. Reparations are to be paid during the interim period on an increasing scale, reaching a total annual figure of two and a half billions of gold marks in the fifth year, and may be increased thereafter by a prosperity index outlined by the committee. These sums are to be raised from a Budget surplus, from interest on railroad bonds (the German Government railroads being turned over to a private company under international control), from the railroad transportation tax now in effect, and from interest and sinking-fund payments on industrial debentures. The latter are to be placed on German industry in order to equalize approximately the bonded indebtedness on these industries before the war, which is assumed to have been wiped out by postwar currency depreciation. The funds thus obtained on reparation account are to be deposited in the new bank of issue, and the responsibility for transferring these sums into foreign exchange for the benefit of the Allies rests with an international transfer committee, the chairman of which, called the agent for reparation payments, must effect these transfers without undermining German financial stability. Controls are established to insure the payment of the sums specified into the bank of issue. The plan offers within itself machinery for correction or alteration of details as difficulties arise in its execution. European stabilization, which this plan may be expected to achieve, will bring about a revival in world trade and increased consumption of commodities, in which the United States is bound to have its share. This trade revival and increased consumption power should outweigh any increased competitive power which might be expected from the execution of the plan. It is not too much to say that this settlement of the vexed reparation problem, coming at the time it did, prevented another European collapse, with its inevitable repercussion on world. trade and on the business of the United States. The Dawes plan is he first effort to solve the reparations question purely on a commerial and economic basis. The American members on the committee vere assisted by a competent staff of technical experts, among them some of the officials of the Department of Commerce. FOREIGN TRADE In the fiscal year under review exports increased 9 per cent in value as compared with the preceding fiscal year, while imports decreased 6 per cent. The net result of these changes in opposite directions was an increase in the excess of exports over imports from $176.000,000 in 1922-23 to $757,000,000 in 1923-24. While in absolute amount this is a larger export balance than in any year prior to the war, the percentage by which exports exceed imports is somewhat smaller than in most pre-war years. The movement is shown in the following table: TABLE IV.-FOREIGN TRADE OF THE UNITED STATES The picture of qur foreign-trade balance sheet is, however, not at all complete without the inclusion of "invisible exchange," but as these figures are compiled upon the calendar year they can not well be included here. The outstanding feature of our foreign trade in commodities is its strong, real growth since 1913. Our total imports and exports in that fiscal year amounted to $4,279,000,000 against $7,865,000,000 in 1923-24. If we correct this difference by the depreciated buying power of the dollar we still find an increase of 18.2 per cent. This compares with decreases of 12 per cent for the United Kingdom, 14 per cent for France, and 51.4 per cent for Germany (in each case based on the calendar year 1923 in comparison with 1913, and with corrections for currency depreciation). The gain in our total trade over the fiscal year 1913 is largely ac counted for by the marked increases in our trade with Asia, Oceania. DAWES PLAN A most important event in the field of world finance was the formulation of the plan of the first committee of experts, com-1 monly called the Dawes plan, which was finally ratified by the London conference on August 17, 1924. The plan provides that German financial and currency stabilization is to be brought about by an internationally controlled gold-reserve bank of issue. During the period necessary for economic rehabilitation, an international loan of about 800,000,000 gold marks is to be floated, proceeds of which are to be placed in this bank and to be used for rehabilitation purposes for the continuance of essential deliveries in kind, and certain prereparation costs. Reparations are to be paid during the interim period on an increasing scale, reaching a total annual figure of two and a half billions of gold marks in the fifth year, and may be increased thereafter by a prosperity index outlined by the committee. These sums are to be raised from a Budget surplus, from interest on railroad bonds (the German Government railroads being turned Over to a private company under international control), from the railroad transportation tax now in effect, and from interest and sinking-fund payments on industrial debentures. The latter are to be placed on German industry in order to equalize approximately the bonded indebtedness on these industries before the war, which is assumed to have been wiped out by postwar currency depreciation. The funds thus obtained on reparation account are to be deposited in the new bank of issue, and the responsibility for transferring these sums into foreign exchange for the benefit of the Allies rests with an international transfer committee, the chairman of which, called the agent for reparation payments, must effect these transfers without undermining German financial stability. Controls are established to insure the payment of the sums specified into the bank of issue. The plan offers within itself machinery for correction or alteration of details as difficulties arise in its execution. European stabilization, which this plan may be expected to achieve, will bring about a revival in world trade and increased consumption of commodities, in which the United States is bound to have its share. This trade revival and increased consumption power should outweigh any increased competitive power which might be expected from the execution of the plan. It is not too much to say that this settlement of the vexed reparation problem, coming at the time it did, prevented another European collapse, with its inevitable repercussion on world trade and on the business of the United States. The Dawes plan is the first effort to solve the reparations question purely on a commercial and economic basis. The American members on the committee were assisted by a competent staff of technical experts, among them Some of the officials of the Department of Commerce. FOREIGN TRADE In the fiscal year under review exports increased 9 per cent in value as compared with the preceding fiscal year, while imports decreased 6 per cent. The net result of these changes in opposite directions. was an increase in the excess of exports over imports from $176.000,000 in 1922-23 to $757,000,000 in 1923-24. While in absolute amount this is a larger export balance than in any year prior to the war, the percentage by which exports exceed imports is somewhat smaller than in most pre-war years. The movement is shown in the following table: The picture of qur foreign-trade balance sheet is, however, not at all complete without the inclusion of "invisible exchange," but as these figures are compiled upon the calendar year they can not well be included here. The outstanding feature of our foreign trade in commodities is its strong, real growth since 1913. Our total imports and exports in that fiscal year amounted to $4,279,000,000 against $7,865,000,000 in 1923-24. If we correct this difference by the depreciated buying power of the dollar we still find an increase of 18.2 per cent. This compares with decreases of 12 per cent for the United Kingdom, 14 per cent for France, and 51.4 per cent for Germany (in each case based on the calendar year 1923 in comparison with 1913, and with corrections for currency depreciation). The gain in our total trade over the fiscal year 1913 is largely accounted for by the marked increases in our trade with Asia, Oceania. |