Our International 
 Relations and 
 Russia’s Lesson To Us 
 
 By 
 
 FRED I. KENT 
 
 Vice-President, Bankers Trust Company 
 
 AN ADDRESS 
 
 DELIVERED BEFORE THE CONVENTION OF 
 THE AMERICAN BANKERS ASSOCIATION, 
 IN WASHINGTON, ON OCTOBER 20, 1920 
 
 Bankers Trust Company 
 
 j! Downtown Office 
 16 Wall St. 
 
 Uptown Office 
 5th Avenue at 42nd St. 
 
 Paris Offices 
 9, Rue St. Florentin 
 16, Place Vendome 
 
1 HIS address was delivered by Mr. 
 F red I. Kent , Vice-President of the 
 Bankers Trust Company of New York , 
 before the Convention of the American 
 Bankers Association in W ashington on 
 October 20 , 1920 . 
 
 Mr. Kent was director of Foreign 
 Exchange for the Federal Reserve Board 
 during the war and he spent last year 
 on the Continent , making his head- 
 quarters in Paris and devoting much of 
 his time to work with the Reparation 
 Commission. 
 
 We have republished this address in 
 this form in the belief that it is timely 
 and that it would prove interesting to 
 our friends. 
 
 BANKERS TRUST COMPANY 
 
Our International Relations 
 and Russia’s Lesson to Us 
 
 F OOD and protection from the ele- 
 ments are all that man requires to 
 exist, but to fulfill his destiny and grow 
 in mentality through the generations 
 human intercourse is necessary. Even if 
 without ideals, human beings could not 
 exist in present numbers if animal in- 
 stincts represented their highest mental 
 development. As populations have grown 
 in density, it has taken greater and greater 
 ingenuity and the further harnessing of 
 the forces of nature to enable people to 
 live in comfort and happiness. In every 
 human group from the family through 
 the community, the city, state or country, 
 the master minds control either directly 
 or indirectly. Unfortunately a master 
 human mind can carry forces of evil even 
 as those of lesser power, but evil forces 
 are elements of weakness, and if not con- 
 trolled will sooner or later tear down and 
 destroy the power of any mind. As a 
 family is affected by the preponderance 
 of good or evil forces exercised within it, 
 so is the community influenced as the 
 trend of such forces is stronger for good 
 or for evil among the families which con- 
 stitute it. 
 
 It is conceivable that if every man 
 could exercise his will without affecting 
 in any particular the will of any other 
 human being, no would-be act of any- 
 one would be committed which could 
 be classed as wrong. So interwoven, 
 however, are the lives of human beings 
 through the families with their growing 
 
 [3] 
 
children and their communities that such 
 a condition is impossible, and no man can 
 live his life fairly to the world without 
 sacrifice. Man-made laws are only neces- 
 sary because of the selfishness and ignor- 
 ance of humanity. No man can conscien- 
 tiously claim the right of entire freedom 
 to exercise his will without admitting that 
 every other human being has the same 
 right. Every man making such an ad- 
 mission binds himself to respect the rights 
 of others, and if he does not make such 
 admission it is positive evidence that the 
 good of humanity does not concern him, 
 but that it is only his own private will 
 which he wishes to exercise, even though 
 it may be at the expense of others. Prop- 
 erly man-made laws represent the expres- 
 sions of opinion of the people who enact 
 them for their own guidance as to wherein 
 the desires of certain individuals which 
 may affect the rights of others must be 
 controlled. 
 
 Peoples who are honest in their national 
 life endeavor to choose for their leaders 
 those whom they think will so guide their 
 afifairs of state as to give them the 
 greatest happiness and be the fairest to 
 all concerned. The least intelligent por- 
 tion of a population is more easily led 
 through appeals to the passions than 
 through reason. Such appeals are essen- 
 tially dishonest, as the force which is 
 being striven for is not of right, but of 
 the power of numbers. To arouse the 
 passions of a people requires neither in- 
 telligence nor ability, and cannot carry 
 with it honesty or a proper sense of re- 
 sponsibility. It is the means used by 
 the cheap politician, the cheap thinker and 
 the vicious to obtain their desires. Such 
 methods often win, but victories under 
 them are short-lived, as they are in- 
 
 [ 4 ] 
 
evitably followed by the suffering of the 
 people. 
 
 It is manifestly impossible for every 
 individual to have a direct voice in pass- 
 ing upon the regulations of the govern- 
 ment to which he submits as a citizen. 
 Density of population would prohibit 
 town-meeting government, even if it were 
 the most effective, which it is not. In 
 the case of such government, however, 
 individuals would have to be appointed 
 to carry out the will of the mob. Repre- 
 sentatives of a democratic people, there- 
 fore, selected in some manner by the 
 people, whether intelligently or other- 
 wise, will determine government. People 
 as such are impotent as masters of their 
 own government until abuses of those in 
 power have been carried to such extremes 
 that general suffering ensues, because 
 what is everybody's business is nobody's 
 business, and so two or more parties can 
 be found in nearly every group of demo- 
 cratic people, the leaders of which take 
 it upon themselves to criticize the acts 
 and principles of their opponents. This 
 when done honestly often results in a 
 change of some policy bad for a people 
 before it could be otherwise brought 
 about, and before it has led to general 
 suffering. 
 
 The best interests of a people demand 
 that its government regulate and not 
 operate. Even though the world's war 
 has proved this beyond any manner of 
 doubt, such is the inconsistency of human 
 nature that we are confronted today with 
 doctrines aimed to cure too much govern- 
 ment with more government, doctrines 
 which if allowed to be exercised would 
 result in an autocracy second in vicious- 
 ness to none which has existed since the 
 beginning of the world's history. 
 
 [ 5 ] 
 
In the Russia of today we have an 
 example of this situation, that is an open 
 book for the world to read. In time the 
 lesson from it will open the eyes of the 
 world, even though at the moment there 
 are many who refuse to accept the facts 
 as they exist, because they consider it to 
 their personal interest not to do so. Rule 
 in Russia at the moment is falsely dig- 
 nified by calling it an experiment in gov- 
 ernment. It does not represent to the 
 slightest degree the voice of the people 
 or of any portion of the people, such as 
 labor. It is a mere tyranny which has 
 existed in the world before in compara- 
 tively smaller ways at innumerable times 
 during its history, and is being carried on 
 solely for the benefit of those in control 
 through terrorism and without the slight- 
 est regard to any other human being or 
 group of human beings. Its existence 
 over such a long period has only been 
 possible because of the vast amount of 
 loot in all forms of wealth which those 
 in control were unfortunately able to steal 
 at its inception. This wealth made it 
 possible for these autocrats to hire the 
 master minds of the underworld to be- 
 come their agents in every civilized coun- 
 try. By this means they have been able 
 to spread a false propaganda throughout 
 the world based on a pretended idealism, 
 which is not being striven for in Russia 
 by intention nor desire, but that has even 
 so been wonderfully effective in fooling 
 multitudes. 
 
 With the vast wealth of the Russian 
 government which was taken over with- 
 out its liabilities, the new Czars came 
 into possession of the machinery for 
 manufacturing paper money. While de- 
 crying the use of capital and money in 
 any form for purposes of propaganda, 
 
 [ 6 ] 
 
they ran the printing presses for Russian 
 currency at the highest speed within their 
 power, and flooded the world with prom- 
 ises to pay which were never intended 
 to be kept. Knowing that currency is- 
 sued over their own signatures would be 
 accepted by no one, they in effect forged 
 the signatures of the government of the 
 former Czar, which they had overthrown 
 and repudiated. Labor in many coun- 
 tries of the world was induced to buy 
 these false promises as an investment, 
 attention being called to the low price 
 at which they could be had in relation 
 to the former value of the Rouble. By 
 this means a further immense fund was 
 built up in many countries of the world, 
 which has been used to finance those who 
 are willing to sell their souls and carry 
 on a propaganda which, if successful, is 
 certain to set the world back many cen- 
 turies, to say nothing of the incalculable 
 human misery which is bound to follow, 
 as the condition in Russia today conclu- 
 sively proves. 
 
 The poor deluded people who purchased 
 these false promises were not able to see 
 that the money which they gave for them 
 was going to be used in such manner that 
 the needed production of the world would 
 be so curtailed that the difficulties of liv- 
 ing would become almost insurmountable. 
 Neither could they seem to see how dis- 
 honest, inconsistent and impossible was a 
 human system which while encouraging in- 
 vestment in order to obtain money was at 
 the same time deyning the right of invest- 
 ment to any and all. The so-called Soviet 
 Government ever since its inception has 
 been ready to make any promise to other 
 peoples where it could obtain a concession 
 in return, and with no intention whatso- 
 ever of living up to any promise given 
 
 [ 7 ] 
 
longer than was necessary to receive the 
 benefits of the concessions. 
 
 The Soviet Government has never been 
 honest with itself nor with any peoples of 
 the world since they stole the possessions 
 of the Russian people from their public 
 and private stores, from their banks, their 
 warehouses and their homes. 
 
 Unfortunately for the world, many so- 
 called intellectuals in every country, a body 
 of people which is composed of men and 
 women who have real gifts in science, art 
 and literature, are adding the weight of 
 their prestige to the false mouthings of the 
 vicious. The attitude of those intellectuals 
 who follow the teachings of the dishonest 
 propagandist is found upon analysis not to 
 be as surprising as it might seem. Their 
 livelihood is based upon gifts which are 
 exercised as a tax upon business, which has 
 a tendency to set their minds in opposition 
 to it. With a life work not requiring 
 practical business knowledge and practical 
 understanding of the laws of economics, 
 they can easily be fooled by logic based on 
 false premises. If a business man should 
 presume to criticize them in any of their 
 specialized fields of activity, they would 
 think that he was crazy in claiming to be a 
 critic of authority when he was a mere 
 amateur in the propositions under consid- 
 eration. Business men look upon the intel- 
 lectuals, who with a superficial knowledge 
 of economics and industry would instruct 
 them how to act, in exactly the same way. 
 
 The honesty of purpose among many such 
 people is beyond question, but they have 
 not the means, because of their method of 
 life, to be able to differentiate between 
 fundamentals and false premises in prac- 
 tical things. They do not appreciate the 
 fact that only a successful business world 
 makes it possible for them to exist in their 
 [ 8 ] 
 
callings. If it were not for the savings of 
 business, every man would be obliged to 
 give his whole time to the production of 
 the necessities of life. 
 
 The expenses of scientific discovery are 
 tremendous, as to the cost of the successful 
 experiments must be added those of the in- 
 numerable failures. Such expenses can 
 only be met because the business of the 
 world is carried on in such manner that 
 there is something left over after payment 
 is made for food, clothing and shelter that 
 can go toward the development of science. 
 The same thing is true as to art and litera- 
 ture. A starving man must have something 
 to eat before he can enjoy a wonderful 
 painting of a good dinner or a well-written 
 book of any kind. That the lack of practi- 
 cal business understanding is common to 
 intellectuals is well known to the crooks of 
 the world, and they make the most of it. 
 On the lists of names which have been 
 taken from the dishonest groups of men 
 who make their livelihood through floating 
 valueless securities are those of doctors, 
 preachers, artists, professors, teachers, 
 writers, etc. The fact that people of this 
 character are constantly investing in false 
 securities naturally adds to their feeling of 
 criticism toward the business world, even 
 though the putting out of such issues has 
 absolutely nothing to do with business any 
 more than the operations of burglars or 
 hold-up men. 
 
 Another class which preys upon the in- 
 tellectuals is that of the vicious radicals 
 who, lacking responsibility as to their state- 
 ments, address gatherings of intellectuals 
 and carry them along with clever logic 
 based on false statements of fundamentals, 
 or they fill magazines and pamphlets with 
 pretty word pictures so constructed as to 
 appeal to the minds of the impracticable. 
 
 [ 9 ] 
 
Again we find ministers conscientiously 
 but thoughtlessly inviting men and women 
 without integrity or responsibility to ex- 
 plain their perverted theories to their con- 
 gregations on the plea of broadening their 
 education. It is just as much the duty of 
 a minister when inviting speakers to address 
 his men’s meetings and general gatherings 
 to make certain of their character and in- 
 tegrity of purpose as it would be to shut a 
 man-eating tiger out of his Sunday School. 
 It is as bad for the world to poison men’s 
 minds as to destroy their bodies, and when 
 a minister is himself willing to play upon 
 the passions of his people for the purpose of 
 making a name for himself, he stoops to the 
 class of the thrower of bombs. In fact he 
 may do more harm than the anarchist, for 
 the explosion of every murderous bomb 
 shocks many careless thinkers into a recog- 
 nition of the evil of their attitudes. 
 
 In order that the full powers of those 
 gifted in science, art and literature may be 
 brought out, it is necessary that they have 
 both the moral and financial support of the 
 business world. It is only because men of 
 business appreciate their work, and its 
 value, that those who have such gifts are 
 able to succeed. It is all the more neces- 
 sary, therefore, that the intellectuals should 
 endeavor to co-operate with men of busi- 
 ness instead of siding against them. The 
 part which the real intellectuals take in the 
 world’s progress is second to none, and 
 they carry with them the respect of all 
 when the good which they do is not dissi- 
 pated through association with the ignor- 
 ant and vicious. 
 
 The word “Red” has been dangled about 
 the world in such manner as to lead cow- 
 ards to think that they can pose as heroes 
 by calling themselves “Reds.” These 
 throwers of bombs and would-be destroy- 
 
 [101 
 
ers of the world’s peace, and their follow- 
 ers, are unfortunately color blind. They 
 may see red, but they are not red, they are 
 yellow. 
 
 A great deal is heard these days of in- 
 ternationalists, which without analysis is a 
 fair catchword. As far as the world has 
 been able to determine at the moment, how- 
 ever, their principles seem to be based on 
 hating your neighbor, but loving your un- 
 seen brothers across the sea. It would 
 seem as though it was considered safe to 
 love only those who are far enough away 
 so that it cannot become embarrassing. It 
 may be that as the means of communication 
 between different parts of the world be- 
 come closer and closer, as invention pro- 
 ceeds, that the internationalist of the day 
 may find it necessary to become an inter- 
 cosmosapalist, in order to avoid local en- 
 tanglements. 
 
 The life of man is so constituted that he 
 can only become a true citizen of the world 
 if he first protects his family, then his com- 
 munity, and then his state and country. 
 There is no such thing as allegiance to a 
 world without allegiance to one’s country. 
 The true selfishness, begotten by love 
 and not desire, gradually extends as 
 man’s mind and heart grow from his 
 family through all other community or- 
 ganizations of man’s building until ulti- 
 mately he can see with great clearness 
 that the good of the whole world is de- 
 sirable for the benefit of his own child. 
 We in the United States of America are 
 just beginning to find this out, but it 
 means no lessening of our love for our 
 family or our neighbor or our country if 
 we would strive to benefit all mankind. 
 In fact success in such work can only 
 follow through love of country, such 
 strong love of country that its position 
 [ 11 ] 
 
before the world as to honor and integrity 
 and right dealing is jealously guarded 
 with man’s every force, be it great or 
 small. As individuals few men can stand 
 before the world with any appreciable 
 force for good, whereas the combined 
 force of many men, through love of their 
 own country as exercised through their 
 country’s representatives in government 
 and commerce, may have a vast influence 
 for good on the lives of those of other 
 nations. 
 
 In industry the same principles follow. 
 The power of any industrial organization 
 increases with the loyalty of its employes, 
 whether they be in official positions or 
 not. The savings of many people are 
 brought together and made to work for 
 them by investment in industrial under- 
 takings. On such investments a double 
 return is received, one through the pay- 
 ment of dividends, and the other through 
 increased production of things which they 
 may require or desire, or that can be ex- 
 changed for such things with other coun- 
 tries. The holders of such interests, 
 knowing that the safety of their invest- 
 ments depends upon the honesty and 
 ability of those to whom they are en- 
 trusted, endeavor to select for the officers 
 of their companies those who they believe 
 will make good. As an industry develops 
 men are continually rising from the ranks 
 to official positions as their ability makes 
 possible. There is no doubt but that 
 here and there mistakes are made and 
 sometimes favoritism is shown, but this is 
 something that will be true in every 
 human organization as long as the heart 
 and mind of man are constituted as at 
 present. Where the stockholder has his 
 own interests to protect such a develop- 
 ment is less apt to happen than in any 
 
 [ 12 ] 
 
other form of organization that society 
 has yet been able to discover. 
 
 The railroads of the United States 
 evidence clearly this situation. The pro- 
 portion of high-salaried men who have 
 risen from the ranks in every railroad 
 in the country is amazing. The same 
 thing is true in our banking and financial 
 institutions, and the men in control today 
 are, with few exceptions, those who have 
 started in mediocre positions. In every 
 industrial organization there must be men 
 to plan and guide it. There must be men 
 who buy raw material, if it is a manu- 
 facturing organization, and men who sell 
 the finished product. There must be 
 those who plan to make both sides bal- 
 ance with a proper profit in between. 
 Different kinds of ability are required to 
 fill different kinds of positions, and human 
 judgment is applied with all the success 
 of which it is capable to put the right 
 men in the right places. The desire of 
 the officials of a company to make good 
 to their stockholders is the strongest in- 
 centive for the selection of the most cap- 
 able men for their assistants that is 
 humanly possible. 
 
 Under the Russian propaganda work- 
 men are encouraged to take over the 
 plants in which they work and run them 
 themselves. Aside from the question of 
 the right and wrong of such action, about 
 which no one really has any doubt, comes 
 that of efficiency and of public benefit, for 
 the public is supposed to be considered in 
 the development of such a situation. All 
 of the various activities of an industrial 
 organization so taken over must be ful- 
 filled, and must be carried out by men, 
 and the only difference in the present 
 system and that advocated by the Third 
 International lies in the question as to 
 
 [ 13 ] 
 
how such men are to be selected. Under 
 the present system promotions are based 
 upon the ability to accomplish work to 
 be done, in so far as human judgment is 
 capable of determining. Under the pro- 
 posed system such positions are to be 
 filled theoretically by the vote of the 
 workers, but actually, as has been proven 
 in Russia, by those who have failed in 
 practical things and whose only success 
 lies in ability and willingness to mislead 
 the people through their passions. 
 
 The complete breakdown of industry in 
 Russia would seem all that is necessary to 
 show the fallacy of the plan of the confisca- 
 tion of property with the idea that it could 
 be managed by the confiscators for the 
 greater public good. That with all their 
 pretended idealistic theories the advocates 
 of this policy are not honest in their pur- 
 pose is evident to all. Do they wish to take 
 over land as such? Not at all. What they 
 wish is to take the land upon which other 
 human beings have spent years of hard 
 study and labor in bringing to a state of 
 effectiveness. Do they wish to build new 
 factories which they can control them- 
 selves in any way that they may desire? 
 No. They only wish to take over factories 
 which represent years of hard work as em- 
 bodied in the savings of the stockholders 
 and the energy of the managements. With 
 all of their pretended criticism of capital, 
 it is actually capital which they wish to ob- 
 tain, and not through any orderly process 
 or on any basis of right, but merely through 
 the power of numbers. 
 
 There is no question but that as the 
 world develops capital and labor should be 
 brought closer and closer together, and that 
 the labor in an industry as it becomes 
 competent should have a greater represen- 
 tation in the things which affect itself. The 
 
 [ 14 ] 
 
very interests of capital will demand it as 
 time goes on, and thousands of industrial 
 organizations are constantly aiming to 
 work closer and closer to their employees. 
 One of the greatest difficulties to success in 
 such attempts lies in the radical agitator, 
 who considers a peacefully-inclined and 
 happy workman a menace to his own in- 
 terests. 
 
 Upon this whole situation depend the 
 future foreign relations of the United 
 States. For instance, in Italy we find 
 through the teachings from Russia that 
 workmen have confiscated plants on no 
 basis of right, but merely because their 
 government has been temporarily cowed 
 sufficiently to prevent it from protecting the 
 owners. While this condition exists, even 
 though Italy has vast industries run by men 
 of ability and integrity to which credit 
 could safely be extended by peoples in 
 other countries, at the moment it is neither 
 safe nor desirable to advance credits to this 
 country. If a group of workmen refuse to 
 recognize the rights of their neighbors who 
 are stockholders in an industrial plant, why 
 should anyone expect them to recognize the 
 rights of foreign creditors who might ad- 
 vance them raw material. Their very ac- 
 tions state clearly that they are either dis- 
 honest or do not believe in recognizing the 
 rights of creditors, and in either case they 
 have no ground upon which to make a claim 
 for credit. As soon as the misled workmen 
 in Italy see their fault, and the government 
 again sees the necessity of protecting those 
 who have built up Italy’s industries, Italy 
 will receive the help which her naturally in- 
 dustrious citizens have a right to expect. 
 This whole unfortunate development in 
 Italy is the outgrowth of the vicious propa- 
 ganda of Pandoric Russia. 
 
 We must expect that until the Russian 
 
 [ 15 ] 
 
tyranny has been destroyed every radical 
 agitator who is being supported by its 
 propaganda and its funds will continue to 
 be able to control large masses of men. 
 When, however, the people in Russia con- 
 trol, and a real government is set up, the 
 forces for evil now rampant in the world 
 will lose their power. 
 
 The foreign relations of a country are 
 political and commercial. Politically we 
 have no real position throughout the world 
 that is not due to our great commercial 
 power. We have never taken our inter- 
 course with other nations seriously enough, 
 and we allow domestic politics to control 
 foreign policies. This is perhaps natural 
 in so young a nation, but it is none the less 
 necessary that we outgrow it. Our repre- 
 sentatives to other nations of the world 
 should be men trained in practical history 
 and business theory. They should be men 
 of integrity and understanding, and they 
 should be so separated from domestic poli- 
 tics that their only fear of displacement 
 would lie in the exercise of bad judgment 
 on their own part. Their positions should 
 be so assured that they would feel that any 
 attempt to manipulate foreign policies for 
 the benefit of domestic politicians would re- 
 act against them. The United States of 
 America should have a foreign office built 
 up for the good of the country and the 
 world, and not for that of any political 
 party. 
 
 Our present system under which our 
 representatives in foreign countries are so 
 often chosen for the purpose of paying off 
 political debts in large measure has pre- 
 vented the United States from being able to 
 carry out the good that the naturally fine 
 ideals of its people would otherwise ac- 
 complish. 
 
 Commerce is so influenced for good or 
 
 [ 16 ] 
 
bad because of our political relations that 
 it would seem in order for the American 
 Bankers Association, the United States 
 Chamber of Commerce, the National 
 Foreign Trade Council, and possibly other 
 manufacturing and commercial associa- 
 tions, to appoint a joint committee to pre- 
 pare a system for selection and training of 
 our diplomatic force that could be recom- 
 mended unanimously by all to Congress for 
 enactment into law. 
 
 Commercially the United States is in 
 a most trying position in its relations with 
 the other countries of the world. Our 
 goods are demanded and needed by those 
 who cannot pay, and our requirements 
 can only be filled by those countries 
 which do not need enough from us in 
 return to cover their cost. During the 
 war we increased our capacity to produce 
 in many lines, for which we have no 
 sufficient output at present. Government 
 regulation made necessary during the war 
 has disturbed all the natural currents of 
 the world's trade, and destruction in the 
 battle-scarred countries has reduced pro- 
 duction in them, and at the same time 
 increased their requirements. These con- 
 ditions are represented in the rates for 
 foreign exchange, which are the barom- 
 eters of commerce. It is just as futile 
 to endeavor to restore trade to a normal 
 condition by trying to fix or stabilize 
 exchange rates as it is to heat a house 
 by putting a candle under the bulb of a 
 thermometer. 
 
 Theorists have stated that the inflation 
 in European currencies has been the sole 
 cause of the depreciation of the foreign 
 exchanges. While such inflation has had 
 its influence upon the exchanges, and 
 will continue to do so, yet another ab- 
 normal condition, which has so far shown 
 
 [ 17 ] 
 
too little improvement, has had much to 
 do with the exchange rates, and has 
 played its part in further increasing the 
 inflation which existed at the time of the 
 armistice. This condition is the absolute 
 need in certain European countries for a 
 greater import for consumption than they 
 have ability to produce for export in 
 equivalent value. Under such a condition 
 all questions of price are subordinated to 
 necessity. Such price changes in com- 
 modities as may be caused by inflation, 
 therefore, do not cover the whole problem. 
 
 The ideal way to correct this situation 
 would be to have the populations in every 
 European country import only necessi- 
 ties, and endeavor through their own pro- 
 duction to reduce the quantity of such 
 necessities to a minimum, and at the same 
 time increase their exports. While this 
 would have a tendency to temporarily 
 slow up the world’s trade, yet when it 
 had once recovered it would be in a far 
 healthier condition, and many nations 
 would not be paying tribute to other 
 countries in the form of annual interest 
 to a burdensome extent. 
 
 Where foreign borrowings can be used 
 for internal development, such as was 
 true in the United States until 1914, the 
 interest that is paid to foreign countries 
 in which securities are floated, either gov- 
 ernmental or industrial, is not harmful. 
 On the other hand where such loans are 
 incurred and the proceeds are consumed, 
 if carried too far an element of danger 
 is introduced that is apt to react upon 
 both the borrowing and lending countries. 
 
 It is on this account that any scheme 
 such as, for instance, an International 
 Clearing House, which might result in 
 making it easier for nations which are 
 already importing more than they can 
 
 [18] 
 
afford to increase their imports, would 
 only aggravate the difficulties. It would 
 seem as though an International Clearing 
 House, if ever needed, should be estab- 
 lished during times of normal trade, when 
 balances for a time at least would flow 
 back and forth rather than constantly in 
 one direction. It must not be forgotten 
 that, after the contribution of any nation, 
 or nations, to a Clearing House fund 
 was dissipated, if operations continued 
 to have the same trend the countries 
 with preponderant exports would have 
 to advance the funds to carry the trade, 
 exactly as if there were no Clearing 
 House. If on the other hand through the 
 establishment of an International Clear- 
 ing house it were found possible to create 
 a new form of security backed by many 
 nations, that would be absorbed by the 
 public from savings, it might have some 
 real value, always provided the regula- 
 tions were such that non-essential im- 
 portations (meaning a greater amount of 
 essentials than is necessary, as well as 
 strictly non-essential commodities) could 
 not be obtained by countries unable to 
 pay for them. 
 
 The necessity of the world at the mo- 
 ment does not lie so much in the creation 
 of new methods of settlement of balances 
 as in the resumption of integrity of pur- 
 pose on the part of all peoples. Safety 
 in banking, and in fact the life of banking, 
 depends upon a recognition of the rights 
 of property on the part of those who 
 would borrow, and upon such others as 
 the borrowers may themselves have to 
 depend. 
 
 If the bankers in the United States 
 refuse to loan to those who would destroy 
 capitalism through repudiation or con- 
 fiscation, or who are subject to others 
 
 [ 19 ] 
 
who would do so, it is not a threat to 
 endeavor to force belief in capitalism, but 
 merely recognition of the fact that bank- 
 ing cannot be carried on with those who 
 do not accept their obligations to the 
 bankers with the full intention to pay, 
 even as the bankers themselves accept full 
 responsibility for the return of deposits 
 when taking them. 
 
 It is the province of the banker to loan 
 against raw materials over a period of 
 manufacture, and it is one of the im- 
 portant and necessary links in the chain 
 of production, but if workmen take over 
 a plant which does not belong to them 
 merely because they have the power of 
 numbers to do so, their very act renders 
 them unfit to ask for credit to enable 
 them to purchase raw material. They 
 could not consistently ask for credit in 
 any event, as their promise to pay could 
 only be given in direct opposition to their 
 professed principles. When men commit 
 sabotage, and do not give a full day's work 
 in return for their wages, they also en- 
 danger the credit standing of the concerns 
 for which they work to the full extent 
 of such operations. 
 
 The rebuilding of destroyed Europe 
 would have presented no difficult problem 
 whatsoever if all men were honest, but 
 when to the natural frailty of humanity is 
 added the tremendous destruction of moral 
 force, which has affected every country in 
 the world, the problem has been made too 
 difficult to solve, except over a long period, 
 during which millions of unfortunate people 
 have to suffer. Integrity in production 
 would not only have made the extension of 
 credit a simple matter, but it would have 
 resulted in an increased production which 
 would have brought the necessity for credit 
 within such limits that it could easily have 
 
 [ 20 ] 
 
been met from the savings of the people. 
 The currency inflation which has gone on 
 in Europe since the armistice need not have 
 occurred, and the budgets of the nations 
 could have balanced instead of showing 
 deficits. 
 
 So great is the power of the underworld 
 force at the moment that we cannot relax 
 our fight against it for one minute, if we 
 would not be overwhelmed. It is not a 
 struggle between capital and labor, as the 
 agitator would have labor believe. Instead 
 it is a struggle between labor and capital on 
 the one hand, and those who would make 
 slaves of the people on the other. 
 
 By stealing the wealth of the world, and 
 using it to bind labor through false prom- 
 ises, the Russian propagandists hope to ob- 
 tain the autocratic power of their desires. 
 Labor and capital must get together to fight 
 this thing, for neither can survive without 
 going through a period of earthly hell, 
 even as has Russia, unless integrity of pur- 
 pose conquers and destroys the will to con- 
 fiscate. The union of capital and labor in 
 a fight for honesty and fairness in produc- 
 tion, transportation and commerce, would 
 so quickly break the power of those who 
 cry for civil war while pretending to op- 
 pose all war that the world would leap for- 
 ward generations instead of being pre- 
 cipitated backward for centuries. 
 
 On the other side of the picture we have 
 the outstanding integrity of the two great 
 nations who only last week, at great sacri- 
 fice to themselves, repaid the American 
 people $500, 000, OCX) which had been ad- 
 vanced to them in the time of their great 
 peril. It is an object lesson for the world 
 that is certain to re-act to the benefit of all 
 mankind. The added prestige which this 
 act will give the peoples of these two great 
 countries among all other nations, coming 
 
 [ 21 ] 
 
as it has at a time when the world is full 
 of thoughts of repudiation, is certain to 
 have a steadying influence on all interna- 
 tional intercourse. If any nations have 
 been weak in their thought concerning the 
 question of meeting their foreign obliga- 
 tions when they mature, the payment of the 
 Anglo-French loan is sure to strengthen 
 them, and they will see that it is worth their 
 while making any effort that is necessary in 
 order to do so. Even the Russian people 
 when they come into their own, as they 
 surely will in time, will benefit by it, and 
 will see the value of meeting their foreign 
 obligations, great as they may be. 
 
 Today Great Britain is our greatest com- 
 petitor in the markets of the world, but she 
 is also our greatest customer. She has 
 won her way as a trader in all lands, be- 
 cause of the inherent honesty of her 
 people. We are prone as a nation to criti- 
 cize Great Britain for doing the things 
 that we would do ourselves, but even so we 
 both have common ideals and a high national 
 sense of integrity, and the world will be 
 better if we pull together. 
 
 France at the moment is the world’s 
 leader in the fight against the annihilation 
 of the obligations of man to man. Her 
 government, acting in a sense as Trustee 
 for her citizens, is making known to Bol- 
 shevik Russia in no uncertain terms that 
 the money which France loaned to Russian 
 industries, Russian railroads and the Rus- 
 sian government to help in the upbuilding 
 of that country must be returned, and that 
 it intends to protect its people, and the 
 principle of the integrity of an obligation, 
 at all costs. 
 
 We in America owe much to these two 
 great nations for the staunch protection 
 which they afford their nationals, and can 
 learn much from them. 
 
 [ 22 ] 
 
In Belgium there has been a return to in- 
 dustry which has impressed all those who 
 have had an opportunity to see it develop. 
 It is another evidence of the turn of the 
 current from sabotage to sanity. 
 
 Italy at the moment is in the midst of an 
 unfortunate labor complication, but we can 
 look forward hopefully to its proper so- 
 lution, as its national life in the past has 
 spelled industry. 
 
 The neutral nations of Europe, except 
 Spain, have maintained a high standard of 
 industrial integrity, in view of the terrible 
 forces for evil with which they have been 
 menaced, and that their peoples are all na- 
 tionally honest seems beyond question. 
 
 The outcome of the industrial difficulties 
 in Spain is harder to determine, although 
 when the backing of Soviet Russia has been 
 taken from those who would destroy 
 Spanish institutions, the situation may look 
 different. 
 
 The Russian example is seemingly serv- 
 ing a real purpose in Germany, in that 
 more and more of its population are be- 
 ginning to see that disaster would come to 
 it as a nation if any such program were 
 followed. 
 
 The new countries between Germany and 
 Austria and Russia have conducted them- 
 selves wonderfully well under the circum- 
 stances, and once freed from the Russian 
 menace some worthy nations may develop. 
 
 The great needs of the hour for the com- 
 plete restoration of Europe are three — the 
 annihilation of Bolshevism in every coun- 
 try , the fixation of the German indemnity 
 to the Allies , and the reconstruction of de- 
 vastated districts . 
 
 With Bolshevism destroyed production 
 will increase, currency expansion will de- 
 crease, governmental budgets can be made 
 
 [ 23 ] 
 
to balance, and ultimately taxation can be 
 reduced. 
 
 With the German indemnity fixed, that 
 nation can get down to work without fear 
 that successful operation may increase her 
 liability, and her burden will begin to grow 
 less. At the same time the payments that 
 she must make will serve to better the con- 
 ditions in the countries of the European 
 Allies. Such help as Germany may fairly 
 ask from the rest of the world can then be 
 extended without fear. 
 
 With the reconstruction of the devas- 
 tated districts productive work can be 
 given to many men who are at present 
 drawing funds from governments for un- 
 necessary purposes. The production from 
 the reconstructed mills will also help to re- 
 lieve the pressure of want to a large 
 degree. 
 
 With these three problems solved, all 
 the wars now going on in Europe, and 
 the tremendous tax that is being put upon 
 the people for military purposes, includ- 
 ing the loss of the use of the time of men, 
 would pass. 
 
 The great part of the United States at 
 the moment lies in using every force 
 possible to uphold the American work- 
 men who have successfully withstood the 
 fallacious arguments of the false agitator, 
 and help them educate the foreign work- 
 ers in our midst who have not been so 
 fortunate. We must also further trade 
 with all of the nations of the world in 
 every safe and judicious manner that 
 opens up to us. 
 
 Many of the. bankers of our country 
 have been given new powers, under which 
 they are able to take a part in our foreign 
 trade. Their co-operation is most de- 
 sirable, but the attention of every banker 
 in the country is called to the necessity 
 
 [ 24 ] 
 
of using these new powers for foreign 
 trade intelligently and honorably if we 
 would not bring criticism upon ourselves. 
 It must be realized that irrevocable Let- 
 ters of Credit when once issued cannot be 
 broken, regardless of falling prices or 
 difficulties which may come to those for 
 whom the Letters have been issued, 
 except in special cases where there 
 is positive breach of the contract of the 
 Letter of Credit itself. Refusal of drafts 
 drawn against Letters of Credit on mere 
 technicalities, in order to get out of bad 
 deals, should never be allowed. The 
 terms and conditions under which Com- 
 mercial Letters of Credit can safely be 
 issued should be so well known to those 
 carrying on such operations that irre- 
 vocable credits are never issued against 
 loose contracts. With prices of many 
 commodities falling as they have been 
 recently, and are certain to do in the 
 future, this is particularly important. 
 
 In some foreign countries it has un- 
 fortunately been the habit of certain 
 classes of exporters and importers to re- 
 pudiate contracts when prices have gone 
 against them. In the case of exports 
 shipments have not been made when 
 prices were rising within time limits in 
 order to allow Letters of Credit to lapse, 
 and when prices are falling unfilled con- 
 tracts which have expired have been filled 
 and manipulation of documents under- 
 taken with the intent to bring the ship- 
 ments inside of agreements. When Com- 
 mercial Letters of Credit are issued by 
 American banks for imports, the contract 
 between the importer and the exporter 
 cannot properly be brought in by the 
 American bank for the purpose of revok- 
 ing a confirmed credit which has been 
 exercised in exact accordance with its 
 
terms. In case of breach of contract the 
 importer may have cause of action against 
 the exporter, but a banker’s confirmed 
 credit cannot be violated if its terms have 
 been fulfilled. 
 
 One reason why London has held its 
 position as the central money market of 
 the world has been due to the fact that 
 British bankers have never repudiated 
 their credit contracts. This is really a 
 more serious matter than is generally 
 understood, for if foreign bankers find 
 that they cannot depend upon American 
 bankers accepting drafts drawn under 
 Commercial Letters of Credit issued by 
 them, it will not only prevent them from 
 buying drafts drawn upon banks where 
 acceptance has been refused, but it will 
 cause them to discriminate against all 
 dollar acceptances, which would be a most 
 serious setback to the growth of Ameri- 
 can banking. 
 
 Our relations with South America and 
 the Far East have been greatly strength- 
 ened since the war. It is, however, be- 
 coming very difficult for us to finance 
 such operations because having debit bal- 
 ances which we cannot settle with Euro- 
 pean credits necessitates gold shipments, 
 and at a time when our reserve require- 
 ments are almost at their peak. Ex- 
 porters and importers have been some- 
 what concerned about the development of 
 this situation, but it is impossible to pre- 
 vent while high prices exhaust our bank- 
 ing capital and at the same time we are 
 exporting to Europe against a balance in 
 credits in large amounts. It is just as 
 important, therefore, for our trade with 
 South America and the Orient that we 
 reach a position where current trade and 
 invisible balances with Europe more 
 nearly offset each other, as it is to our 
 
 [ 26 ] 
 
money market, for they are of necessity 
 closely bound together. Our whole world 
 relationship demands in no uncertain 
 terms that orderly production be resumed 
 in every country. 
 
 We are apt to be frightened by the vast- 
 ness of the figures which represent gov- 
 ernmental indebtedness today, and talk of 
 the bankruptcy of nations is often heard in 
 high places. While there is no question as 
 to the seriousness of the situation, yet it 
 must not be forgotten that there is a real 
 relationship between the power to destroy 
 and the power to create on the part of 
 human beings. As the world has pro- 
 gressed the ability of man to produce has 
 increased, and in each period of war the 
 power to destroy has been in proportion to 
 it. 
 
 Eliminating the question of waste which 
 follows all governmental operations, the 
 whole indebtedness of all of the nations 
 taking part in the war up to the time of 
 the armistice, and in fulfilling contracts 
 which had been undertaken, has gone to 
 pay for production accomplished during 
 the four years of the war and in payment 
 for the time of the men engaged in it. If 
 it had not been for the ability of the people 
 to produce at high speed, it would have 
 been impossible for such indebtedness to 
 have been created. To the increased in- 
 debtedness of nations since the war started 
 must be added the destruction of property 
 in the devastated regions and the loss of 
 human life. The rebuilding of the devas- 
 tated regions is only a matter of a few 
 years at most with present powers to pro- 
 duce. There is, of course, no question but 
 that in time of peace with the war pres- 
 sure removed it would take more than four 
 years to produce the same quantity of com- 
 modities that were created during the war 
 
 [27] 
 
period. On the other hand, many of the 
 machines and methods invented during the 
 war were not available for use until the war 
 had nearly run its course, and they will all 
 add to the ability of the world to produce 
 from now on. 
 
 Again, it is not necessary to reproduce 
 the munitions and engines of war which 
 cost such tremendous sums, but instead the 
 indebtedness created can be paid off from 
 the proceeds of useful production, which 
 immediately lends itself to further construc- 
 tion. 
 
 The material loss to the world, therefore, 
 is not of such moment as it would seem, 
 even though governmental indebtedness 
 was incurred during a time of a high aver- 
 age of prices; consequently if no destruc- 
 tion of human life had taken place, and no 
 destruction of the moral forces of the 
 world, we would need have little concern 
 about the future. But with millions of the 
 best and healthiest minds of the world gone 
 forever, and great numbers of misguided 
 individuals endeavoring to stir up civil 
 wars, the real menace for the future would 
 seem to lie principally in the difficulty of 
 the restoration of moral force. It is on 
 this account that it seems essential that we 
 give more of our attention to this phase of 
 the matter. 
 
 Upon our success in re-establishing in- 
 tegrity of purpose depends our ability to 
 help in the restoration of a proper financial 
 relationship between the nations, without 
 which an orderly world is inconceivable. 
 To accomplish this will require the exercise 
 of the full power of our national ideals. We 
 must co-operate with the strong to help the 
 weak. 
 
 Our intercourse with other peoples must 
 be based on fairness and goodwill. Our 
 minds must be free from petty jealousies 
 
 [ 28 ] 
 
and filled with that hope which conquers 
 despair. The opportunity of all history has 
 opened before us. Can the country of 
 Washington and Lincoln fail in such a 
 crisis? It is unbelievable. Mistakes we 
 will make, but if we stand firmly against 
 the forces for evil which would destroy 
 our institutions, our example will go far 
 toward helping the stricken nations of 
 Europe to recover their morale. With all 
 peoples united in their determination to 
 bring order out of the present chaos, we 
 need have no fear of the vast indebtedness 
 and the extended currency inflation which 
 exist today. They will disappear before the 
 combined energy of the world, if it is exer- 
 cised with integrity of purpose, like mists 
 before the wind. 
 
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