IN EVENT OF WAR

Evening Post, Volume CXXIII, Issue 58, 10 March 1937, Page 10

IN EVENT OF WAR

THE UNITED STATES

NEUTRALITY ISSUE

FINANCIAL ENTANGLEMENTS

(From "The Post's" Representative.) NEW YORK, February 17. Can the United States remain neutral in the-nex,t war? This question is being seriously discussed from Maine to California since the country awoke to the- fact that foreign investments and deposits in the, United States total between 7,000,000,000 and 8,000,000,000 dollars, or 70 per cent, greater than they were at the outset of the Great War. These • huge investments, that have grown, unnoticed, by the general public, during the European armament race of the past three years, have begun to cause grave anxiety, not only in! Washington but also in Wall Street. They have helped to increase the price of American securities and caused an embarrassing pyramid of bank reserves. President Roosevelt moved to counteract the effect of these investments, known in the financial world as "hot money," in view of the danger they constitute, in the event of war in Europe, in which they would be withdrawn, in the shape of gold, raw materials, or manufactured products. He increased the Federal reserve, and guided the flow of future imports of gold into the Stabilisation Fund, to prevent it causing undue inflation of credit. Financial authorities are generally agreed that the aggregation of foreign investments in the United States, prior to, the Great War, created a boom which, if it was not the basic cause of entering the war, set up an economic condition that made neutrality impracticable, if a. serious depression was to be averted. Manufacturers, merchants* and farmers could not'resist the temptation to- make huge profits. Will they be able to resist it when war next comes to Europe? Three major causes may be assigned to the recent influx: the devaluation of the dollar, early in 1934; successive, financial and political crises in former gold standard countries; fear of war, or civil war. Necessarily/the profit motive helped the inflow. GREAT BRITAIN AND FRANCE. . Of the long-term investments in this country, 43 per cent, is held by European countries and 27 per cent, by Great Britain. A war in. which Great Britain and France were allies would find them in possession of half the foreign stake in the United States. With "the aid of the Dominions, and the sale to Americans of her investments remote from th^ theatre of war, Great Britain could mobilise in the United States approximately 5,000,000,000 dollars—bas"ed on the latest Department of Commerce estimates. In spite of the popular cry for a ban' on armaments, other war materials, and commodities, would the United States be able to resist the thriving export trade experienced in 1914, 1915, and 1916? Thoughtful observers are convinced that the bait would be too attractive to discard. Where and when could a halt be called, to avoid being drawn into the conflict? Many have tried, but none have succeeded in offering a solution, beyond / that of securing effective control over all foreign investments —an expedient that would defeat itself, if the United States chose, as it did in 1914, to trade with only one side in the conflict. As to what will actually take place, a guess, hazarded in London or Wellington, would be as safe as one made today in New York or Washington.