SHALL THE FLAG FOLLOW THE INVESTOR?
Shall the Flag Follow the Investor? qnHE AMOUNT of American capital loaned abroad during- the past ten year*, exclusive of the war debt, has reached the enormous total of twelve billion dollars....
...The warning sounded by Mr...
...One essential principle should dominate the character of these transactions," Mr...
...The situation has alarmed even the international bankers in this country...
...Thomas W. Lamont of the Morgan firm, recently made a significant statement which amounts almost to a warning...
...Will their exports so far exceed their imports that they can continue (except by fresh borrowing) to transfer the sums necessary for interest and sinking funds...
...There could be no greater step taken in the prevention of war itself...
...The question is no longer academic...
...If President Coolidge's reiteration of the principle that the flag follows the investor is to be the policy of our government, then it needs little imagination to see what will happen if the interest payments and sinking fund requirements amounting now to one billion per year should be defaulted...
...The average interest rate is' 6%, which makes an interest charge of seven hundred and twenty million dollars payable annually by foreign creditors to private creditors in the United States...
...The Department of Commerce estimates that the sum is increasing...
...Lamont of the Morgan firm, largest international bankers in the United States, and Secretary Hoover, who is in close touch with the great financial interests in this country, should make public statements almost simultaneously in which there is a clear note of warning that under existing economic conditions further unrestricted foreign loans may bring on a defalcation of interest payments and perhaps repudiation of principal...
...It must be an important issue in the campaign of 1928...
...Under President Coolidge's policy that American dollars abroad "are a part of the general domain of the nation," every means at the command of the government, including the Army and Navy, will be used to protect and collect those billions which our international bankers have invested abroad...
...There seem at first glance to l>e but two alternatives to the situation pictured by Mr...
...two, to increase imports from foreign countries into the United States, thus making the trade balances more favorable to the borrowing countries...
...This clanger becomes alarming when President Coolidge's declaration in his New York speech of April 25th is recalled...
...It is a dominant factor in the determination of our foreign policy...
...It is hardly necessary to point out the danger to peaceful relations between this country and the creditor nations if this should happen...
...Hoover said recently, "that is that no nation should itself borrow, or should permit its citizens to borrow money from foreign countries, and no nation should allow its citizens to loan money to foreign citizens unless this money is to be devoted to productive enterprise," He said further, "In fact, if this principle could be adopted between nations of the world, that is, if nations would refuse to allow the lending of money for the balancing of budgets, for military equipment or war purposes * * * a great number of blessings would follow to the entire world...
...He said, "America's credit position has now been so far reversed that it is figured that gross annual interest and Sinking fund service payable to America, including governmental loans, now total about one billion dollars a year...
...It is a matter of significance that Mr...
...The answer concerns the happiness and welfare of every citizen...
...The Progressives will be united upon the proposition that the flag does not follow the investor...
...72 rv more having been loaned in April of this year than in 1926...
...Lamont,—one, to curtail foreign loans...
...Secretary Hoover has made a suggestion offering a third alternative, namely that foreign loans should be made only for productive purposes...
...Twelve billions of American dollars are now abroad with more going every month...
...With so great a sum due America each year, naturally the question arises as to how much further foreign countries will be able to stand the burden...
...He said, "The person and property of a citizen are a part of the general domain of the nation, even when abroad...
...Lamont and Secretary Hoover was intended, no doubt, to reach the ears of the bankers and others primarily interested in foreign loans, but it should serve to arouse the public to the danger which may confront the whole people in the not distant future...
Vol. 19 • June 1927 • No. 6
