It does not much matter whether we buy Government bonds or other securities.  If we buy of French capitalists their holdings in American railway securities we simply provide them with the wherewithal to take the French Government loans themselves.  They virtually become, without our knowledge, the go-between through which we lend, as it were, to the French Government, in spite of ourselves.  It is doubtless well, as a matter of policy, to refuse to loan directly to France, but we must not for a moment conclude that France or any other nation will have to finance the war without our aid.  We shall not be consciously helping any particular nation, but we shall be actually helping any nation which can trade with us.  Evidently England will get more of our help than any other nation because her shores are more accessible.  Germany is more isolated.  Unless she possesses a larger food stock than commercial statistics indicate she will be pressing for our food supplies, which may reach her indirectly, we selling to Holland and Holland to Germany; also reversely, via Holland or via Austria and Italy, Germany may sell a stream of securities the other end of which we receive.  Whether directly or by devious routes there will inevitably be, so far as I can see, a vast exchange of commodities passing to Europe for securities coming from Europe.  In this interchange will be found the dominant economic effect of the war on the United States.

Foreign nations will get their much-needed loans on better terms, even if less promptly, by the circuitous process mentioned than if they could borrow directly in our markets; for their own citizens will pay higher prices than we would, even if, to get the money, they have to sell their other investment securities to us at a considerable sacrifice.  England has sold Treasury bills for seventy-five millions of dollars on as low a “basis” as 3-3/4 per cent.

In this virtual trade of this year’s crops for titles to future years’ crops we shall get a high price for the former and pay a low price (in present valuation) for the latter.  Investment securities are, and will be, a drug on the market.  In other words, the rate of return to the investor will be high; the rate of interest on long-time loans will be high and stay high, that on short-time loans may fluctuate greatly.  The rise in the rate of interest on long-time investments is one of the most vital and far-reaching effects of the war.  At bottom, interest always arises from the exchange of present and future goods.  The rate of interest, as I have tried to show in my book of that title, is simply the crystallization, in a market rate, of the impatience of the human race for its bread and butter.  War has now produced such impatience in populations of hundreds of millions.  It is this impatience which dumps the securities upon us, sends down their price, and sends up the rate of interest.  As Byron W. Holt has said, there is no moratorium for hunger.  The fall of securities in Europe produces the like fall in this and other countries.