One of the consequences to America of being forced to play the role of money lender and one of the consequences of the rise in the rate of interest here, or what amounts to the same thing, the fall in the prices of bonds, will be an increased difficulty of financing our own enterprises.  Only the most promising enterprises will be able to sell their securities.  This means that we shall be neglecting, to some extent, our own enterprises, to finance the European war instead.

This general depreciation of investment securities will doubtless lead to many bankruptcies, if not to a genuine crisis.  It will also give tempting opportunities to investors.  The likelihood of a genuine panic is lessened by the fact that every one recognizes the real cause of the disturbance and that insolvency is not suspected.  According to the best commercial observers, the previous liquidation had been fairly well completed.  Unless they are mistaken, disaster will not be likely to follow.

We repeat that since the necessities of Europe have forced her to buy our food in return for her investments, it is evident that during the war food prices will be high and security prices, especially bonds, will be low.  These are the two facts of greatest economic significance to us.  To the country as a whole they defer some of our pleasures till after the war.  Uncle Sam will cut down for the present on his eating and drinking, his clothes, shelter, and amusements in order to share his rations with Europe.  Instead of the pleasures foregone he will invest—­not in new enterprises at home, but in old ones—­American and possibly European also—­purchased of Europe.  We can never have our cake and eat it too.  In this case we shall let Europe eat some of it on condition that she in turn shares hers with us after the war.  Moreover, we shall trade off a relatively small piece of our present cake for a relatively large piece of Europe’s future cake.  In other words, Europe will fill up the great breach in her income now impending by inducing us to make a small breach in ours.  The result will be that the course of our real income, that is, economic satisfaction or enjoyable consumption, will imitate in some degree that of Europe.  This is, reduced to its lowest terms, the chief economic result of the war.

But to many the question is, do we gain or lose, as compared with what might have been the case if there had been no war?  I do not think any one can answer that question with certainty.  Europe is willing to mortgage its future to us on terms very advantageous to us; but when the future comes, the purchasing power of money will probably be so much lessened as to have absorbed all our advantage.  Probably we shall lose slightly on the whole.  But it is not economically impossible that there will be a net gain.  In either case the net effect will, I believe, be small.