Ireland) is presented herewith by statistics giving their number, the number of branches, their deposits, and discounts and advances made by years: The private banks had during the same years deposits ranging from £26,000,000 in 1912 to £56,000,000 the highest after the war. The joint-stock banks of Scotland had deposits ranging from £118,793,000 in 1912 to an average of over £250,000,000 during the period of 1921–28. The joint-stock banks of Ireland had deposits of £66,901,000 in 1912, over £200,000,000 in 1920, 1921, 1922, and an average of over $50,000,000 for Northern Ireland from 1922 to 1928. Returning to the banks of England and Wales, their deposits and discounts and advances had increased as follows: Deposits in British banks aggregating upwards of $5,000,000,000 over and above the pre-war deposits are disclosed by a survey of the British financial resources of the years 1921–31. This is only one of a number of such huge British resources that have not been considered in the discussion of the war debt and the settlement of economic questions. In fact, in all such discussions it has been represented that the World War had reduced Great Britain's ability to pay her debts and post-war difficulties had aggravated the conditions. These huge assets of Great Britain are not shown in the report of Great Britain's economic conditions made by Stanley Baldwin, then Chancellor of the Exchequer, and Montegu C. Norman, the Governor of the Bank of England, upon which the debt funding agreement was reached. That report, presented at the opening meeting of the Anglo-American Debt Commission on January 8, 1923, was followed by statements of the budget of the British Government and reports on revenue sources and taxation, national debt, and apparent evidences of British difficulties, and other arguments about Great Britain's inability to pay. The gloomy picture presented by the British officials was accepted by the American Commissioners who were Secretary of the Treasury Andrew W. Mellon, chairman; Secretary of State Charles E. Hughes; Secretary of Commerce Herbert Hoover, Senator Reed Smoot, and Representative Theodore E. Burton. Had the Americans had the facts, they could have pointed out that— 1. The banks of England, Wales, and Scotland had deposits aggregating upwards of $5,000,000,000 over and above the deposits of the 1911-14 period. 2. The total deposits of the banks of England, Wales, and Scotland had been discounting and making advances each year since the war aggregating upward of $5,000,000,000 over and above the sum they made before the war. 3. Britain's exports, which had only averaged $3,558,300,000 per year for the years 1911-13, increased to an average of $5,759,900,000 per year during the years 1926-30, or a yearly exports increase of $2,201,600,000. 4. That Great Britain was a large beneficiary, not only in volume of exports but because her system pernits her to benefit from exports, imports, re-exports to to colonies and empire units, converting imported materials into manufactured goods, from granting credits and from employment of British ships, railways, and other British-controlled methods of transportation. 5. That the public issues of new capital in London after the war had been exceeding the amounts so invested before the war. 6. That the records of the British Ministry of Labor stated that the wage rate since the war, to British labor, had been close to double the wage rate of 1912-14. The list of such British assets could have been doubled then. It can be doubled now, there having been no reduction, as will be shown in other surveys. Had the United States been borrowing, or had bankers been making loans, the borrower would have been required to show all the assets. The same would have been true if seeking to fund a loan. It would have been true in any bank anywhere in the world. The people of the United States now find that that precaution was overlooked when the British delegates met the American commissioners to consider the funding of Britain's debt which, as of December 15 1922, amounted to the huge sum of $4,600,000,000. Britain's prosperous conditions before her financiers precipitated the 1929 New York stock market crash, to wrest the financial control from the United States, are established by the economic reports of that period. The deposits of her people and industries in the commercial banks of the United Kingdom had grown from £984,875,000 at the end of 1912 to £2,362,600,000 at the end of 1922, and to £2,280,900,000 at the end of 1928. There are hundreds of reliable British reports confirming that Britain was enjoying prosperity. I quote them in preference to foreign reports because they are self-evident. For instance, the report of Mr. J. Beaumont Pease, chairman of the Lloyds Bank Ltd., one of the largest banks of the United Kingdom for the year 1928, presented February 1, 1929, stated: "Industry, outside of the four great exceptions which I have mentioned, appears to be undoubtedly prosperous, and the general standard of living is higher than it was * * * "The returns of our foreign trade during 1928 show that our exports are increasing, and suggest, according to reliable estimates which have been published that the total amount available for investment abroad will come out at £169,000,000 against £96,000,000 in 1927. "The Bankers Clearing House turnover has increased during the year by £2,654,000,000." The savings of the population of the United Kingdom were given by the London Economist for February 23, 1929, as follows: "On the whole it appears not unreasonable to conclude from the survey of the available data that the total wealth belonging to the 'small saving' class lies between the limits of £1,700 and £2,000 millions." In other words, less than half of the small savings would pay Britain's entire war debt to the United States. At the time Great Britain abandoned the gold standard September 21, 1931, the banks of England and Wales alone had daily bank clearings of £12,200,000. Following the abandoning of the gold standard the bank clearings of those banks increased. Following are the average daily bank clearings of the banks of England and Wales for the year 1931-32: Daily average for January-March 1931_. Daily average for July-September 1931. Daily average for October-December 1931. Daily average for January-March 1932_. £13, 500, 000 12, 900, 000 12, 200, 000 13, 000, 000 Daily average for April 1932__. Previous to September 21, 1931, when Britain abandoned the gold standard the new capital issues underwritten in England had been, by months, as follows: January-March 1931 period.. April-June 1931 period__ July-September 1931 period__ Per month £15, 100, 000 8, 500, 000 2, 700, 000 Following Britain's abandonment of the gold standard, the new capital issues underwritten in England were: October-December 1931 period, per month. April 1932 had amounted to.. £3, 200, 000 9, 000, 000 12, 100, 000 18, 000, 000 The larger part of the new capital issues from July 1931 to March 1932 had been for domestic purposes. In April 1932, £8,400,000 was for overseas. Mr. WOODHOUSE. First of all, France had at the end of the World War, like all the allied and several of the central powers, bank deposits more than twice the amount of the deposits of 1912 and 1913. That was already an increase. Senator GORE. They doubled during the war? Mr. WOODHOUSE. Yes. But since then, beginning in 1923—and I will give you the figures for 1923-the deposits in the commercial banks amounted to 1,500,000,000 francs. Mr. Chairman, in 1928 that had grown Senator GORE (interposing). When was that? Pardon me. Mr. WOODHOUSE. This was in 1923, Senator Gore. Senator KEAN. Mr. Witness, you calculate the number of francs before the war. A franc then was 19%. Mr. WOODHOUSE. Quite so. Today it is 4. Senator KEAN. Did you figure it that way? Mr. WOODHOUSE. To cover that point I avoided the period before that and I began with the 1923 franc, which was the time when the franc was stabilized. Senator KEAN. You were talking before the war and comparing them, and, as over 80 percent of the value of the franc has been canceled, why, that makes a different situation entirely. Mr. WOODHOUSE. Exactly so. That would be correct. So I began to figure from 1923, so as to make it clear, by dealing only with the years since the stabilizing of the franc. Senator KEAN. Yes; but you spoke about before the war there. Senator WAGNER. I did not quite get it clear. What do those deposits represent? Mr. WOODHOUSE. These are the commercial deposits. Mr. WOODHOUSE. Oh, no. Senator WAGNER. By the French? Mr. WOODHOUSE. By the French themselves. My survey shows that the increase which I show separately grew from 1,905,000,000 in 1923 to 27,435,000,000 in 1925, which was enormous. grew again. But then they Senator MCADOO. Have you reduced that to dollars? Senator GORE. Would it not be a lot more than that, Mr. Woodhouse, from one billion and a fraction to 27 billions? Mr. WOODHOUSE. It grew from 20,130,000,000 francs in 1922, to 49,563,000,000 in 1930. Senator GORE. That would be a much larger percent than you stated, would it not? Mr. WOODHOUSE. Yes. Oh, I have it by the year. Senator BARKLEY. Have you converted that into the dollar of 1923 and the dollar of 1930? Mr. WOODHOUSE. I have not, because the values changed slightly and it meant a great deal of figuring, so I just left it in francs. In some cases I have translated the figures into dollars. Senator GORE. It looks to me like that would be an increase of over 2,000 percent. Mr.WOODHOUSE. That is right. You are quite right as to the ratio of increase. The amount of increase was only 1,905,000,000 francs in 1923. It increased for 1930 by 29,433,000,000 francs. The CHAIRMAN. You have presented that statement for the record? Mr. WOODHOUSE. Yes. Senator GORE. Would it be too much trouble to convert that into dollars-state it in terms of dollars too? Mr. WOODHOUSE. I believe it would take quite a few days to do that. Senator WAGNER. If I may ask a question, Just what point are you attempting to establish by showing the amount of deposits in the commercial banks of France? I mean, What has that to do with paying for their bonds, for instance, sold in this country, unless there is some way of transferring that into dollars? Mr: WOODHOUSE. I will answer it in two points. Senator WAGNER. Here is what I have in mind, if I may- Senator WAGNER. As to whether the foreign government pays its obligations in the form of securities to an American, say, depends on whether or not they can sell goods to our country in addition to the goods that we may sell to them. They have to have the balance of trade, isn't that true, in the long run? Mr. WOODHOUSE. Senator, I dislike to disagree with you as to that. Senator WAGNER. How are they going to pay it? Mr. WOODHOUSE. They pay it just as I pay my bills, without my neighbor ever considering whether I can pay or not. That is, they have money, they have resources, and they do not have to sell to the United States to pay those bills. Senator WAGNER. I mean if they are going to pay their obligations in this country there is only one of three ways of paying them that I know of: Either with their gold-and there is a limit to that; with their service, or with their goods. The amount of deposits that may exist in the banks of France does not determine the question as to their ability to pay us. That is the point that I am trying to make. Mr. WOODHOUSE. Senator Wagner, I believe that that is an economic theory which is not applicable. For instance, when the United States has to pay $725,000,000 in interest it taxes its people, does it not? Senator WAGNER. Yes. Mr. WOODHOUSE. Now, France could tax her people and pay. Senator WAGNER. I am speaking about transferring it into the United States. I think that they could raise the money in taxation, and if they have gold enough they could give us that particular debt in gold, but they cannot continue to pay in gold. Some time they have got to pay us in goods. Mr. WOODHOUSE. I believe that you would find that it is possible for the nations to pay. They have had 15 years in which to pay. They could have paid the entire amount by now. The gold resources of the large debtor nations are larger than are represented. They have great resources besides those reported by their central banks. We discovered during the past year that France had over å billion dollars in gold in the United States. We have also discovered that England's gold reserve grew enormously after she made the payment of 97 million dollars in gold, last December 13. The pitiful arguments against asking England to pay them sound strange now when we read of her large gold resources. But we must not forget that the debtor nations are allowed to pay their debt in United States banks. As far as I have been able to ascertain, they hold over 5 billion dollars of United States bonds, which they could turn in in payment of their debt. Senator WAGNER. Well, I do not want to go into that question too much, except I think that is information that should be given to the American purchaser of foreign securities. Senator BARKLEY. Mr. Chairman, I think it is all very interesting, but I suggest it ought to be submitted to the Debt Settlement Commission instead of to us. Senator WAGNER. That is a very pertinent question, as to the security of the foreign bond, as to what business they do with us. Everything depends on that. Senator GORE. I want to ask one question before we leave this subject. Senator WAGNER. I am not speaking about the debts. I am speaking about when they sell us foreign securities. They can pay only in one of three ways. Senator BARKLEY. It is based upon their ability to pay what they Owe us. This bill does not deal with that. Senator GORE. Before we leave the subject I want to ask one question. During the same period from 1923 to 1929 bank deposits in this country increased from 42 billions to 58 billions, an increase of 16 billions. That represented in this country an expansion of credit, an overexpansion really, and did not represent earnings or income. That was the trouble. The amount of money in the country declined during that period. Does the increase of deposits in France, for instance, do you think, represent an inflation of credit or does it represent earnings and income? Mr. WOODHOUSE. I believe it represents earnings. I believe it represents the process of converting national resources into wealth, and distribution of wealth. Senator GORE. It would have to represent that in order to constitute paying power with reference to the debts they owe us and not mere inflation. The CHAIRMAN. Proceed, Mr. Woodhouse. You have just a few minutes more now. Mr. WOODHOUSE. Yes. In connection with a statement regarding the French capacity to pay which is expressed by the commercial bank deposits, may I insert in the record the agreement between the United States and France regarding the debts, side by side, so that it can be studied together? The CHAIRMAN. We have that in many records. I have no objection to it. You may present it, and we will see about its insertion. |