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Fri 1 Nov 1929
In: HOME FINAL EDITION
BROAD FACTS OF U.S.A. CRISIS
Largely Paper Losses Cancelling Paper Gains
SLUMP MAY LEAVE WORLD BETTER OFF
(By Professor Shann)
When in 1913 the United States set up the Federal Reserve System its sponsor, Senator Owen boasted that it would make the old-time panics impossible. Now, out of a blue sky of record prosperity comes a devastating smash on Wall-street, and at the usual time— "the
fall."
The trouble is that American financiers have not yet learned their responsibilities as leaders of a great creditor nation. In their days of sudden wealth the United States have hugged their traditional interest, first and foremost, in the home market. No doubt it is a wonderful one—120 million people with high spending power, rather uniform, notions of using it, and no impediments to internal trade. Yet even that is insufficient scope for business expansion and modern salesmanship, despite consumers' credit. Great Britain, in similar circumstances after the Napoleonic war, had perhaps less temptation to play the hermit in her own market, though she tried it in wheat-growing for a time. In the second half, the wonder time of the 19th century, she took the more courageous line of budding up the prosperity of her customers abroad, by private investment there.
CREDIT SYSTEM
Private venturers sold British iron and steel, locomotives and steamships, above all British textiles, all on credit. Having by railways and mechanical transport overcome physical obstacles to trade, they offered rich cash markets in Britain for old and new lands' raw materials and food. They spread thence a great system of finance and insurance to make the process safe. Thus they raised the world's income almost, six-fold between Waterloo and Mons. 'The States' became suddenly rich by selling munitions and food to governments and thought, after the war, to go on dealing with governments. British investors, finding private venturing less welcome abroad, have done this, too, since 1900. But when America found her European debtors were paying her just what Germany had borrowed from her to pay them, she drew in her horns as a lender. With a foreign trade back to 8½ per cent. of her production, as against Britain's 30 and Australia's 34 percent., she thought to concentrate at home and let Europe solve her own problems. All went well. Steel production, building construction, retail turnovers, automobiles registered, even railway receipts advanced from record to record. The combined net profits of 536 manufacturing and trading concerns showed an increase, in the first six months of this year, of 36.6 per cent. over 1928, it self a record half-year. Iron and steel led the way with doubled gains. Such figures set up a crescendo of stock-exchange speculation during the last two years. Yet a few straws floating wide hinted that the tide was at the flood. Building in 1929 was at a lower level than in 1928. New records set up each month in motor production told of a strenuous struggle to sell between Ford and General Motors, making respectively 35 and 30 per cent, of the new cars.
https://trove.nla.gov.au/newspaper/article/85141129