"Then I'll wait until he can get a robe on," said Le Bas.

Fifteen minutes later, the man who holds the British purse strings sat clad in a dressing gown and listened to the suggestion that revolutionised British methods of financial salesmanship.

"If we want to sell the War Loan, Mr. Chancellor," said Sir Hedley, "we will have to advertise in a big way. It's a business proposition and we must adopt business methods."

"It sounds interesting," said the Chancellor. "Come to my office at ten and we will talk it over."

It was then 8:30 o'clock. By the time he met the Chancellor at the Treasury he had dictated the whole outline of the advertising campaign. The scheme was adopted: the Government spent fifty thousand pounds advertising the loan but it sold every penny of it.

This then was the type of man who had sat in the six meetings of War Loan for Small Investors and listened to many conventional suggestions. He instinctively knew that the Five Pound Exchequer Bond was not a sufficient bait to hook the small savings of the great mass of the people.

"We've got to make some kind of attractive offer," said Sir Hedley to himself. "In fact, we must give the investor something for nothing to make him lend his money to the country. A pound note looks big to the average Englishman. Why not give him a pound for every fifteen shillings and sixpence that he will lay aside for the use of the Nation? In other words, why not make patriotism profitable?"

When he laid this plan before the Committee, it was unanimously approved. The maxim of "Fifteen and Six for a Pound" was now unfurled to the breezes and the super-campaign to corral the British penny was on, under the auspices of the National War Savings Committee which now superseded all other organisations as the head and front of the National Thrift idea.

Although he had a strong selling appeal in the fact that he was giving the small British investor something for nothing, Sir Hedley realised that his first bid for savings must have the real punch of war in it. What was it to be?

He thought a moment and then went over to the War Office where Lloyd George had just succeeded the lamented Kitchener.

"What could a man buy for fifteen and six?" he asked the many-sided little Welshman who was progressively filling every important job in the Empire.

"He could buy six trench bombs," was the reply.

"What else?" queried the publisher.

"He could get 124 cartridges or—"

"That's enough!" exclaimed Le Bas. "I've got it!"

Lloyd George looked a little startled, whereupon his visitor remarked: "You have given me just the thing I wanted. Wait until to-morrow and you will find out what it is."

The very next day Lloyd George and a great part of the whole British Nation knew exactly what Sir Hedley got out of his interview with the War Minister, because the first advertisement announcing the new type of War Loan read like this:

"ONE HUNDRED AND TWENTY-FOUR CARTRIDGES FOR FIFTEEN AND SIX, AND YOUR MONEY BACK WITH COMPOUND INTEREST

"Do you know that every 15/6 you put into War Savings Certificates can purchase 124 rifle cartridges?

"How many Cartridges will you provide for our men at the Front?

"For every 15/6 you put into War Savings Certificates now you will receive £1 in five years' time. This is equal to compound interest at the rate of 5.47 per cent.

"Each year your money grows as follows:

In 1 year it becomes 15/9
  In 2 years it becomes 16/9
  In 3 years it becomes 17/9
  In 4 years it becomes 18/9
In 5 years it becomes £1

"If you need it you can withdraw your money at any time, together with any interest that has accrued."

This advertisement made a good many people sit up because it brought home for the first time one concrete use of the money absorbed in war loans.

The National War Savings Committee had two things to sell. One was the Five Per Cent Exchequer Bond: the other was the new Fifteen and Six War Savings Certificate. The promoters were quick to see that while the Exchequer Bond was very desirable, the principal effort must be concentrated on the War Savings Certificate for which the widest appeal and the best selling talk could be made.

That it was a good "buy" nobody could deny. It was the obligation of the British Government: it was free from Income Tax: it could be cashed in at any time at a profit: and it made the owner part and parcel of the financing of the war. Every post office and nearly every bank became a selling agent. In short, it was a simple, cheap and worth-while investment absolutely within the scope of every one.

At the outset the sale was restricted to those whose income did not exceed $1,500, the purpose being to keep the investment among the wage earners. So many munition workers were receiving such large incomes that this ban was removed. The only limitation imposed was that no individual could hold more than 500 Certificates. This did not prevent the various members of a family, for example, from each acquiring the full limit.

Having decided to make the War Savings Certificate its prize commodity, the Committee proceeded to launch a spectacular, even sensational promotion campaign. J. Rufus Wallingford in his palmiest days was never more persuasive than the literature which now fairly flooded Great Britain.

The phrase "Your King and Country Need You" that had stirred the recruiting fever now had a full mate in the slogan "Saving for Victory" which began to loosen pounds and pence from their hiding places. The injunction that went forth everywhere was

"WORK HARD: SPEND LITTLE:
SAVE MUCH"

From every bill board and every newspaper were emblazoned:

"SIX REASONS WHY YOU SHOULD SAVE"

Here are the reasons:

1. Because when you save you help our soldiers and sailors to win the war.

2. Because when you spend on things you do not need you help the Germans.

3. Because when you spend you make other people work for you, and the work of every one is wanted now to help our fighting men, or to produce necessaries, or to make goods for export.

4. Because by going without things and confining your spending to necessaries you relieve the strain on our ships and docks and railways and make transport cheaper and quicker.

5. Because when you spend you make things dearer for every one, especially for those who are poorer than you.

6. Because every shilling saved helps twice, first when you don't spend it and again when you lend it to the Nation.

The word "Save" which had dropped out of the British vocabulary suddenly came back. It was dramatised in every possible way and it became part of a new gospel that vied with the war spirit itself.

The National War Savings Committee became a centre of activity whose long arms reached to every point of the Kingdom. Branch organisations were perfected in every village, town and county: the Admiralty and the War Office were enlisted: through the Board of Education every school teacher became an advance agent of thrift: the Church preached economy with the Scripture: in a word, no agency was overlooked.

The sale of Certificates started off fairly well. On the first day more than 2,000 were sold and the number steadily increased. But while many individuals rallied to the cause, there was not sufficient team work.

One serious obstacle stood in the way. While fifteen shillings and a sixpence is a comparatively small sum to a man who makes a good income, it looms large to the wage earner, especially when it has to be "put by" and then goes out of sight for four or five years. So the National War Savings Committee set about establishing some means by which the average man or woman could start his or her investment with a sixpence, that is, twelve cents. Even here there was a difficulty. Millions of people in England could save a sixpence a week, but the chances are that before they piled up the necessary fifteen and six to buy the first Certificate they would succumb to temptation and spend it.

The English small investor, like his brother nearly everywhere, is a person who needs a good deal of urging or the power of immediate example about him. Thereupon the Committee said: "What seems impossible for the individual, may be possible for a group."

Thus was born the idea of the War Savings Association, planned to enable a group of people to get together for collective saving and co-operative investment. This proved to be one of the master strokes of the campaign. From the moment these Associations sprang into existence, the whole War Savings Certificates project began to boom and it has boomed ever since.

War Savings Associations are groups of people who may be clerks in the same office, shop assistants in the same establishments, workers in the same factory or warehouse, people attending the same place of worship, residents in any well-defined locality such as a village or ward of a town, members of a club, the servants in a household: in short, any number of people who are willing to work together. Some have been started with 10 members, others with as many as 500. Up to the first of January nearly 10,000 of these Associations had been formed throughout the Kingdom.

Now came the inspiration that was little short of genius for it enabled the lowliest worker who could only set aside a sixpence a week to become an intimate part of the great British Saving and Investment Scheme. The idea was this:

If one man saves sixpence a week, it would take him thirty-one weeks to get a One Pound War Certificate. But if thirty-one people each save sixpence a week, they can buy a Certificate at once and keep on buying one every week. Thus their savings begin to earn interest immediately. Thus every War Savings Association became a co-operative saving and investment syndicate—a pool of profit.

How are the Certificates distributed? The usual procedure is to draw lots. In a small Association no member is ordinarily permitted to win more than one Certificate in a period of thirty-one weeks, except by special arrangement. Each Association, however, can make its own allotment rules. The value of winning a Certificate the first week is that the winner's 15/6 will have grown to one pound in four years and a half instead of five. This is broadly the financial advantage gained by being a member of an Association, although the larger reason is that it is more or less compulsory as well as co-operative saving.

Britain is buzzing with these War Savings Associations. You find them in the mobilisation camps, on the training ships, on the grim grey fighters of the Grand Fleet, even in the trenches up against the battle line. The London telephone girls have their own organisation: sales forces of large commercial houses are grouped in thrift units: there are saving battalions in most of the munition works, and so it goes. In many of the big mercantile establishments that have Associations, the weekly drawings of Certificates with all their elements of chance and profits are exciting events.

Many Britishers shy at co-operation. For example, they like to save "on their own." To meet this desire, the War Savings Committee devised an individual saving and investment plan which begins with a penny, that is two cents. Any person can go to the Treasurer of a War Savings Association and get a blank stamp book. Each penny that he deposits is marked with a lead pencil cross in a blank square. When six of these marks are recorded, a sixpenny stamp is pasted on the blank space. As soon as the book contains thirty-one stamps it is exchanged for a War Savings Certificate.

Still another plan has been devised to meet requirements of people who do not care to affiliate with the War Savings Associations. Any post office will issue a stamp book in which ordinary sixpenny postage stamps can be pasted. When thirty-one have been affixed they may be exchanged at the post office for a pound Savings Certificate. These books have this striking inscription on their cover: "Save your Silver and it will turn into Gold! 15/6 now means a sovereign five years hence."

The whole Savings Campaign is studded with picturesque little lessons in thrift. The London costers—the pearl-buttoned men who drive the little donkey carts—subscribed to $1,000 worth of Certificates in a single week, although they had made a previous investment of $4,000.

In hundreds of factories the idea has taken root. In some of them War Savings subscriptions are obtained by means of deductions from wages. Employees can sign an authorisation for a certain amount to be taken each week or month out of their wages. They get accustomed to having two, three, four or five shillings lifted out of their wages and thus their saving becomes automatic.

Often the employer helps the movement by contributing either the first or last sixpence of each Certificate or offering Certificates as bonuses for good conduct or extra work. When one small employer that I heard of pays his men their War Bonus, he gets them, if they are willing, to place two sixpenny stamps on a stamp card, for which he deducts tenpence. The employees are thus given twopence for every shilling they save. When these cards bear stamps up to the value of 15/6 they are exchanged for War Savings Certificates.

No field has been more fruitful than the public schools where the thrift seed has been planted early. In hundreds of public educational institutions Savings Clubs have been formed to buy Certificates. In Huntingdonshire, where there were less than 150 pupils, more than $35.00 was subscribed in a single morning. At Grimsby a successful trawler owner gave $5,000 to the local teachers' association to help the War Savings crusade. A shilling has been placed to the credit of every child who undertakes to save up for a War Savings Certificate, the child's payments being made in any sum from a penny up. Ninety-five per cent of the children in the town have begun to save. Similarly, a councillor of Colwyn Bay has offered to pay one shilling on each Certificate bought by the scholars of one of the town's schools, and also offered to add fifty per cent to all sums paid into the school savings bank during one particular week, provided that the money was used to purchase War Savings Certificates.

Almost countless schemes have been devised to instil, encourage and develop the thrift idea. In certain districts, patriotic women make house to house canvasses to collect the instalments for the Certificates. They become living Thrift Reminders. Tenants of model flats and dwelling houses pay weekly or monthly War Savings Certificates at the same time they pay their rent.

That this economy and savings idea has gone home to high and low was proved by an incident that happened while I was in London. A man appeared before a certain well-known judge to ask for payment out of a sum of money that stood to his credit for compensation to "buy clothes." The judge reprimanded him sharply, saying, "Are you not aware that one of the principal War Don'ts is, 'Don't buy clothes: wear your old ones.'" With this he held up his own sleeve which showed considerable signs of wear. Then he added: "If I can afford to wear old garments, you can. Your application is dismissed."

With saving has come a spirit of sacrifice as this incident shows: A London household comprising father, mother and two children moved into a smaller house, thus saving fifty dollars a year. By becoming teetotalers they saved another five shillings (one dollar and a quarter) and on clothes the same weekly sum. They took no holiday this summer: ate meat only three times a week, abstained from sugar in their tea, cut down short tramway rides, and the father reduced his smoking allowance. By these means they have been able to buy a War Savings Certificate every week.

Just as no sum has been too small to save, so is no act too trivial to achieve some kind of conservation. People are urged to carry home their bundles from shops. This means saving time and labour in delivery and permits the automobile or wagon to be used in more important work. I could cite many other instances of this kind.

Even the children think and write in terms of economy. At the annual meeting of the British Association for the Advancement of Science held last summer at Newcastle, an eminent doctor read a paper on "London Children's Ideas of How to Help the War." The replies to his questions, which were sent to more than a thousand families, all indicated that the juvenile mind was thoroughly soaked with the savings idea. Some of the answers that he quoted were very humorous. A boy in Kensington gave the following reasons:

"Eat less and the soldiers get more: If you make a silly mistake in your arithmetic tell your mother not to let you have any jam, and put the money saved in the War Loan: Stop climbing lamp-posts and save your clothes: Don't wear out your boots by striking sparks on the kerbstones: If you buy a pair of boots you are a traitor to your country, because the man who makes them may keep a soldier waiting for his: Don't use so much soap: Don't buy German-made toys."

The net result of this mobilisation of the forces of thrift is that up to January the first 50,000,000 War Certificates had been sold, representing an investment of nearly 40,000,000 pounds or approximately $200,000,000. The striking feature about this large sum is that it was reared with the coppers of working men and women. "Serve by Saving" in England has become more than a phrase.

All this was not achieved, however, without the most persistent publicity. England to-day is almost one continuous bill board. The hoardings which blazed with the appeal for recruits and the War Loan now proclaim in word and picture the virtues of saving and the value of the now familiar War Certificates. Likewise they embody a spectacular lesson in thrift for everybody.

One of the most effective posters is headed "ARE YOU HELPING THE GERMANS?" Under this caption is the subscription:

"You are helping the Germans when you use a motor car for pleasure: when you buy extravagant clothes: when you employ more servants than you need: when you waste coal, electric light or gas: when you eat and drink more than is necessary to your health and efficiency.

"Set the right example, free labour for more useful purposes, save money and lend it to the Nation and so help your Country."

A gruesome, but none the less striking, poster is entitled: "What is the Price of Your Arms?"

Then comes the following dialogue:

Civilian: "How did you lose your arm, my lad?"

Soldier: "Fighting for you, sir."

Civilian: "I'm grateful to you, my lad."

Soldier: "How much are you grateful, sir?"

Civilian: "What do you mean?"

Soldier: "How much money have you lent your Country?"

Civilian: "What has that to do with it?"

Soldier: "A lot. How much is one of your arms worth?"

Civilian: "I'd pay anything rather than lose an arm."

Soldier: "Very well. Put the price of your arm, or as much as you can afford, into Exchequer Bonds or War Savings Certificates, and lend your money to your Country."

Still another is entitled "BAD FORM IN DRESS" and reads:

"The National Organising Committee for War Savings appeals against extravagance in women's dress.

"Many women have already recognised that elaboration and variety in dress are bad form in the present crisis, but there is still a large section of the community, both amongst the rich and amongst the less well to do, who appear to make little or no difference in their habits.

"New clothes should only be bought when absolutely necessary and these should be durable and suitable for all occasions. Luxurious forms, for example, of hats, boots, shoes, stockings, gloves, and veils should be avoided.

"It is essential, not only that money should be saved, but that labour employed in the clothing trades should be set free."

Harnessed to the Saving and Investment Campaign is a definite and organised crusade against drink, ancient curse of the British worker, male and female. It is really part of the movement instituted by the Government at the beginning of the war to curtail liquor consumption. One phase is devoted to Anti-Treating, which makes it impossible to buy any one a drink in England. This was followed by a drastic restriction of drinking hours in all public places where alcohol is served. Liquors may only be obtained now between the hours of 12 noon and 2:30 in the afternoon and from 6 to 9:30 at night. As a matter of fact, the only tipple that you can get at supper after the play, even in the smartest London hotels, is a fruit cup, which is a highly sterilised concoction.

The War Savings Committee has borne down hard on the drinking evil and England's enormous yearly outlay for liquor—nearly a billion dollars—is used as a telling argument for thrift. A poster and a pamphlet that you see on all sides is headed, "THE NATION'S DRINK BILL," and reads:

"The National War Savings Committee calls attention to the fact that the sum now being spent by the Nation on alcoholic liquors is estimated at

£182,000,000 a year.

"And appeals earnestly for an immediate and substantial reduction of this expenditure in view of the urgent and increasing need for economy in all departments of the Nation's life.

"Obviously, in the present national emergency a daily expenditure of practically £500,000 on spirits, wine and beer cannot be justified on the ground of necessity. This expenditure, therefore, like every other form and degree of expenditure beyond what is required to maintain health and efficiency is directly injurious to national interests.

"Much of the money spent on alcohol could be saved. Even more important would be (1) the saving for more useful purposes of large quantities of barley, rice, maize and sugar; and (2) the setting free of much labour urgently needed to meet the requirements of the Navy and the Army.

"To do without everything not essential to health and efficiency while the war lasts is the truest patriotism."

Under the silent but none the less convincing plea of these posters, backed up by millions of leaflets and booklets explaining every phase of the Savings Campaign, the sale of Certificates rose steadily. From 906,000 in May they jumped to nearly 3,000,000 in June. But this was not enough. "Let us make one big smash and see what happens," said the Committee. Thereupon came the idea for a War Savings Week, which was to be a notable rallying of all the Forces of Thrift and Saving.

No grand assault on any of the actual battle fronts was worked out with greater care or more elaborate attention to detail than this Savings Drive. No loophole to register was overlooked. It was planned to begin the work on Sunday, July 16th.

First of all, the resources of the Church were mobilised. A Thrift sermon was preached that Sunday morning in nearly every religious edifice in the Kingdom. Following its rule to leave nothing to chance, the War Savings Committee prepared a special book of notes and texts for sermons which was sent to Minister, Leaders of Brotherhoods and Men's Societies. Texts were suggested and ready-made and ready to deliver sermons were included. One of these sermons was called "The Honour of the Willing Gift," another was entitled "The Nation and Its Conflict," and its peculiarly appropriate text was "Well is it with the man that dealeth graciously and lendeth."

A special address (in words of one syllable) to the children of England embodying the virtues of penny saving and showing how these pennies could be made to work and earn more pennies, as shown in the concrete example of a War Savings Certificate, was read by thousands of Sunday school teachers to their classes throughout the nation.

Nearly every human being in Great Britain got the Message of Thrift that week. Boy Scouts and Girl Guides went from house to house bearing copies of the various kinds of instructive literature that had been prepared for the campaign. Typical of the thoroughness of the detail is the fact that in Wales all this material was printed in the Welsh language. The only country where no special efforts were made was Scotland, where to preach thrift is little less than an insult.

For seven days and nights the almost incessant onslaught was kept up. When the smoke cleared and the count was taken, it was found that 3,000,000 Certificates had been sold during the week while the total for the month was 10,700,000.

So vividly was the phrase "War Savings Week" driven home that the War Savings Committee decided instantly to capitalise this new asset. In a few days hundreds of bill boards and fences throughout the Kingdom blossomed forth with this sentence, painted in red, white and blue letters: "Make Every Week National War Savings Week."

Not content with splashing the bill boards with the injunction to save, the National Committee hit upon what came to be the most popular medium for disseminating the Gospel of Thrift. It enlisted the movies. A film called "For the Empire" was made by a number of well known motion picture actors and actresses who gave their services free of charge.

It was a moving and graphic story of the war showing how a certain English lad volunteers at the outset and goes to the front. You get a vivid picture of life in the trenches shown in actual war scenes. Then you see the young soldier fall while gallantly leading a charge: his body is brought home and he is buried with military honours. Then the screens hurls the question at the audience: "This man has died for his Country. What are you doing for the Nation in its hour of trial?" Now follows a vivid lesson in how to save and buy a War Savings Certificate. This film has been shown in 2500 cinema theatres up to the first of the year and was booked to be shown in 1000 more within the next few months.

So widespread has the Thrift movement become that the War Savings Committee now publishes its own monthly magazine called War Savings. The first issue appeared on September first and included such timely articles as "The Might of a Mite," a lesson in penny building: "The Final Mobilisation," which showed how the last £100,000,000 would win the war: a third article explained the Economy Exhibition now being held all over Great Britain as part of the Thrift crusade. There was also an article on the War Saving movement by Reginald McKenna, Chancellor of the Exchequer, and a very illuminating appeal, "Every Household Must Help Win the War."

This leads to one of the most instructive branches of the whole campaign, the one devoted to the elimination of waste in the household. Under the direction of the Patriotic Food League a voluminous and helpful literature has been prepared and distributed. One booklet devoted to "Waste in the Well-to-do Household" shows how gas, coal and electric light bills, and the whole cost of living can be reduced. Another called "Household Economies" has helpful hints for mistress and maid: a third is "The Best Foods in War-Time." A stirring plea was made to every household in the shape of a card surmounted by a picture of Lord Kitchener and containing his famous warning to the English people: "Either the civilian population must go short of many things to which it is accustomed in times of peace, or our armies must go short of munitions and other things indispensable to them." Below this quotation was the stirring question:

"Which is it to be: economy in the household or shortage in the Army and Navy?"

Under the title of "War Savings in the Home" a plan of campaign has been sent to every household in England for operation during the whole period of war. Among other things it urges every family to give up meat for at least one day in the week, and in any case to use it only once a day. Margarine is recommended instead of butter. Home baking is strenuously suggested. It is shown how reduction in personal and household expenditure can be effected, for example, in the laundry by using curtains and linen that can be washed in the house. A special appeal to dispense with starched and ornamental lingerie is made. In these and many other ways the style of living is simplified so that the amount of domestic service in every home is greatly cut down and much labour set free for war work and general production.

Indeed, no phase of Life or Work has escaped the Search-Light of the benevolent Inquisition which has wrought Conservation out of Waste.

It has a larger significance than merely changing habits and converting pounds and pence into guns and shells. It means that England is creating a Sovereignty of Small Investors, thus setting up the safeguard that is the salvation of any land. The War Savings Certificate will have a successor in the shape of a more permanent but equally stable Government bond.

When all is said and done you find that huge reservoirs of Savings at work form a country's real bulwark. Through investment in small, accessible, and marketable securities a people become independent and therefore more efficient and productive. It mobilises money.

Behind all the spectacular publicity that has swept hundreds of millions of British shillings into safe and profitable employment is a Lesson of Preparedness that America may well heed. It means a form of National Service that is just as vital to the general welfare as physical training for actual conflict. A nation trained to save is a nation equipped to meet the shock of economic crisis which is more potent than the attack of armed forces.

What does it all mean? Simply this: no man can touch the English thrift campaign without seeing in it another evidence of a great nation's grim determination to win, whatever the sacrifice.

The British people at home have come to realise that by personal economy and denial they can serve their country and their cause just as effectively as those who fight amid the blare of battle abroad. They are animated by a New Patriotism that is both practical and self-effacing. It is giving the Englishman generally a higher sense of public devotion: it is making him a better and more productive human unit: it is equipping the nation to meet the drastic economic ordeal of to-morrow.

If this lesson of conservation is heeded after the war and becomes a feature of the permanent British life, then the Great Conflict will almost have been worth its dreadful cost in blood and treasure. He who saves now will not have saved in vain.

VI—The Price of Glory

War, on the other hand, is a gigantic engine of destruction. Instead of building up, it tears down. It is a monster machine consecrated to waste. The only possible dividend can be peace.

The cost of the European conflict has a deeper interest for us than mere curiosity over staggering statistics. The reason is that we have joined the Paymaster's Corps. In other words, we have backed up our sympathy with cash. We are silent partners in the costliest and deadliest of all businesses.

Up to the present stupendous struggle and with the exception of the Russo-Japanese War in which we floated several issues for the little yellow men, we have had no definite economic part in the wars that shook other nations. The losses in money and in men fell on the combatants.

This war, which has shattered so many precedents, has drawn the United States out of its one-time aloofness. To the dignity of World Trader we have added the twin distinction of World Banker. Already we have poured out practically two billions of dollars for securities and credits of the warring countries. To this must be added an even greater sum representing our enormous war exports. The price, therefore, of whatever freedom emerges from these years of bloodshed intimately touches thousands of American pocketbooks in one way or another.

What is the final toll that Battle will take: more important than this, what is the future of the treasure that we have laid on its Consuming Altar?

Before making any analysis of the American stake in the cost of the European War, it is important to find out first just how much money has been expended and what the likelihood of future outlay will be. Like every other phase of the stupendous upheaval this one is both speculative and problematical.

To deal with these European War figures is to flirt with Titanic Numerals. They are more the Playthings of the Gods than matters for mere mortals to juggle with.

Up to the first of January, 1917, the total military expenses of both sides had reached approximately $61,000,000,000. It is only when you reduce this enormous sum to terms that every man and woman can understand that you begin to get some idea of the amazing cost of conflict.

The amount of money expended for direct war purposes alone since August 1, 1914, is equal to three times the par value capitalization of all the American railroads. It represents fifty times the net national debt of the United States: eighteen times the amount of money in actual circulation in this country: and eleven times the total deposits in all our savings banks. With it you could build 146 Panama Canals or pay for the Napoleonic, Crimean, Russo-Japanese, South African and American Civil Wars and still have a surplus of $34,000,000,000 left. Such is the New and High Cost of War!

The price of glory is being constantly advanced. The expenditures for the first year of the war were $17,500,000,000: for the second they had increased to $28,000,000,000: the estimate for the third year, to end August 1, 1917, at the present rate of spending is about $33,000,000,000. This means that by the time the next harvest moon shines (and no man in Europe to-day doubts that it will gleam on carnage), the war will have represented a sacrifice for military purposes alone of $78,500,000,000.

Taking the daily cost of the war you find that England is $25,000,000 poorer for every twenty-four hours that pass: that France must check out $20,000,000: Russia $16,000,000: Italy $5,000,000. Little Roumania is cutting her war expenditure teeth at the rate of $1,000,000 per diem.

Cross the frontier (for war expense is no respecter of cause or creed), and Germany is "discovered," as they say in play-books, spending $17,500,000 every day: Austria, Turkey and Bulgaria, $11,000,000. Thus between sunrises that break over these warring hosts very nearly $100,000,000 has gone up in smoke, splinters or ruin of some kind, or the upkeep of fighting.

Since England's cost each day is heavier than any of the other countries at war, due to the fact that she is Financial First Aid to most of her Allies and is maintaining a fleet almost equal to all the others combined, let us reduce her enormous daily war bill of $25,000,000 to simpler form. It means that participation in the greatest of all wars is costing her $1,410,666 an hour, $17,361 a minute and a little over $289 a second. At this rate of waste John D. Rockefeller would be bankrupt in forty days; Andrew Carnegie would be in the bread line in ten. The sum is greater than the entire net public debt of Chicago; it equals the assessed valuation of all the taxable property in Poughkeepsie, New York.

Work out this immense daily outlay from still another angle and these striking facts develop: the war is costing at the rate of 29 cents a day for every inhabitant of the United Kingdom: 31 cents for every individual in France: 22 cents for every person in the Kaiser's domain, and 6 cents for each human unit in the Russian Empire.

Yet this well-nigh overwhelming rush of figures only accounts for the actual cost of hostilities. By this I mean arms and armament, food and military supplies, the construction, maintenance and renewal of fleets, the cost of transport and the pay of soldiers and sailors.

To the vast sum already recorded must be added the loss registered by the destruction of cities, towns and villages, the sinking of ships, the wiping out of factories, warehouses, bridges, roads and railways.

Then, too, you must allow for the almost incalculable productive loss due to the killing and maiming of millions of men: the shrinkage of agricultural yields and the more or less general dislocation of the machinery of output. All these factors pile up a total, the calculation of which would almost cause a compound fracture of the brain. Sufficient to say it puts a terrific human and financial tax on coming generations and we in America will feel its effects when the world begins to readjust itself to the altered social and economic conditions which will come with peace.

Of course the inevitable question arises: Who is paying the Scarlet Piper? In seeking the answer you encounter for the first time America's intimate and all-important part in the costly drama now being unfolded to the tune of billions. She sits in the armoured box-office with the Treasurers of the embattled nations.

At the outset of the war all the belligerent countries believed that they could finance their needs without seeking neutral aid. Less than a year was enough to dispel this delusion. Although England and France immediately voted immense credits they were not long in finding out that they must back up their unprecedented mobilisation of resources with outside help. They came to us.

When the great Anglo-French loan of $500,000,000 was first discussed as a possible American financial feat, people over here began to wonder why Great Britain and France, whose combined wealth exceeds that of all the other nations at war, should want overseas assistance. Since the reason for this loan as well as the disposition of proceeds are practically the same as that of most of the other Allied issues in this country in which thousands of our investors have participated, it is well worth explaining because it also carries with it a lesson in international barter. Here it is:

Before the war our foreign trade was growing fast. England and France, in particular, were good customers for our wheat and other foodstuffs, iron and cotton manufactures, oil and automobiles. In exchange we imported the product of many European factories.

Business relations between nations are not settled like transactions between individuals and firms, that is, with checks or cash. They are settled by balances. England's imports from the United States, for example, are paid by her exports to us. Usually exports and imports so nearly balance that the difference is paid by gold or with the temporary use of bank credit. Therefore it is not a question of actual money but of exchange and this foreign exchange is a commodity whose value fluctuates with supply and demand.

Along came the war. Millions of artisans in France and England were withdrawn from lathe and loom to fight in the battle line. What workers remained at their posts had to produce war supplies. Yet civilian and soldier needed food, clothing and arms. The demand for our products increased and the United States suddenly became the work-shop and the granary of the world.

The Allies, in control of the seas, became our principal foreign customers. American exports soared: those of France and England declined correspondingly. A huge balance of trade—the biggest in our history—swung to our favour.

This balance of trade had to be settled, but on an abnormal basis. What was ordinarily a comparatively trivial matter of a few millions suddenly became an item of many millions and it was all owed on one side. The demand for exchange on New York greatly exceeded the supply and the inevitable dislocation happened. England and France had to pay a drastic premium on the American dollar. The English pound, normally rated $4.86, dropped to $4.50; the franc, ordinarily worth 19.29 cents, fell to 16.94 cents. This shrinkage in values was not due to any impairment of the resource or wealth of the Allies but because the machinery of international payment works automatically and unsentimentally.

Here was a crisis that without aid from us might have eventually cost us dear. Rather than submit to the terrific drain on the exchange value of the pound and franc, England and France could have set about emulating the example of Germany and become self-sufficient. It was not a month's work or even a year's work, but ultimately it would have made these countries more independent of the United States after the war is over.

Of course England and France could have met the situation by shipping gold. Each had a large reserve but the United States had all the gold it wanted, and still has. Besides, in such an emergency gold is an inert and unproductive commodity.

Again, the Allies might have "dumped" their American securities representing an investment of over three billions of dollars, which would have upset the American stock market and sent prices down. Either one of these performances would have done us no good.

It was important, therefore, for the benefit of all interest involved, that the Allies establish a credit in the United States that would enable them to buy freely and remove the costly handicap on American exchange. In a word, instead of having to pay their bills through an intricate mechanism that rose and fell with the tides of trade and put a premium on trading with us, a medium was needed that would restore the whole economic trade balance. It was as essential to us as to our customers.

Hence the Anglo-French Five Hundred Million Dollar Loan was floated and Uncle Sam became a war banker. This loan, however, was nothing more or less than the setting up of a credit of half a billion dollars for England and France in the United States. To put it in another way, it is just as if the two Allies had deposited this sum in an American bank and then drew checks against it for goods and raw materials made or mined in America. In a word, we lent to ourselves.

Put out at a time when money was scarce, the loan would have been unpatriotic and uneconomic. But our banks were filled with idle cash: everywhere capital sought safe and profitable employment. Now you begin to see why these allied loans are really good business in more ways than one.

What is our financial stake in the cost of the war: what does it yield: how is it safeguarded?

Clearly to understand this whole situation you must know just how these foreign bonds are put out. There are two kinds. One is the internal loan issued in the money of the country whose name it bears. This means that if it is a French bond it is in terms of francs: if English it calls for payment in pounds sterling: if Russian, in roubles: if German, in marks. An external loan, on the other hand, is issued in the money of the country in which it is floated. The Anglo-French loan is an example of this kind because both principal and interest are to be paid in United States gold coin. These internal and external loans may be direct obligations of the issuing governments or may be secured by collateral.

There is still a third medium for the employment of American money in the war. Technically it is known as bank credit. Through this agency, foreign firms make deposits of money or collateral in the national banks of their respective countries and purchase goods in America through credits thus established for them in a group of New York banks or trust companies. The acceptances for the goods thus bought become negotiable documents and are bought and sold by institutions and investors at a discount.

This evidence of debt is not the kind of foreign investment suitable for the man or woman with savings to employ because it is more or less a banking transaction. These credits usually net about 6½ per cent.

With the exception of a comparatively small amount of German and Austrian Bonds bought in the main by natives of these two countries for purely sentimental and patriotic reasons, the entire bulk of European loans placed in America is for the Allied countries, principally England and France who are our heaviest customers in trade.

The largest foreign loan brought out here so far is the Anglo-French 5 per cent External Loan which was negotiated through J.P. Morgan & Company—Fiscal Agents for the Allies over here—by the Commission headed by Lord Reading and Sir Edward Holden. It is the Joint and Several Obligation of the Governments of the United Kingdom of Great Britain and Ireland and the French Republic, is dated October 15, 1915, and is due five years after that date. It ranks first amongst the foreign war obligations of these countries.

This was the first big credit arranged by England or France in the United States and the proceeds were used, in the manner that I have already described, for the purchase of American goods and to stabilize the foreign exchange. These bonds which have had a very wide sale in America were brought out at 98 and interest and at the time of issue represented an investment that paid nearly 5½ per cent.

These bonds, I might add, are convertible at the option of the holder on any date not later than April 15, 1920, or provided that notice is given not later than this date, par for par, into 15-25 Year Joint and Several 4½ per cent bonds of the Governments of the United Kingdom of Great Britain and Ireland and the French Republic. Such 4½ per cent bonds, payable, principal and interest, in United States gold coin, in New York City, and free from deduction for any present or future British or French taxes, will mature October 15, 1940, but will be redeemable, at par and accrued interest, in whole or in part, on any interest date not earlier than October 15, 1930, upon three months' notice.

The equity behind these bonds is the good name, wealth and taxing power of the issuing countries. The interest on this loan equals only one-fifth of one per cent of the total estimated income of the British people in 1914. It is slightly more than one-third of one per cent of the French Republic in 1914.

Between this loan and the next large borrowing by England or France in the United States occurred an event of significance to the American investor interested in the securities of foreign nations. The Anglo-French loan, as you know, was simply the promise to pay of two great countries whose Government Bonds at home represented the last word in unshakable security.

But when England and France stepped up to our money counters again, Uncle Sam put sentiment aside and became a pawn broker. "I think you are all right," he said, "but you are in a war that may last a very long time and I must have collateral."

To English pride this was a terrific jolt. I happened to be in England at the time and I recall the astonishment of no less a distinguished individual than the Chancellor of the British Exchequer. It was unbelievable that any nation could demand greater security than the good name of the Empire. "If the elder J.P. Morgan were alive this would never have happened," said the London bankers. They knew that the Grizzled Old Lion of American Finance always held that character was the best collateral. In the war emergency, however, many American bankers thought to the contrary and the net result was that with all external loans thereafter England and France have been forced to dig into their strong boxes and do what any individual does when he borrows money—put up a good margin of security.

An illustration of this secured obligation of the British Government is the issue of $300,000,000 Five and a Half Per Cent Gold Notes dated November 1, 1916. Principal and interest are payable without deduction of any English tax in New York and in United States gold coin. The holder of these notes, however, has the option to get his money in London but at a fixed rate of $4.86 per pound sterling, the normal value of the pound in peace time. Since the pound sterling at the time this article is written is quoted at $4.76, this is a decided advantage.

The new English loan is secured by stocks and bonds whose total market value is not less than $360,000,000. One group of this collateral consists of stocks, bonds and other obligations of American corporations and the obligation, either as maker or guarantor, of the Government of the Dominion of Canada, the Colony of Newfoundland and Canadian Provinces and Municipalities. The second group included obligations of Australia, Union of South Africa, New Zealand, Argentina, Chili, Cuba, Japan, Egypt, India and a group of English Railway Companies. I enumerate this collateral to show the inroads upon British securities that increasing war cost is making. This collateral must always show a market value margin of twenty per cent above the amount of the loan. It means that should there be any slump the English Government must supply additional security.

This issue was brought out in two forms. Half of the loan is in Three Year Notes due November 1, 1919, which were issued at 99¼ and interest and yielding over 5.75 per cent: the other half is in Five Year Notes due November 1, 1921, brought out at 98½ and interest and yielding about 5.85 per cent. These Notes are redeemable at the option of the Government at various interest dates between 1917 and 1920 at prices ranging from 101 to 105 and interest.

Having established the precedent of a secured loan, all succeeding English issues in this country have been backed up with ample collateral. These bonds have a ready market, an important detail that the investor must not overlook in purchasing foreign securities.

Now turn to the borrowings of France in the United States. With this great nation, whose middle name is Thrift, Uncle Sam was no respecter of past performance. For the one separate French external loan he exacted his pound of collateral. As a matter of fact it amounted to nearly a ton.

I refer to the issue of $100,000,000 Three Year Five Per Cent Gold Notes bearing the date of August 1, 1916. To float this loan the American Foreign Securities Company was formed which arranged to lend the French Government $100,000,000. As security the Company—it was merely a group of American bankers, required France to deposit stocks and bonds having a value at prevailing market and exchange rate of $120,000,000. Should the value of these securities fall below this sum they must be replenished until there is a margin of twenty per cent in excess of the principal of the loan.

These securities throw an interesting sidelight upon the resource of the French Republic and its ability to borrow desirable collateral from patriotic citizens. They include obligations of the Government of Argentine, Sweden, Norway, Denmark, Switzerland, Holland, Uruguay, Egypt, Brazil, Spain, and Quebec. The most picturesque parcel in the lot is $11,000,000 in Suez Canal shares. This stock is one of the corporate heirlooms of France and is very closely held. It not only pays a large dividend but shares in the profits of the company which in peace times are big. The fact that France should put these prize securities in "hock" is evidence of her determination to keep her credit absolutely above reproach.

The Three Year French Notes were brought out at 98 and interest and at the time of issue yielded about 5.73 per cent.

But all direct French borrowing in America has not been on the pound of flesh basis. For now we come to what might well be called The Loan of Sentiment. It is the $50,000,000 City of Paris Five Year Six Per Cent Gold Bond Issue dated October 15, 1916. It gave Americans the opportunity to pay a substantial tribute of affectionate gratitude for happy hours spent in the Queen City of Europe and have the prospect of a desirable dividend at the same time. Here is a piece of foreign financing with a distinction and a background all its own. Aside from its purely sentimental phase it is perhaps the only loan floated in America since the war which is dedicated to construction instead of destruction. The proceeds are to be used to reimburse the City of Paris for expenditures in building hospitals and making other necessary humanitarian improvements and to provide a sinking fund to meet similar disbursements. Amid the incessant hate and passion of war it is pleasant to find this back water of cooling relief.

Like most of the foreign issues made during the war it follows the highly intelligent European practice of putting out loans in small denominations so as to be within the reach of the great mass of the people. These bonds may be had in multiples of $100 and upward. The Government of France has agreed to permit the exportation of sufficient gold to permit the payment of principal and interest in the yellow metal in New York. The loan—the only external one of the City of Paris—was brought out at 98¾ and interest, which would make an investment of 6.30 per cent. In addition to this yield as an investment there is the possibility of profit in exchange in view of the option to collect principal and interest at the rate of 5.50 francs per dollar instead of the normal rate of exchange before the war.

This statement of possible exchange profits leads us to one of the conspicuous features of the latest National French Loan, which although internal in form has been put within the ken of the American investor.

Fully to comprehend it you must know that in ordinary times a dollar in American money is worth 5.18 francs. On account of the dislocation in foreign exchange the value of a dollar in French money has risen to approximately 5.85 francs. Therefore when you buy a French security in terms of francs for American dollars you get a great deal more for your money than you would have received before the war. Hence the possibility of profit when francs return to normal is large.

The National French Loan was sold to American investors at an exchange rate of 5.90, which means that every dollar you employ gives you a principal of 5.90 francs. On this basis the price for the security issued at a par of 100 would be 87½, which would make the direct yield over 5.70 per cent. Should exchange return to normal, the subscription price would be equivalent to 75½, which would make the direct yield over 6-5/8 per cent.

Translating this loan into terms of money, you find that for every $14.83 you invest you get 100 francs capital: for every $148.30 you get 1000 francs capital: for $741.52 you receive 5000 francs capital. If French exchange should return to normal and the securities sell at the issue price—87½—the investor would receive $16.89 for every 100 francs of capital: $168.88 for every 1000 francs: $844.39 for every 5000 francs. On this basis without regard to income return the holder of 5000 francs capital would receive a profit of $103.94 or over 13.75 per cent on his investment.

Should the market price of the issue advance to 100 and exchange return to normal the investor would get $19.30 for every 100 francs capital; $193.00 for every 1000 francs capital; $965.00 for every 5000 francs capital. In this case and again without regard to income return, the holder of 5000 francs capital would receive a net profit of $223.50 or approximately 30 per cent.

This loan is issued in Rentes and in denominations of 100 francs and multiples. Rentes is the form in which all French Government issues are brought out at home. The word means interest or income. The French always refer to their Government Bonds in terms of interest without any mention of principal. This is because rentes are supposed to be perpetual. The new French loan just explained is not redeemable or convertible before 1931.

Usually there is no limit to these National French loans. To be in France during the war and see the popular response to the appeal for funds is to have a thrilling experience in the practical side of patriotism.

I chanced to be in Paris when one of these loans was launched. Throughout a day of driving rain thousands of people stood in line at the post offices and private institutions waiting for a chance to put their money out to work for their country. The French wage worker, be he artisan or street cleaner, needed no coaching in the art of employing his funds safely and profitably. Just as saving is instinct with him, so is the putting of these savings out to work in a Government bond second nature. He is the thriftiest and most cautious investor in the world. He has established a close and confidential relation with his banker such as exists in no other nation. Therefore when the French financier offers him Government Bonds or "Loans of Victory" as the war issues are emotionally termed, he does not hesitate. He knows it is all right.

Alluring as is the possibility of profit in the new French Rente at the present abnormal exchange basis, it fades before the prospects for similar profit that lie in some of the Russian Government Bonds available in the United States. The Imperial Russian Internal Five and a Half Per Cent Loan of 1916 amounting to 2,000,000,000 roubles will illustrate.

Ordinarily the Russian rouble is worth 51.45 cents in American money. It has gone down to 32 cents. At this rate of exchange a thousand rouble bond bearing interest at 5½ per cent would only cost $320.00. Based on the normal value of the rouble this bond would be worth $514.60 or $194.60 above the present price of the bond—an increase of about 60.8 per cent on the investment. Figuring roubles at the normal rate of exchange the yearly yield would be $28.28 or 8.8 per cent on the investment.

The fact that roubles are down so low is evidence that Russian credit at the moment is not as high as it might be. The principal equity behind this bond, as well as most other Russian securities available in America, is the fact that Russia has immense post-war possibilities. She will emerge from the conflict like a giant awakened and with the first realisation of her enormous undeveloped resources. To offset this, however, is the lack of stability of Russian Government as compared with the other Allies which makes all Russian Bonds speculative.

On account of the difficulty in shipping bonds and the preponderance of pro-Ally sentiment here, there has been a comparatively small market for German and Austrian war issues in the United States. Yet, in the face of these handicaps, a considerable market has developed. It is due to two definite reasons. One is the desire of the native born and transplanted Teuton to help his country. Many of them appear at the German banks with their savings books eager and ready to make financial sacrifice for the Fatherland. The other reason is that the German mark has so greatly depreciated (it has gone down from 23.82 cents to 17.65 cents) that should it ever come back to anything like normal and the Government does not repudiate its issues the investment will be very profitable.

Here is the way it works out: in ordinary times a 4000 mark bond which would be the equivalent of a $1000 American piece, costs about $960. At the present low rate of exchange the same German bond costs $690.00 in American money and therefore shows a profit on the exchange basis alone of $270.00 or over 28 per cent. Austrian Bonds show even a larger profit.

Summarise our war lending and you get a total of all loans to belligerent Governments since the outbreak of the war that aggregate $1,828,600,000, which is nearly one-third of the whole cost of the Civil War. Add to this our loans of $185,000,000 to Canadian Provinces and Cities and $8,200,000 to the City of Dublin and to the City of London for water works improvements, a grand total of $2,075,800,000 is rolled up. Of this sum $156,400,000 in obligations have matured and been paid off, which leaves a net debt to us of $1,919,400,000. It divides up as follows:

Having taken this financial plunge into European financial waters, Uncle Sam has got the foreign lending habit and has loaned $117,000,000 to Latin-America, mainly to Argentina and Chili: $39,000,000 to neutral European nations, including Switzerland, Norway, Greece and Sweden. Not desiring to play any race favourites, he has speeded China on her way to enlightenment to the extent of $4,000,000.

In buying foreign war bonds—a procedure which in war time naturally involves sentiment—it is wise for the investor to watch his step. Patriotism is all right in its place but unless you can afford to contribute money for purely emotional reasons, a cold business estimate of the situation is advisable. This applies especially to the man or woman with savings who cannot afford to take chances. He or she will find it a good rule to stick to external bonds except under exceptional conditions.

One objection to the average internal bond is that with the exception of England the native money has greatly depreciated in international value. Of course, if all these countries finally get back to their old standards of wealth, these investments will yield a very large profit. To reap this benefit, however, it will be necessary to hold the securities for a considerable period because it will take the warring countries a long time to "come back." Another fact in connection with internal bonds well worth remembering is that while belligerent countries will scrupulously respect their obligations held by a great neutral like the United States whose good will and resources will be very necessary after the close of hostilities, there is the possibility, remote though it may be, that repudiation of home issues may come in the shock of readjustment.

In a word, in purchasing a foreign war bond be sure to get a stable national name, accumulated wealth, habits of thrift, an ample taxing power, and a good conversion basis behind the security.

Amid all our war lending lurks a menace to future and necessary American financing. In flush times like these it is comparatively easy for us to spare large sums of money, because such capital is available and not missed at home. If there was the absolute certainty that all the foreign short term loans would be paid on maturity there would be no reason to show the red light.

But any man who knows anything about the European financial situation also knows that it will be extremely difficult, almost impossible, for the fighting nations to meet their obligations within the time specified. This does not mean that they will be unable to pay. It does mean, however, that the inroads of the war will have been so terrific that pressing needs will so continue to pile up that renewals must be sought. Thus our money will still be tied up.

What will happen at home? Simply this. American enterprise which will need capital for expansion may have to wait. In discussing this matter one of the best known American bankers said this to me the other day:

"If America had a benevolent despot I believe that he ought to set aside an arbitrary sum which would represent the limit that we as a nation could lend each year to foreign countries."

There is still another hardship in this outward flow of our capital. It lies in the fact that the very attractive terms of the war loans have made it very difficult for American railroads and corporations to finance their needs. They must pay more for their requirements than ever before.

Yet this war financing has done more for us than merely provide an opportunity for the profitable employment of hundreds of millions of dollars. It has brought back home about $1,500,000,000 of our securities, mostly in railroad, that were held abroad. This has not only meant a considerable cutting down in the sum that we formerly had to send to Europe in interest and dividends, but it has helped to make us more economically independent. There is still $1,780,000,000 of our securities held abroad, and if the war keeps on much longer a great portion of it is likely to come back.

There were two good reasons for this liquidation. One was that the holder of the American security in England is subject to a very high tax in addition to the normal income tax on large fortunes. Another was the necessity for the mobilisation of American securities to become part of the collateral offered by the British Government for the loans made in this country. In many instances the English owner of American securities has simply loaned them to his country as a patriotic act. In numerous other cases, however, he has sold them outright and put the proceeds into home war issues.

You have seen how our millions have joined that greater stream of European billions to meet the rising tide of war cost. How is this vast debt to be paid and what is the paying capacity of the nations involved?

In analysing the war debt and its costly hangover for posterity, you must remember that not all of it is in actual money. The nations at war have not only taxed their economic reserve through the destruction of productive capacity in the loss of men and material—as I have already pointed out—but have made a costly and well-nigh permanent drain upon what might be called their nervous systems.

Look for a moment at the American Civil War whose cost was a mere flea bite as compared with the stupendous price of the European Conflagration. At the end of that war only half of its reckoning was represented in the country's bonded debt. After fifty years we are still paying in some way for the other and larger outlay, the invisible strain on the country.