G

OLD, which has been pouring

into this country in an almost unbroken stream since 1920, has begun to flow outward. Approximately $175,000,000 have gone since the first of September.

Not only Wall Street, but the rest of the country, finds this situation strange and vaguely disturbing. Between 1920 and the end of last summer our gold holdings increased by about $1,500,000,000 until we held nearly half the world's gold supply. In only one of the last six years, 1925, did we lose gold on balance.

Our transformation from an importer to an exporter of the metal raises three questions: Why has the flow reversed itself? How will American business be affected? When will the exports be replaced again by imports?

The answer to the first question is simple. We are losing gold because money rates are so much lower here than abroad that funds seeking the most profitable employment travel to London, Amsterdam, or other financial centers. When these movements reach sufficient proportions, they draw gold away. Rates have declined here partly because business, because of its diminished activity and its greater efficiency in the use of money, has decreased its demands, and partly because the Federal Reserve System has deliberately increased the supply. To a great extent, gold is being exported because the Federal Reserve authorities think it advisable. They favor re-establishment of the gold monetary standard throughout the commercial world and they believe that other countries have real need of gold which we can spare. European nations need the precious metal to maintain their monetary stability and to furnish the basis for necessary credit expansion.

The Federal Reserve System's method of increasing the supply of money is not esoteric. It simply purchases Government securities and, in this sense, pumps funds into the open market. On December 21 the Reserve holdings of these securities, Treasury notes and certificates of indebtedness, amounted to $587,952,000. This represented an increase of $273,542,000 over the holdings a year before. The System, moreover, emphasized its easy money policy by

By THOMAS H. GAMMACK

dropping its rediscount rate from 4 to 32 per cent in August. By more purchases the Reserve authorities can increase the supply of credit still further. By selling securities they can restrict it. This control over the American money market and the consequent influence over the whole financial world make the Federal Reserve a tremendous power.

What effect will loss of gold have on American business? We have been assured by the highest authorities that the Federal Reserve System can and will prevent any serious deflation of commodity prices. That assurance is well founded. We have been assured by the same authorities that credit will remain comparatively cheap. In all probability, comparatively cheap. In all probability, it will. Finally, we are assured by authorities whose standing is not so high that we could lose almost an indefinite amount of gold without being forced to pay higher rates for money. Louis T. McFadden, Chairman of the Banking and Currency Committee of the House of Representatives, declared blithely in London that the United States could lose $1,500,000,000 in gold without the New York money market being affected. Mr. McFadden and those who agree with him are certainly wrong. Unless credit rates abroad decline materially and this is distinctly improbable-a continued outflow of gold would mean that sooner or later we would have to pay higher rates for money.

The Federal Reserve System can, up to a certain point, neutralize the loss of gold by purchasing Government securities. If Mr. McFadden had limited himself to the statement that the loss of $1,500,000,000 in gold would not reduce the Federal Reserve System's reserves below the 40 and 35 per cent limits against note issue and deposits prescribed by law, he would have been on sound ground. The implication that the money market would watch complacently such an expansion of Federal Reserve credit is, however, distinctly false. Bankers, who always have an eye on the System's reserve ratio, would be sure to raise their loan rates long before this ratio shrank to anything approaching the legal limit. Psychology is important in the money, as in other markets.

But higher rates probably will not be the result of any drastic reduction in

the Federal Reserve ratio and consequent nervousness in banking circles. They will be caused, in all likelihood, by the Federal Reserve System's sale of securities or by increased demands from industry. Since higher rates are the only power that can start gold and other money returning to this country, it is apparent that the outflow of the metal will continue until either the Federal Reserve System or business blocks it.

Because of the Reserve System's very great power, there is always the danger of its being regarded as omnipotent. It is hardly that. Its operations can only supplement fundamental developments, and, quite conceivably, the System might wish to halt gold exports and still be unable to do so without disturbing our financial equilibrium.

Business activity has been reduced. materially during the past eight or nine months, and a respectable minority of prophets expect that this lull will continue for another equally long period. If they are correct, business requirements for credit will remain low and, unless the Federal Reserve System intervenes, higher money rates abroad might continue to suck money away. In this situation, the System could force rates higher, in theory. In practice, they probably would not. The Federal Reserve Act directs that discount rates be fixed and open market operations be conducted "with a view of accommodating commerce and business." It would be poor accommodation, indeed, to raise rates just when business needed encouragement. So the outward flow of funds and the exports of gold might continue until business revived sufficiently to pay rates high enough to keep money here.

If, on the contrary, the majority prove to have been the reliable business prophets and business picks up in the early part of this year, its demands for funds soon may be strong enough to keep gold away from foreign countries. By purchasing securities, the Federal Reserve authorities could try to accommodate business and still keep rates low enough to let the gold exports continue, but, with business improving, a cheap money policy might stimulate excessive speculative activity.

The reasonable answer, then, to the

question as to the probable extent of the gold outflow is that the result will depend largely on the trend of domestic business conditions. The World War's upset of the international monetary system was only temporary. Normally, gold moves from countries whose industries are demanding less and seeks employment in more active markets. That is what is happening now, and that is what will happen, except under exceptional circumstances, until the present financial system is overthrown.

The Pure Land of Extreme Bliss

(Continued from page 7)

couldn't recall a single instance. She

went on:

"And you didn't hurt me really. That broken arm was a very good thing for me."

I couldn't understand what grandmother was driving at. "I hurt you, grandmother-madam-hurt you terribly, I know that."

"That isn't what I mean," said the old lady, gently. "What I am trying to tell you is this: Pain is not a bad thing -not always. It's a messenger of the Lord of Grace at times. It brings a great lesson. I am going to tell you something you may not understand it now-not fully, perhaps, but you will when you get a bit older."

Then she quoted the opening sentence out of the Buddhist sutra called "Dhammapada:" "What we are is the result of what we have thought."

She made me repeat that several times after her. There was no big word in it-not a single adjective. But she told me that it was the greatest sentence ever penned or spoken.

Whatever we are at this point of existence is the one and inevitable result and sum total of all the billions and billions of thoughts we have thought in countless myriads of existences, past. And, as thoughts are the only entities in the universe, and actions are nothing but mere shadows, my life at this particular point of time is nothing more or nothing less

in our blindness, 'bad'-pain, misfortunes, sickness-are quite often the messengers of the Lord of Grace. Often they are good and great blessings to us."

TN the above grandmother was sketchIN ing for her small grandchild about the loftiest water-mark of Buddhistic thought.

And what grandmother was talking about was not that type of dramatic tragedy which St. Paul and many other early Christian martyrs faced at the stake and counted for joy. She was talking about the petty, inglorious trials and tribulations of every-day life. If one only had the magic of turning the ills and trials of life into smiling graces and the bearers of golden lessons, what can a thousand devils do to him? What tidal wave of tragedy can prevail against a man like that?

Is happiness the end of life? The highest good?

What higher peak was there for grandmother to aspire-she whose soul seemed to feed and wax serene and hearty on the heroic diet of life's tribulations?

"My broken arm was not a bad thing at all for me," said the old lady, simply.

All this explained why it was that grandmother did not punish me. That, by no means, explained another puzzle:

"But-but," I asked, "why hasn't father punished me all this time?"

Grandmother turned and looked at me with a tremulous smile flickering in her eyes:

"He didn't because-well, because I wouldn't let him," said grandmother.

Attic Tales

(Continued from page 22) "Don't bother," he said-unappreciatively, it seemed to me.

"As you like," I agreed; "but I assure you it's one of the best poems ever written on Lee."

"Oh, I'm ready to admit," he exclaimed, "that it's the best poem ever written on Lee. I'm even ready to agree that it's the best poem ever written on any subject. I wrote it."

sown in my former existences.

Therefore there is, and there can ever be, no such frivolous thing as an unkindly slap from a fickle fortune. In the dictionary of the enlightened there is no such word as luck.

Upon this one sentence could be built the whole towering structure of the Buddhistic dogma of reincarnation.

"So, you see," said grandmother, concluding her explanation, "what we call,

used up, and I have done nothing except to tell a few war-time stories. The war time comprised only a little more than a year and a half of the fourteen years that the Club has been in these quarters, and there is much to be told of the peace-time years.

But the new Club will have many years of peace to be written about-let us hope. And it will have no war to win-let us pray.

I

T is hard to understand why historians have paid so little attention

to captains of industry. They have given us no end of portraits of kings, soldiers, statesmen, explorers, and men of letters; but financiers, merchants, and manufacturers have seemed to interest them little. Perhaps this is because the great English historians were classicists and followed classical models, and in the days of Herodotus, Thucydides, Livy, Xenophon, and Plutarch there were no captains of industry as we understand the term.

A singular example of this historical negligence of the industrialist is found in the case of Lord Macaulay. The famous third chapter of his "History of England," in which he describes the industrial, economic, social, and agricultural conditions of the English people in the time of Charles II, is one of the most vivid and human stories that any historian ever wrote. Yet one may search Macaulay's essays and papers in vain to find any reference to the great economic and political revolution produced by his own contemporary, George Stephenson, the father of the steam railway, whose influence on the course of English history was as great, although not so violent, as that of Oliver Cromwell. Adam Smith and Walter Bagehot are the two most prominent among the few English literary men who have believed in the profound historical influence of the accumulation of wealth and the development of capital by individuals.

The study of any great accumulator of riches by a writer trained in the analysis of human motives, ambitions, and sentiments, who has no ax to grind, who is affected by neither a spirit of eulogy on the one hand nor a spirit of malignity on the other, is always worth reading from the historical point of view. Such

By LAWRENCE F. ABBOTT Contributing Editor of The Outlook

studies are not common. It is with unusual interest, therefore, that I have just read one of the recently published biographies, entitled "The Portrait of a Banker." It is a character sketch of James Stillman, who, although not the founder, was in a very real sense the re-creator of the National City Bank, the largest and most powerful institution of its kind in the United States. The author is Anna Robeson Burr, of Philadelphia, a writer who has been well trained in the art of novel writing. The spirit in which she has approached her task is discovered in her preface:

The prevalent type of 1880-1910 was the capitalist so-called, as we see him in magazines, in books, and on the stage. He appears, for example, in the novels of Frank Norris and as the hero of such dramas as "The Lion and the Mouse" or "Les Affaires sont les Affaires." Even Ibsen could not resist him. And when we examine more nearly this strong silent Master of Capital, we notice that he is a composite photograph of two men, John Pierpont Morgan and James Stillman. For reasons which it is hoped this book may make clear, this composite portrait is dominated by the features of the latter.

The author started with one view of the main character and ended with another. In this, she followed the experience of every one who came in contact with him in the ordinary way of life, and who found, as she has done, that there was no pigeonholing this personality. A manner entirely direct and simple, veiling a character so extremely complex, offered a perpetual enigma to the world and challenge to the biographer. . . . Herein lies the value of such a study.

It is not the purpose of this article to

1 The Portrait of a Banker: James Stillman. By Anna Robeson Burr. Duffield & Co., New York.

furnish any solution of the enigma, but merely to point out the fact that James Stillman, like most men of determined ambition and powerful character, had an amazing appreciation of the gentler side of life which he concealed from the general public.

In his day the three great figures of American finance were J. Pierpont Morgan, E. H. Harriman, and himself. Of these three, the popular impression was that James Stillman was wholly cold and inexorable and often ruthless. That he had a side of loyal and generous friendship I personally knew, for he was, solely through friendship, for several years a minority stockholder of The Outlook. It was during a period when The Outlook's attitude toward and utterances on the financial and industrial tendencies of the day must have run counter to his most profound convictions and most important interests. But never once did he indicate his dissent or seek to influence our editorial opinion. The cynic may say that this was because he did not consider The Outlook's opinion important enough to bother about. It was, however, as James Stillman well knew, important enough to bring Theodore Roosevelt to its staff in 1909, which created a temporary journalistic tempest in a teapot because the ex-President had joined the staff of a periodical "controlled by Wall Street." The Outlook, of course, stated the exact facts of Mr. Stillman's connection with the paper, which were highly creditable to his generous friendship. But the only comment he made was in the following passage from a letter to his mother, of which I learned for the first time from the pages of Miss Burr's biography: "It was very nice of Dr. Abbott to allude in The Outlook in such an appreciative way to (Continued on page 36)

T

What Everybody Is Reading

HE books in greatest demand are usually those most discussed. The following list is compiled from the lists of the ten best-selling volumes sent us by wire by eight book-shops each week. These particular book-shops were chosen because we think that they reflect the tastes of the more representative readers. These shops are as follows:

New York-Brentano's.

Boston-Old Corner Book Store.
Rochester-Scrantoms Inc.
Cleveland-Korner & Wood.
St. Louis-Scruggs, Vandevoort
& Barney

Denver-Kendrick Bellamy Co.
Houston-Teolin Pillot Company.
San Francisco-Paul Elder & Co.

Fiction

"Jalna," by Mazo de la Roche. Little, Brown & Co. A clannish family in Canada survives the potentially disrupting love affairs of several members. If you like a good story, peopled by startling and brilliant caricatures, you will enjoy it. Reviewed November 2. "Adam and Eve: Though He Knew Better," by John Erskine. The Bobbs-Merrill Company. You will find this an entertaining satirical tale dealing with the first companionate and the first Mr. and Mrs. marriages. Reviewed last week.

"Death Comes for the Archbishop," by Willa Cather. A. A. Knopf. This imaginative biography of a French missionary bishop to the Southwest is fine in spiritual concept, rich in beautiful description and moving characterization. Reviewed October 26. "Kitty," by Warwick Deeping. A. A. Knopf. A young wife's struggle against her dominating mother-in-law for the possession of her husband, set in post-war England. You will enjoy it if you like a machine-turned story with humor and wholesome sentiment. Reviewed last week. "Red Sky at Morning," by Margaret Kennedy. Doubleday, Page & Co. The overtaking by the storm foreshadowed by their lurid heritage of an enchanting and haplessly enchanted pair, the children of a poet tried for murder. You will find the qualities which made "The Constant Nymph" such delightful reading present in this book. Reviewed November 23.

Non-Fiction

"Trader Horn," by Alfred Aloysius Horn and Ethelreda Lewis. Simon & Schuster. The romantic story of an ancient adventurer, full of poetry, guileless wisdom, action, information, and color. Reviewed November 16. "Bismarck," by Emil Ludwig.. Little, Brown & Co. This splendid biography by a master craftsman is unhesitatingly recommended_to any one with a taste for solid reading. Reviewed November 9.

"Napoleon," by Emil Ludwig. Boni & Liveright. You will find this engrossing biography a fine foot-note to the Napoleonic period. Reviewed November 9.

"We," by Charles A. Lindbergh.

G. P. Putnam's Sons. The young hero's story of his life is a direct, simply expressed, and often moving account. It deserves a permanent place among boys' books. Reviewed August 17. "Count Luckner, the Sea Devil," by Lowell Thomas. Doubleday, Page & Co. See below.

sticks pretty close to the truth, and his books are as reliable as to facts as any books of true adventures, and far more entertaining than most. Count Luckner is, of course, the German sea captain who turned an old schooner into a raider, Seeadler, sailed her through the blockade tricked out as a Norwegian lumber boat, and sank fourteen Allied ships, up and down the South Atlantic and the Pacific, and, finally, in extremity, sailed hundreds of miles in an open long-boat, to escape internment. Thomas, intent upon finding a German hero to match Lawrence, chose Luckner.

The choice was good. He is the classic hero of boyhood romance, gallant and courteous, brave and proud, swearing and laying about with a marlinspike. The son of a noble family, he ran away to sea and served before the mast for seven years, besides finding time to be a prize-fighter in Queensland, a kangaroo hunter in Australia, a barboy in Hoboken. If there are lingering personal antagonisms against Germany among the young, Thomas's book should do much to allay them. Count Luckner never took an innocent life in his raids. His successes were bloodless. When he sank an Allied boat, he took all hands aboard his own ship and gave them a treat. He never sank a ship without first running up the German flag on his raider and putting on his German uniform-no sneaking about him. Everything he did had the fine flavor of the gentleman-pirate.

Only one thing against him-the publishers of Lowell Thomas's book say that Count Luckner is lecturing in America this winter.

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Hemingway's story does startle, and by sheer technical virtuosity, by an economy of words that is sometimes fairly grudging in its masculine taciturnity, and by a closeness to the cadence and phraseology of more than ordinary conversation that almost reproduces the tones of the voice. Nevertheless I feel that there is a ripeness and warmth about Mr. Anderson's far more discursive sketch that suggests the difference between the brilliant performance of a concerto for the sake of technical effect and the softer, dreamier improvisations

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lost in his music; and I almost prefer "Another Wife."

There are a number of other good stories in the book, and two or three that I should call very bad, particularly that dreadfully flowery outgrowth of the good soil of Kansas yclept "Persephone." But what I miss is any vivid, living sense of the rich and racy abundance of the human life that teems within the American scene. Here are the American stories, but where are the Americans? Certain of the odder species appear, but the rank and file are missing. I catch an echo of their voices in Mr. Hemingway's story. I get a brief pathetic glimpse of them in the two henpecked husbands that figure in the stories by Harold Brecht and James Hopper. Three stories deal with Southern poor whites and mountaineers, three with primitive Negroes, one with an Indian, one with an Italian, one with a French governess, one with an English remittance man, and one with a cultivated English author so tragically married to an American author. This is all legitimate enough, but the volume, taken as a whole, gives only the thinnest, most diluted sense of the vigorous American scene.

Mr. O'Brien says in his introduction that American short-story writers since the days of Poe have tended toward abstraction. But it is not wholly that dread monster Plot that is responsible for the human leanness of this volume. Mr. O'Brien also speaks of the "sterile inbreeding of American art and letters" among our young expatriates in Paris. But it seems to me that Mr. O'Brien is speaking from the inside room of a glass house. The introduction itself is stamped "London." Similar introductions for the last few years have borne that postmark. Not long ago I read Mr. O'Brien's introduction to "The Best British Short Stories," much more detailed, much more sympathetic-the plea of an advocate, in fact. I cannot help feeling that Mr. O'Brien is at present more in touch with that "living current"

which he desires in literary England than in literary America. Exactly half of his American selections use an English technique, the first-person innocentbystander device, as rooted in English fiction as the plot device in our own. In method, tone, and view-point-as in "Good-morning, Major," which turns on the idea that a hard-boiled army general is a man but "not a gentleman”—the same influence is visible. I certainly have no desire to emulate an irate citizen and pluck out these stories for the burning. But I do think that Mr. O'Brien has been so long absent, both in person and in sympathies, from the scene of American fiction that it has become as much of an abstraction to him as to the authors of whom he speaks, and that this is not well for the editor of "The Yearbook of the American Short Story."

appropriate, and she would have liked his picture of her as she was a grownup tomboy; very noisy, very troublesome to the right-minded citizenry, very entertaining (if she didn't stay too long) to the anti-social, very silly. She began acting when she was a little thing, and she kept on acting until the demands of her part absorbed her wholly and she ceased to be except when she was on the stage playing the big, bold, bad woman rôle.

The other lady Wildcats in Mr. Aikman's book are mostly milder editions of Jane. Carrie Nation, whose warwhoopings have somehow the same tonal quality, although presumably they were not stimulated by the same spirits, is very like Calamity Jane. Pearl Hart is