it once more touched par and then began to run against London as the amount of foreign purchases in the United States steadily mounted. To check this unfavorable balance of trade, large quantities of American securities held abroad were sent to the United States. It was estimated that during the years 1915 and 1916 more than $2,000,000,000 of such securities were transferred to American investors. Even this proved adequate but for a short time and the Entente powers and many neutral powers resorted to loans in the United States to sustain their credit.

For

OREIGN BONDS SOLD TO INVESTORS IN
THE UNITED STATES.

During 1915 and 1916 more than $2,000,000,000 of such loans were made to Great Britain, France, Switzerland, Sweden, Norway, Greece, Russia, Italy and Argentina. In addition, $10,000,000 of German Treasury notes were sold to American investors. The greater part of this sum was used to finance German propaganda in the United States and Mexico. These loans marked a new era in American finance. Never before had foreign bonds appeared in the American market in any considerable amounts. This tremendous transfer of capital profoundly affected world trade and finance. In two years the United States had been transformed from a debtor to a creditor nation.

The immense increase in the volume of American foreign trade created a critical situation in the shipping industry. More than ninety per cent of the export trade of the United States at the beginning of the war was carried in merchant ships of foreign nations, chiefly British and German. In the first weeks of the war German shipping was driven from the seas and British tonnage available for American commerce was greatly reduced. By the fall of 1915 it was almost impossible to obtain cargo space despite the fact that every type of sailing and steam vessel was pressed into service. Freight rates went to four times the pre-war level, or even higher. In some cases a vessel would earn its entire cost on one round

trip. To meet this critical situation the Administration proposed the establishment of government steamship lines. Congress did not finally act on this recommendation until September, 1916, when a ship-purchase law was passed.

THE

HE GOVERNMENT GOES INTO THE SHIP-
PING INDUSTRY.

This act provided for a Shipping Board of five members which was empowered (1) to form one or more corporations for the purchase, lease, and operation of merchant vessels with a maximum capital of fifty million dollars, (2) to acquire vessels suitable for naval auxiliaries, (3) to regulate commerce on the Great Lakes and the high seas including the fixing of rates, (4) to cancel or modify any agreement among carriers that was found to be unfair as between carriers and exporters, or which operated to the detriment of United States commerce, (5) to sanction pooling agreements among shippers which were exempted from the operations of the Sherman Act. Vessels were to be operated by the board, however, only if it was unable to sell, lease or charter such vessels to citizens of the United States and government ownership was limited to five years after the close of the war. The effects of this act did not begin to be felt until after the entrance of the United States into the war.

While the struggle in Europe brought a large measure of prosperity to the United States it also brought a heavy financial burden. Measures to protect neutrality together with legislation providing for a greater degree of military preparedness called for increased appropriations. In three years Congressional appropriations increased from $1,089,408,777 for 1914, to $1,626,439,209 for 1917. To meet this increase the fiscal system, or lack of system, was poorly adapted. Repeated efforts to have Congress adopt a budget system had met with no success. One of the chief items of national revenue, custom receipts, was materially reduced on account of greatly diminished imports. It was necessary to find new sources of revenue.

International Film Service

excise tax of 121⁄2 per cent on the net profits of munition manufacturers. These new taxes showed a distinct tendency to place the added burden of taxation upon persons of wealth and upon those deriving profits from war industries. This policy was continued and expanded after the entrance of the United States into the war.

HE ATTITUDE OF THE PEOPLE OF THE UNITED STATES TOWARD WAR. It was inevitable that the people of the United States would be profoundly affected by the great struggle in Europe

though this fact was not realized at first. Nearly a century before President Monroe had laid down the princip'e that the affairs of Europe did not concern us, and the statement became a part of the mental attitude of most citizens. Though challenged by the Spanish War, nevertheless in 1914, the great majority of American citizens did not dream that their country had any vital interest in the struggle beginning in Europe. A few, chiefly in the Eastern States, wished the United States to take a strong position from the beginning.

Few Americans, however, had any accurate knowledge of foreign affairs, and did not understand the reasons why Europe was an armed camp. The reaction from the Civil War had produced a distaste for war. The efficient navy of that period had been allowed to rot and only slowly had the advocates of a greater navy gained followers. For a short time the navy of the United States was second in strength, but it had lost this position in 1914. Until the Spanish War the tiny regular army was hardly large enough for defense. against the Indians, and it was still small in 1914. The American people, engrossed in internal development, had come to believe that a real war on this continent was improbable. For a hundred years not a gun had been fired along the 3,000 miles of frontier with Canada. Relations with Mexico had been less peaceful but the people of the United States were not belligerent. This attitude had been even strengthened by the trifling contest with Spain.

HE EFFECT OF IMMIGRANTS ON PUBLIC
SENTIMENT.

The United States, however, is to a great extent an immigrant nation. Of the hundred million people in the country, about one-third are of foreign birth, or have at least one parent foreign born. About one-fourth of this foreign element was of German origin. Ties of blood, race and former nationality soon asserted themselves. British or French immigrants naturally took the side of the Entente Allies, though a part of the Irish and the French Canadians were, to say the least,

lukewarm. The part of the population classed as Russian was very largely of Jewish birth, who had fled from bitter persecution. It was difficult for many of these to feel that any alliance which included Russia could be fighting upon the side of civilization. They were not so much pro-German as anti-Russian. As the war went on the sentiments of this group changed.

G

ERMAN EFFORTS TO INFLUENCE OPIN.
ION IN THE UNITED STATES.

Of all the belligerent powers, Germany made the most persistent efforts to influence opinion in the United States. Dr. Bernhard Dernburg, formerly Colonial Secretary of the German Empire, was sent to convince Americans of the justice of the German cause. A Press Bureau was established in New York and newspapers and magazines. were subsidized throughout the country. This agitation became so widespread that President Wilson deemed it wise to issue an appeal to all Americans to be "neutral in speech as well as in action. He pointed out that the spirit of the nation would depend on what was said at public meetings and in the pulpit, and what was printed in the papers. He "ventured therefore to speak a word of warning against partisanship in order that the country would be free to do what is honest and truly serviceable for the peace of the world."

The open and avowed pro-German propaganda in the United States received a serious set-back as a result of the Lusitania outrage. The horror which this barbarous act aroused brought to an end the easy-going tolerance of German agitators throughout the country. Thereafter the German agents and their American sympathizers were forced to adopt different methods. In urging an embargo on munitions they appealed to humane sentiments against the prolongation of the war. They sought to stimulate and capitalize American resentment against the British restraints on American commerce. Every effort was made to take advantage of Irish-American antipathy to Great Britain. Organizations with appealing names such as