officials, together with independent experts, was called on February 27, 1922. This conference, after two months of public hearings, study, and investigation, unanimously recommended the immediate extension of the regulatory powers of the Government, and drafted its technical provisions for submission to Congress. Fisheries. On May 9 and June 16, 1921, conferences of representatives of the fishing industry and interested public bodies were called to consider the problem of ocean pollution by oil, in its destruction of the fisheries, its danger to harbor cities (disastrous fires having already resulted), and its contamination of the beaches. The conference unanimously insisted upon the necessity of public regulation and the general lines of recommended legislation were drafted. In May and June, 1922, conferences were called at the request of the fishing industry to consider the stifling of inland fish consumption by the increased transportation rates. Committees were appointed, negotiations instituted with the railway and express companies, and hearings arranged before the Interstate Commerce Commission in November. In result, the rates were modified so as to work less hardship upon the industry and the public. At the request of State authorities and of the fishing industry, a conference was called on October 25, 1921, to consider the destruction of salmon fisheries in the Federal waters of Alaska. Grounds of agreement were found for the extension of conservation measures, and the necessary legislation was recommended to Congress. Aviation. At the request of the industry, a conference upon commercial aviation was called comprising representatives of the manufacturers, of engineering societies, and public officials to consider the great loss of life due to faulty machines, faulty construction, and inadequate experience in aviators. The conference urgently recommended regulation and inspection similar in character to that applied to shipping, and the technical form of such legislation was drafted for recommendation to Congress. Conferences of less importance have been held to the number of over 50 with different economic groups, mainly for the purpose of assisting to smooth out relations with Government departments and to promote activities of public interest in many directions. Part II.-INVESTIGATIONS INTO VARIOUS ECONOMIC PROBLEMS IN PURSUANCE ORGANIC ACT. OF THE Under the provisions of the organic act and at your suggestion from time to time, the department has made investigation and study of various important economic problems confronting the country. The reorganization of the departmental staff and the cooperation of the business community in advancing information have contributed to make the undertaking of such investigations possible. The war, the postwar boom, and the unparalleled depression arising there from have displayed both strength and weaknesses in many of our economic institutions and in governmental relationships to commerce and industry. These experiences warrant deep consideration of remedies which may be applied in gain to our economic progress. THE BUSINESS SITUATION. The outstanding feature of the fiscal year (July, 1921, to July, 1922) was that it marked the low point in the most violent commodity slump in our history. The liquidation and deflation precipitated the commercial community into all the losses and unemployment that flow from such occasions. It was inevitable that we, in common with the rest of the world, should readjust ourselves not only from the inflated levels of the war but also from the still higher levels of the wasteful postwar boom. The unparalleled character of the slump is indicated by the comparative index tables given on page 38, Appendix A. During the 12 months prior to the year under review both prices and manufacturing production outside of foodstuffs fell by, roughly, 40 per cent, and in consequence some 4,000,000 to 5,000,000 people were unemployed and business stagnated. The only marked exception to this ratio of decreased activities was the quantitative volume of foreign trade. Our recovery has been marvelously rapid, for within 16 months. following the bottom of the slump unemployment was practically extinguished and production was proceeding up to between 85 and 95 per cent of our normal. We have entered into a period of lower and more stable prices with its consequent much sounder and more stable business. The tremendous shock of the slump together with the aftermath of the war will require some time yet for complete recovery, and speculation is in no way justified. The readjustments are still unequal in price levels between various commodities and between wage earners and farmers. Nevertheless the outlook is so improved over a year ago as to be scarcely comparable. CREDIT SYSTEM. The most distinguishing feature of this slump was that for the first time a major commodity crisis-the greatest we have ever faced-was passed without financial panic. That our recovery from depression has been more rapid than ever before is to be attributed to the fact that we were not compelled in relief from financial panic to repair the vast destruction from bankruptcy that has inevitably followed on such occasions. This fact was in the main due to the Federal reserve system, which here successfully stood the severest test that can ever be applied to it. The measures taken by the administration in the reduction of Government expenditures and taxes, in the handling of Government finance, in voluntary cooperation with many industries to meet their special crises, and in the provision of direct finance to the agricultural community-all contributed to a successful outcome. The reduced financial strength of Europe, in the diminution of her ability to purchase our agricultural produce in advance of her need, demanded slower marketing and more credit in some parts of the agricultural community. Furthermore, the increased mechanization of the agricultural industry and its enlarged productivity per man have increased its credit necessities. Under the strain there also developed the fact that the demand deposits of the country, limited in their use as they must be to short credits, can not supply the need for the 9 to 36 months' credits required in some parts of this industry or assure the credits needed in finance of the farm cooperatives. Some sort of mobilization of investment capital for agriculture is required to supply this need, which lies midway between those supplied by the Farm Loan Board and by the Federal reserve system. CURRENTS IN FOREIGN TRADE. During the 12 months ended June 30, 1922, our foreign trade suffered in common with the general world depression. The monetary value of our exports and imports during the period in question, in comparison with the previous fiscal year, is shown in the following table: The fall in the monetary value of imports was therefore 28.6 per cent, of exports 42.1 per cent, and of our total trade 37.3 per cent. The great decline in value from the previous year was due in a larger degree to a fall in prices rather than in quantities, as indicated by the tables of quantity movements of larger commodities noted on p. 41, Appendix B. From these tables it will be seen that our agricultural exports were slightly larger in quantity during the year of depression, although they decreased in value by about $600,000,000. A study of the whole export and import list so far as quantitative statistics are available indicates that, roughly, our trade in 1922, if it were valued at 1921 prices, would have shown a decrease in exports of 12 per cent, an increase in imports of 29 per cent, or an increase in total trade of, roughly, 2.7 per cent. The balance of goods in our favor diew a net amount of $449,000,000 in gold and silver during the fiscal year 1922, as compared with $511,000,000 during the previous year. INVISIBLE EXCHANGE.-The influence of the balance of invisible exchange in our whole trade and financial relationships is of growing importance. It is possible to estimate roughly some elements in invisible exchange, such as public issues of foreign loans, tourist traffic, remittances of immigrants, and freights; but other items, such as private loans, reciprocal payments, investments, and loss by speculation in foreign currencies, are unknowable factors. Foreign loans were issued publicly during the fiscal year to the amount of $1,015,000,000 as compared with $618,000,000 during the previous year. It would appear that the net balance of the other items against us amounted to a minimum of from $400,000,000 to $500,000,000 per annum. In any event, the invisible exchange against us could be roughly approximated at not less than $1,000,000,000 or $1,100,000,000 in 1920-21 and about $1,400,000,000 or $1,500,000,000 in 1921-22. For the year 1920-21 the excess of export goods over imports-i. e., the total trade balance of $2,862,000,000—was liquidated in part by $511,000,000 in precious metals shipped to us, in part by invisible exchange of, say, $1,100,000,000, leaving an apparently unliquidated balance of about $1,200,000,000 to $1,300,000,000 for that fiscal year. A study of the banking and merchant returns of unfunded foreign advances at this time does not bear out the conclusion that such an amount of private financing of exports as indicated above was ever undertaken, and thus the probabilities are that the speculative losses in European currencies and other investments and other forms of invisible exchange were even larger than has been estimated above. For the year 1921-22 the excess of exports over imports of $1,163,000,000 was liquidated in part by $449,000,000 net imports of precious metals, and this, together with the additional estimated balance against us of $1,500,000,000 of invisible exchange, exceeds the amount necessary to square accounts by some $750,000,000. No doubt this was at least partly absorbed in repayment of private loans, because even a smaller amount of private export financing existed in July, 1922, than in July, 1921. Generally this change indicates a much sounder and firmer basis of trade. GOLD MOVEMENT.-The gold situation in the world is a matter of a great deal of economic thought and no doubt the heavy drain to America has contributed to the instability of foreign currencies, not only by the diminution of their essential guaranties but also by the fluctuation of exchange involved in liquidating trade balances in this fashion. Our gold stocks amount to about $3,077,000,000. Of this, the minimum legal necessities at the moment for assurances to our currency and credits amount roughly to about $1,600,000,000, but for a 60 per cent reserve of security we would require about $2,400,000,000. Therefore, our surplus amounts to somewhere over $700,000,000. While this is an asset, it, nevertheless, would be more advantageous to us if it were in active use abroad. The automatic tendencies in our international trade and financial relations are, however, setting strongly toward rectification of this whole situation without artificial action. There is a steady increase in the ratio of imports over exports of goods, as indicated by the decrease in the average monthly balances in our favor over the last two and one-fourth years. Six months, July 1 to Dec. 30, 1920_. Average monthly balance in our favor. $274, 674, 811 202, 333, 636 126, 980, 328 66,887, 576 51, 623, 542 |