THE PERIOD OF NEUTRALITY
OUR wartime experience with price control must be viewed in the light of the conditions which prevailed in April, 1917, when we joined the Allies. The problems and possibilities of war financing can only be understood in terms of credit facilities available from banks and other sources, while both the limitations and the necessities of price fixing are visible in the pre-war industrial situation. The economic state of the nation at the time of the declaration of war may best be studied through a brief account of the period of neutrality; in this way we shall see not only the specific developments arising from our position with relation to the belligerents, but we shall get a general picture of the milieu into which the war problem fell. This chapter, then, will be devoted to an examination of the financial and industrial background of the war price problem.
THE immediate effect of the declaration of war in Europe at the end of July, 1914, was a severe financial crisis in the United States. The almost complete discontinuance by English banks of the acceptance of bills of exchange, the attempted liquidation of American securities held abroad, necessitating the suspension of trading on the New York Stock Exchange, and the difficulty of making exports of cotton and wheat, caused a rise in sterling and other European exchanges. In the four months preceding November, $108,841,000 of gold was exported by the United States. Additional pressure was put on New York banks by increased demands from interior banks and other customers.
Although the emergency was very serious at the moment, it did not last long. The monetary stringency was relieved by the issuing of $382,502,645 of currency