Big "Biz"

Up north at Basle in the German-speaking neck of Switzerland drowses a bleak building once the Hotel de I'Univers, today the financial watch tower not only of Europe and Asia but of the entire world. Through its small lobby scurry page boys, their grey liveries initialed in silver with the suggestive letters, BIZ. The big table around which biggest business is done by the Governors of Banks of England, France, Germany Italy, Japan and a U. S. group headed by J.P. Morgan & Co. is draped in grey, the color of money bags. On this grey table lay fresh and crisp last week the second annual report of BIZ or Bank fuer Internationalen Zahlungsausgleich, famed in English as BIS (Bank for International Settlements), in French as Bri (Banque des Reglements International--). When he stood up to report, Manhattan Banker Gates W. McGarrah, President of BIZ was seen to have eased his substantial midriff by undoing as usual the two bottom buttons of his vest. What President McGarrah had to do was to report a notable BIZ success and issue to the world an ominous warning which he hoped would produce action.

Cash Register? Two years ago, when the Young Plan was supposed to have "taken Reparations out of politics." BIZ was set up as the "Cash Register of German Reparations"--the bank through which German payments would be distributed to the Allies (TIME, May 26, 1930) Jealous of their own power, certain central bank governors insisted at the time that BIZ must not become a world bank--but those days seem gone forever.

Depression drove President Hoover to put Reparations back again into politics with his Moratorium (TIME, June 29 et seq.) Thereupon German payments ceased and BIZ would have had to shut up shop had it been only or mainly the cash register of Reparations. Instead BIZ has never been busier than at present and is today the World Bank. In softly burring Scotch last week BIZ President McGarrah announced a BIZ profit of 15,182,819 Swiss francs ($2.930,000) or 4,000,000 Swiss francs ($772,000) more than last year.

Monetary Internationalism, Said Gates McGarrah, reviewing the Great Depression Year: "Events have shown to what extent our monetary systems, bott great and small, have become interdependent. Internationalism in monetary matters is now not merely a theory but an accomplished fact! The tidal wave of uncertainty and fear . originated in Austria, swept quickly through Hungary and Germany . . . flowed onward to Britain and the Scandinavian countries backwashing into the United States, and carried unusual demands on the American gold supply and credit system.

"No such widespread effects (which extended soon to Japan also) could have occurred except for the already existing essential unity in international finan which ignores political and geographical frontiers. This interdependence is not confined to the field of finance, but penetrates much further into the whole economic structure of various countries

"The indices of production, employment trade and profits show to an astounding degree recurrent tendencies in almost every country of the world. All the evidence available leads to the conclusion that any hope that a single country may achieve prosperity apart from the rest of the world would indeed be based on an insecure foundation."

Capitalist International? In the past most bankers have been closely nationalistic. All look askance today upon the Socialist International and the Communist International. But sound conservative Gates McGarrah proceeded to prescribe for the world's fiscal ills last week three steps which amount to laying the corner stone of a Capitalist International. The prescribed steps:

1) All nations should scale down taritt walls and scrap import quotas which Mr McGarrah called "the new method of interfering with trading relations [which] has resulted, in many cases, in rendering the working of most favored-nation clauses and other provisions in commercial treaties practically inoperative.

2) No nation should persist in efforts to bolster up its currency by blocking international exchange across its frontier --something which all the Balkan nations and many another are now doing.

"Exchange control . . ." earnestly warned Mr. McGarrah. "forces trade into a kind of straitjacket, leaving little or no room for the play of economic forces . . that normally tend to re-establish equilibrium."

3) All nations should prepare for "monetary reconstruction . . . which will be as indispensable after the world crisis as after the World War."

"Inherent Power." Touching short-term credits, which he seemed to regard as one of the sorest spots in the entire Depression, Mr. McGarrah estimated such credits outstanding at the beginning of 1931 totaled 50 billion Swiss francs ($9,647,500,000) and that frightened lenders suddenly called home 30 billion Swiss francs ($5,788,500,000) of their short-term loans.

"It is unnecessary," said the Work Banker, "to emphasize the havoc wrought by this vast movement of liquid funds . . . which was increased rather than reduced by the warning implied in Mr. Hoover's proposal ... or to dwell upon the stagnation resulting from the magnitude of the sums immobilized. They nave contributed each their part to the persistent fall of prices and they have accentuated the deflationary forces which are oppressing world economy. "

The most remarkable thing is that economic systems have been able to withstand such dislocating forces--a fact that seems to indicate their inherent power resistance."

Justice 6 Stability. To end the Basle business last week a BIZ dividend of 6% was voted to BIZ stockholders who are the central banks of 25 countries and the J. P. Morgan group.

When BIZ was organized an additional bloc of stock was set aside to be bought within two years by other nations, providing each buyer was a state on the gold standard and could meet certain other reliability tests.

Up to last week BIZ had discovered no such nation, had turned down numerous applicants. Therefore, despite the fact that not all the original stockholders remain on the gold standard, they were permitted last week to buy the outstanding BIZ stock, will receive the extra slices ot BIZ dividend melon to which their privileged purchase entitles them.

With their business done, eminent . men read papers to each other. Professor Charles Rist, speaking for the gold-gorged Bank of France, notably declared, "It is impossible to return to the price levels of 1929. I believe the world faces a long period of low prices." President Dr. Treub of the gold-gorged Netherlands Bank flayed bimetallism.

Siqnificance. Since Gates McGarrah has sat for two whole years at the nerve centre of World Depression his recommendations weightily point a way for the Lausanne Conference, postponed from January to late June. At Lausanne Germany will assert her total inability to pay Reparations, either now or at any future time (see p. 17); and the imminence of U S elections will have strengthened the U S Congress' resolve not to cancel War 'Debts. Therefore the Lausanne statesmen will be under terrific pressure, perhaps under a pressure sufficient to squeeze them together into a Capitalist International. Though the motto "All For One and One For All" sounds somewhat daring when applied to international finance, it had achieved last week at Basle a most eminent, conservative, historic sponsorship.

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