merchandise. But fighting Europe's industries, with the exception of a
part of England's, are mobilised for munitions. Therefore, these goods
have been paid for largely in gold.

This gold is now part of our basis of credit. When the war ends Europe
will make every effort that ingenuity, backed up by trade resource, can
devise to get that gold back. One way is through loans from us; the
other is by exports to us. Now you see why we must maintain our foreign
commerce.

Our huge gold reserve hides another menace: The war demands for our
commodities, paid for with the yellow metal, have increased the cost of
production; and it will stay up. This will lead to an unequal
competition with the cheap labour markets of Europe when the war is
over. Both groups of Allies will be able to undersell us.

Turn to the raw materials and you encounter a further danger in the
economic pact. If the Allies develop their own sources, it will cut down
our export of cotton, copper and oil. If they cannot develop sufficient
sources for self-supply they may, through co-operative buying outside
their dominions, satisfy their needs. In the third place, they may
stimulate, through tariff or shipping concessions, or by
subsidies--which are much talked of in Europe to-day--a preference for
their own manufactures over American products in both allied and neutral
markets.

Take navigation: England controls an immense shipping. As a matter of
fact, outside the three-mile limit, she practically owns the waters of
the world. If she makes lower rates for her allies, or others to whom
she gives preference, where shall we be in our chronic and unpardonable