f Germany could cut the lines of communication and so prevent
essential supplies from reaching British ports, the population of Great
Britain could be starved into surrender in a very brief time, France
would be overwhelmed, and the triumph of the Prussian cause would be
complete. That the success of the German submarine campaign would
accomplish this result was a fact that the popular mind readily grasped.
What it did not so clearly see, however, was that the financial collapse
of Great Britain would cut these lines of communication quite as
effectually as the submarine itself. The British were practically
dependent for their existence upon the food brought from the United
States, just as the Allied armies were largely dependent upon the steel
which came from the great industrial plants of this country. If Great
Britain could not find the money with which to purchase these supplies,
it is quite apparent that they could not be shipped. The collapse of
British credit therefore would have produced the isolation of the
British Isles and led to a British surrender, just as effectively as
would the success of the German submarine campaign.

As soon as Bernstorff was sent home, therefore, and the participation of
this country in the war became extremely probable, Mr. Balfour took up
the financial question with Page.

_To the President_
March 5, 1917.

The inquiries which I have made here about financial conditions
disclose an international situation which is most alarming to the
financial and industrial outlook of the United States. England has
not only to pay her own war bills, but is obliged to finance her
Allies as well. Up to the present time she has done these tasks out
of her own capital. But she cannot continue her present extensive
purchases in the United States without shipping gold as payment for
them, and there are two reasons why she cannot make large
shipments of gold. In the first place, both England and France must
keep the larger part of the gold they have to maintain issues of
their paper at par; and, in the second place, the German U-boat has
made the shipping of gold a dangerous procedure even if they had it
to ship. There is therefore a pressing danger that the
Franco-American and Anglo-American exchange will be greatly
disturbed; the inevitable consequence will be that orders by all
the Allied Governments will be