but it did little to cheer me up. I retired early and was awakened about two in the morning by a piercing scream. Hurrying footsteps sounded in the road below. I went to the verandah and looked down. Bosun-Woman passed, going to the wake, her flabby face with its ghastly smile looking even more horrible by moonlight. She walked with a light mincing step and her hair slapped back and forth across her back like a wet rag.

Others followed: children, old men, old women, all on their way to hear the new dirge Bosun-Woman would wail over the body.

Screech after screech cut through the still night air, but at length these subsided and the death chant burst forth. How is one to describe such a song with nothing of the sort from civilized lands to be used as a comparison? Puka-Puka death chants are peculiar to this island, and there seems to be nothing human about them. The sounds range from eerie guttural moans rising slowly to ear-splitting screams when the wife throws her body across that of her dead husband, tearing her hair with outcries that chill the blood; then there are almost whispered chantings and sobbings that seem to come from another world. When I first heard one of these songs I was fascinated by its unearthly quality, and found myself unconsciously swaying my body in unison with BosunWoman, uttering meaningless syllables in her unvarying cadence. I had to tear myself away from the spot and dash my hands against my head to break the spell I was under.

All that night, all the next day, and all the following night Bosun-Woman led the death chant over the body of Wail-of-Woe. Thus all the relatives exhausted themselves emotionally, abandoning themselves to grief until an inevitable reaction set in. As a result,

when Wail-of-Woe was buried, even Sun-Eater could greet the world with a smile.

VI

At night the coconut groves of PukaPuka are filled with moving shadows lacelike shadows of fronds, shadows of stiff-limbed pandanus trees, of ground bush, of fleecy trade-wind clouds skimming low overhead. And there are the shadows of the kaki, the young unmarried, stealing from the villages to their meetings on the lonely outer beaches, where great breakers thunder on the reef and long stretches of pure coral sand glimmer faintly under the light of moon or stars.

If some Paul Pry were to follow them to these nightly rendezvous, he would doubtless be greatly shocked. He would see naked youthful figures dancing joyously in the ghostly light. He would hear snatches of weird heathen song, provocative rhythms drummed out on coconut shells; and faintly above the roar of the surf he would hear, far offshore, exultant shouts where groups of young Puka-Pukans disport themselves like schools of porpoises in the deep sea, riding the great swells just rising to break on the reef.

The young unmarried of Puka-Puka correspond to 'these wild young people' that parents of our day of all times, in fact are forever shaking their heads about. But the parents of this island are by no means concerned about their sons and daughters just emerging into manhood and womanhood. They themselves were once young, they remember, and did precisely as their children are doing now. Their parents before them did the same, and so it has gone through countless generations. If there is any place on earth where men and women live naturally, surely it is Puka-Puka.

I

SINCE the end of the war we have heard much about the doctrine, long recognized as a commonplace among economists, that the debts of one country to another can be settled only through the transfer of goods or services from the debtor to the creditor country. We have been confronted with this doctrine more and more with each succeeding year. We first encountered it when we ventured to form an intelligent opinion on the reparations question - how much Germany could pay and the manner in which she would pay it. We next heard about it when we began to deal with the disturbing problem of war debts-how England, Belgium, France, and Italy were going to pay the interest and principal on their war and post-war borrowings from the American Government. Bringing the matter all the way home, we are now obliged to take fresh cognizance of the doctrine whenever we seriously consider the status of that large group of private American investors who have been buying enormous quantities of foreign bonds - how these investors are to receive the interest or dividends in years to come on the foreign securities they have been putting away in their strong boxes.

In its more refined form the doctrine does not state that a debtor country seeking to effect a settlement of its obligations must send goods direct to the country where its creditors live. On the contrary, it may sell its goods or services

in any foreign market. The essence of the doctrine is that a debtor country in its trade relations with the rest of the world must develop an excess of total exports over total imports, an excess approximately equal to the yearly obligations it expects to meet. It will then be in a position to satisfy its foreign creditors. The sale of goods abroad in excess of purchases abroad will leave cash balances, somewhere beyond its own boundaries, on which drafts can be drawn for the payment of external obligations.

Just as a debtor country must sell more than it buys, so a creditor country must buy more than it sells. It must increase its importations of foreign goods, no matter in what country the goods originate, or it must diminish its export trade, if it would receive the money payments which the foreign debtor is trying to make. In short, a creditor country must have an excess of total imports over total exports sufficiently large to permit it to receive in goods or services the interest and principal payments due from the outside.

At times we have given an attentive and sympathetic ear to this doctrine. It has seemed clear to everyone, for example, that Germany could make reparation payments only to the extent that she was able to develop a surplus production of goods and services which outside markets would take. Up to this point there has been no ground for argument. We have accepted the doctrine. outright as applied to the method by which a debtor country must discharge

its external obligations. But when it comes to fitting the doctrine in with our own status as a great creditor country, foredoomed to receive large payments from foreign debtors, our attitude toward all such doctrine becomes at once lukewarm, then cold, and, on further consideration, openly antagonistic. Surely, we argue, there is some way to beat it.

We have made determined efforts to negative that portion of the doctrine which tells how a creditor country must receive its interest and principal payments from debtor countries. We have shown unequivocally that we do not want foreign goods to compete in our markets with the products of our own manufacture. If foreigners can arrange to send us raw materials which we do not produce, all well and good, but under no circumstances do we want their manufactured products. That has been our answer to the widely proclaimed doctrine of the economists.

II

Our demonstration of protest began shortly after the end of the war. We had a strong feeling at the time—and it may have been a reasonable feeling - that European countries would make a supreme effort to recover market outlets which had been lost while the war was on. Our feelings in the matter were aggravated by at least three important considerations. In the first place, there lay in the back of our minds the fact that European countries owed the American Government billions of dollars on account of our war and postwar advances which, according to the doctrine of the economists, could be repaid only in the form of goods or services. Secondly, it was realized that Germany in particular had need of a large external market where she could sell her products and build up cash bal

ances with which to pay her reparation obligations. And what more accessible or coveted market was there than ours? Finally, our leaders made much of the argument, though it contained only a modicum of truth, that a nation having a depreciated currency enjoyed special manufacturing and selling advantages not possessed by nations whose currencies were on a gold basis.

Confronted with an international trade situation which seemed ominous, at a time when our own industry was languishing as the result of post-war deflation, we promptly convinced ourselves that drastic action was needed to meet the trade emergency. In order to safeguard our industries against the alleged dangers of European competition and to ensure the maintenance of our high standard of living, we put through special tariff legislation in 1921 in the form of an Emergency Tariff Act. In the following year we reaffirmed our belief in the efficacy of goods-exclusion principles by passing the Fordney Tariff Act.

Our return to a high-tariff policy did not inflict great hardship on European countries at the moment. Although heavily indebted to us on open account as a result of the war, they could not immediately pay off these obligations by sending us goods. Their productive efficiency was too far below pre-war standards, their trade was still disorganized. It is impossible to believe that they could have become dangerous competitors in our markets forthwith, even if our tariff had been left unchanged. Be that as it may, the effect of the very substantial increase in our tariff duties was to make their case more hopeless than it would have been otherwise. It not only operated to retard the revival of their internal trade, but it put off still further the day when they could pay their external debts in the ordinary commercial way. Deprived of

the power to send us goods, they had no alternative but to send us gold. Here was a product which could be sent in duty-free.

Throughout the three and one-half year period ending January 1924, we had a veritable flood of gold imports. Our gold holdings piled up at an average rate of more than $1,000,000 a day. We became the possessors of one half of the world's supply of monetary gold. Never before had a single country amassed so large a proportion of the world's standard money; such a persistent and one-sided movement of the metal had never been considered within the bounds of possibility. It was as if one half of the contents of the Atlantic Ocean suddenly moved over into the Pacific and remained there, notwithstanding an old-fashioned doctrine about water seeking its own level.

Our tariff legislation of 1921 and 1922 was not, of course, the only factor which caused foreign gold to pile up in this country. There were a number of contributing causes, not the least important of which, as will be seen presently, was our manner of dealing with imported gold after it reached our vaults. But when all of the causes of this phenomenal gold movement have been enumerated and appraised, there is no escaping the conclusion that our goods-exclusion policy, as expressed in post-war tariff legislation, forced us to take vast quantities of gold which need never have come and which now constitute a serious problem to be reckoned with.

III

Had our banking authorities utilized the gold as it came to us, matters would have righted themselves in the course of time in spite of tariff barriers. Gold imports would have set about automatically to create the conditions under which foreign goods could be sold in our

markets. The flood of gold coming to our shores would have cheapened the dollar and, in accordance with the predictions of practically all European students of the question, we should have had an inflation in our prices. On the other side of the picture, the countries which were sending the gold to us would have experienced the opposite effects they would have had a corresponding deflation in their prices. Sooner or later the automatic workings of the gold standard would have created a sufficient differential between our level of prices and that of foreign countries to permit their goods to scale our tariff wall and to create cash balances which they could use to pay their obligations.

Wisely or unwisely, we did not permit the flood of gold to work toward this goal. We astonished the European prophets by temporarily depriving gold of its inflationary power. We deliberately thwarted the intelligent purpose for which it came to us. We delayed the issue.

Putting vast quantities of gold into storage where it could have no stimulating effect upon the volume of credit or the level of prices was an accomplishment without precedent in the world's banking history. We need not delve into the technical structure of Federal Reserve banking which made this accomplishment possible. It is sufficient to note that we happened to be in a position where a gold-storage, or goldsterilization, policy could be carried out, within certain limits, if we wanted to make the attempt. And we wanted earnestly to make it. We had just come through a painful period of deflation, following the inflation of 1919 when a too liberal use had been made of our gold reserves. Having had that memorable experience with the full cycle of inflation and deflation, we were bent on avoiding a repetition of it.

Moreover, the feeling was general among Federal Reserve authorities that we were only trustees for a large part of the gold which was being sent to us, and that when European countries set about restoring their depreciated currencies we should have to part with some of our holdings. In these circumstances it was deemed the part of prudence that the vast gold supply we were accumulating should be so managed that it might be kept available for redistribution, as the occasion arose, without producing any untoward or disturbing effects on our own trade or financial situation.

Some have objected to the statement that we 'sterilized' gold, and a number of other terms have been suggested as more fairly descriptive of our policy. For the present purpose it matters little whether we say that gold was sterilized, valorized, neutralized, buried, warehoused, hoarded, impounded, or conserved. The records show that during the period between August 1920 and January 1924 our net imports of gold amounted to $1,400,000,000, and yet

here is the extraordinary factover the period as a whole we had no net expansion in the total volume of credit either at the Federal Reserve banks or at seven hundred of the largest member banks. Whether we sterilized $1,400,000,000 of imported gold or merely conserved it, we did what we could in a financial way, though we must have done it unwittingly, to make the tariff all the more effective in excluding foreign goods.

IV

It is still too early to make a full appraisal of the consequences of our gold-sterilization policy. That there are and will continue to be important consequences of a policy which, whatever its purpose, effectively postponed

the date when foreign debtors could pay us in goods, we can rest assured. Or, to state the case in other terms, we can hardly expect to thwart the intelligent purpose of a large and sustained gold movement over a period of three and one-half years without getting consequences of a far-reaching nature, affecting not only ourselves but our foreign debtors as well. A few of the immediate consequences can be seen already.

One of the direct results of refusing to employ the gold we received was that we continued to get more gold. This result was inevitable. In the face of excessive gold supplies we maintained money rates at a high level, a level too high to make it worth while for business to expand and use up some of our dormant credit. We engaged in a kind of price-fixing programme with respect to gold, arbitrarily fixing the interest price at which gold could be used as a basis for credit. Our object, of course, was to prevent inflation, and in this we were partly successful, but the net result of our efforts was to aggravate the problem of excessive gold supplies in a way that was never contemplated.

We could at any time adopt a similar policy with reference to wheat or any other farm product for the purpose of bringing relief to a depressed agriculture. We could enact a law requiring some federal agency to raise the prices of farm products arbitrarily. We have not taken this drastic step as a remedy for agricultural depression because we have known full well that such a step would be unwise. It would stimulate farmers to produce more wheat when we already have too much, and the supplies would eventually become so large that arbitrary price maintenance would break down of its own accord.

Our price-fixing efforts with respect to gold met exactly that fate. The