GERMANY'S FINANCIAL BANKRUPTCY

Dominion, Volume 8, Issue 2523, 31 July 1915, Page 7

GERMANY'S FINANCIAL BANKRUPTCY

WORKING OF THE DAMJEHNSKASSEN. Under the title of "British, and German Finance," a very interesting little brochure, by Mr. E. F. Da vies, has been puo.lished. The writer, whose position in tho banking world enables him to speak with knowledge And authority, seta out to refute tho impudent claim made by Dr. Helfferich recently that' German finance ■was sounder than that of Great Britain, and does so very effectively. The following is an extract regarding the working of tho. Darlelinskasson, which is'a part of the great German financial fraud not properly appreciated. • "The Daaiehnskassen," says the writer, "were formed to facilitate the financing of tho different loans, and in the beginning they advanced 60 per cent.,then /0 -per cent.', and later 75 per cent.on German and Prussian. State bond's and on tho shares of important 'German compauies. In the event of tho actual value being much higher than the nominal value, at first 40 per cent,, with a maximum of 100 per cent, of tho nominal value, was advanced, and this was afterwards raised to. 50, per cent. (125 per cent, maximum). Loans were also made against Austrian bonds (including ifche "War Loan of 1914) and Bosnian bonds, and on stocks and bonds of neutral States, cities', and mortgage banks quoted in Germany, tip to 40 per cent, of the nominal value. The samo conditions were granted for American Railway bonds. Advances were also made on spirit, cotton and sugar, the maximum amount being 60 per cent. The extraordinary manner in which tho cash is' obtained for advancing against those securities was and is by issuing Darlehnskasscn-Scheino ("War Loan n-otes)—that is, notes issued by the lending institution and which are taken ae legal currency. Tho lieichsbank itself. accepts these notes, and is authorised to issue its own bonk notes against tho same in the proportion of one to three, the Reichsbank being forced to consider the Darlehnskas-een-note as gold. When one considers that all these notes have been' issued to iihe public, many millions being in circulation in the 6ame way - and with the ramo va-luo as bank notes, for which there is no gold cover, frenzied finance is the only description that can be applied to such a. system, and df all the details connected with these 'pawning' operations vrero fully known and appreciated abroad the uern»an mark would depreciate still further, and no neutral investor would place any money iu German loans which, unless Germany is wholly successful in the war—; and everybody knows that this is out of (the question—cannot possibly be redeemed. All private companies in the past which have promoted new companies to lmance the older ones have ended in the game way—namely, in bankruptcy—and a btate at war operating in this way is m an even worso position, because all the money xaiS: ed is ruthlessly spent in the destruction of capital. Germany's can only be compared with that of a gambler, with the one exception that all chances aro closed to her .There can only bo one end— bankruptcy—default. Germany will bo able to continue raising loans, becauso she is willing to lend and advance) money on the previous loans in order that the new ones may be subscribed; >but what -will this lead to?—financial and economic chaos—and the sooner the position is made clear to the German people the better it will bo for the whole country. The difficulties, as the German paper '\onvacrts,' in its issue of March 24, 1915, points out, will begin when it becomes necessary each year for Germany to provido the interest on the loans. That newspaper touclungly says: 'These, of-course, are the sorrows o! coining days, but one ought to think about them iu time.' Probably investors in neutral countries who have participated in the German War loans have not, considered what- will happen when and if the interest on tho loans is paid to them in marks; they will be forced to sell marks to obtain payment of tho interest in their own money, and as shows a depreciation at present of 14 per cent., which no doubt induced them to subscribe to the limns, t.hoy must celcyl&to Y/tbh <!• biff loffi in mtfewe U»lr matHji. KVjio know wh»i ji ,wJJJ bc-a low 14 ac to dm: