THE GERMAN WAR LOANS

Dominion, Volume 11, Issue 96, 16 January 1918, Page 9

THE GERMAN WAR LOANS

FINANCING ON "BLUFF."

"It would be erroneous to regard the continued success of the German war loans as a sign of economic strength, for it is, in" fact, only the necessary consequences of the policy of isolation pursued by tho Allies. Being cut off from the rest of tho world, Germany has gradually used up a considerable part of her capital wealth in the shape of concrete goods. Her stocks of raw materials and manufactured goods have disappeared, her reserves of-food stuffs have been consumed, her stock of cattle has been diminished, her soil exhausted, her tools and machinery worn out. The disposable means realised by this process of liquidation of the national wealth no longer find any adequate economic opportunities for investment. In this way the war loans obtain, so to say, the privileged. position of "a monopoly and absorb all the liquid means available. The German, therefore, in placing" his "savings" at the disposal of his country does so only for the reason that there are no other economic possibilities for their investment."

"However great tlia success of the German war loan policy may nnnear today, this policy cannot be said to have been in accord with the real, i.e.. per- • manent interests of Germany ns nn economic body. The maintenance of the State credit .would have/demanded that, in proportion to the reduction of material wealth referred to, the cost of the war should have been borne directly by the people. As conditions are at present, the loans may be compared to a mortgage which lacks a rnateri 3 ! foundation; Germany, so to say, finds herself in the position of a. business i concern paying dividends in suite of having bad timpß and covering its losses by raising loans. A company of this kind mi>v porhans deceive its shareholder* for a certain time about its real iwition, but sooner or later t''e price of it* shares will smtninatieallv adinst itself to their reduced intrinsic value. "This develonment lms in reality alI renflv taken place in"the ea«e of Germany, and is evidenced by the ste-'ly decline in the German oxehamre. T!)f latter has touched in Switzerland nearly one-half of the rrold value of the German currency. It would be erroneous to seek the explanation for this state of things in the present condition of Germany's foreign trade. Under the prevailing circumstances Gcrmanv cannot have to finance any large purchases from abroad, for commercial intercourse between her and the few small neutral countries is now essentially based on the system of compensations. (Besides, she lias never actually been a creditor country, so that she has not. like France, for instance, to forego her usual income from abroad.) But even if anv substantial balances should result in favour of the neutrals, the latter would, in view of thn easy monetary conditions undoubtedly be in a position and willing to j grant the necessary credit, all the more so as pressure is continually brought to bear in this direction by Germany. .It is, for instance, known, that on the occasion of the last renewal of the Swiss commercial sarcrroent with. Germany, it has bneiV stipulated that a large part of the goods supnlied by Switzerland should be sold on 18 months' credit."