The Guardian (And Evening star,with which is in-Corporate the west coast Times.) THURSDAY, AUGUST 16th. 1923 GERMANY’S FINANCIAL BURDEN

Hokitika Guardian, 16 August 1923, Page 2

The Guardian (And Evening star,with which is inCorporate the west coast Times.) THURSDAY, AUGUST 16th. 1923 GERMANY’S FINANCIAL BURDEN

In view of last week’s decline in the German currency to a fresh low lecord, it may be useful to follow the remarks of a I/ondon financial journal, and trace the course of the mark and also the growth of the note circulation during the last year or two. Towards tlio end of May. 1020, the Beilin exchange was quoted in London at. under 130, so that- each mark then was worth about 2d., as compared with the normal value of nearly one shilling. Even a year later the into had nor. much more than doubled, little over 210 marks io the £ being quoted towards the end of May 1921. From that point there was a sulwtantial advance, that is to say, a heavy decline in the sterling equivalent of the currency, and hv the end of November a figuro of over 1,100 was reached. The fall became much more serious in 1922, for from a rate of little over 1,000 quoted at the end of February there was an advance to nearly 13,000 by October, and in November the figuro reached 38,5C0. A still more severe decline in the currency was witnessed in January of this year when the quotation rose to 225,000 marks to the £, and although this was followed by a drop to 90,000 in February, as" the result of support given to the exchange by the German authorities, the improvement was short-lived, and by the end of May the rate had risen to £285,000 while June witnessed a further advance at one time to 740,000, and now the advance is in the millions. At the end of 1913, before the outbreak of war, of course, the note circulation of the lieichsbank amounted to 2,593,000,000 marks. By the end of 1910 the total was a little over 8,000,000,000 marks; at the end of 1917 it was little under 11,500,000,000; at the end of 1918, it slightly exceeded 22.000,000,000, \vhilo at the end of the

three following years tho totals wore 35.698,000,000, 68,805X00,000 and 11.3,639.000,000 marks respectively. The roaliy big expansion commenced in 1922, for at the end of that year the amount was 1,280,095,000,000 marks, while during this year the increase has been on an almost fantastic and bewildering scale. At tho end of February last a total of 3.512,787,000,000 bad been reached, this having closely followed tho temporary improvement in the external value of the mark to about yO.OOO to tho £. The inability to maintain that improvement is sufficiently explained by the extent to which the note circulation afterwards increased. By the end of March last a total ot fullv oj billion marks bad been readied, and on June 9 the amount was over l.'i billions, namely 9,309,565.583,000 marks, the figure having increased by nearly 1 i billion marks in a fortnight. With this growth in the number of paper marks issued by the Reichsbauk, the holding of gold has diminished. At tin* end of December, 1916, the amount was 2,520,000,000 marks, hut by tlw end of 1921 it had fallen to 995,000.000 marks, and tnc latest return shows a holding of loss than 757,000,000 marks. No depreciation has taken place in the gold mark, of course, so that the value of the Reielisbank’s gold reserve i:s about £37,800,000, and the curious tiling Is tr.at this is largely in excess of the sterling equivalent of the paper marks in circulation at the current rate of exchange. Taking the mark at <IO,OOO to the £, as it was in Juno, the note circulation of Germany was worth about £12,580,000 so that the value of rile gold held exceeds it by over £2.>.000,000. It might be said, therefore, that Germany could buy up all the paper marks with the gold it holds in the Rculisbank. In practice this would not work, because ns soon as the operation commenced there would he a sharp ri-e in the value of the mark, and assuming tho rate improved to 200,000 to the £, tho sterling equivalent of tho pa; or marks would exceed the value of the. gold reserve by over £7,000,000. ine loss in the gold holding shown above has been partly caused by purchases of foreign currencies, presumably for reparation payments, and partly in redeeming the Treasury Bonds issued to Belgium about a year ago in accordance with the settlement then reached with that country. These Treasury Bonds were discounted by Belgium in Switzerland, and subsequently the British Government bought them, thus becoming entitled to the gold by which Germany effected trie repayment. This gold wars exported to America, and used in part payment ot the interest instalment on tho British debt which Ptelv fell due.