IS GERMANY BANKRUPT?

Matamata Record, Volume II, Issue 73, 23 March 1918, Page 2

IS GERMANY BANKRUPT?

/ Hev Small Gold Reserve. German finance has been systematically based on confidence in being able to get away with the spoils. The numerous and heavy tines imposed on Belgian municipalities; the loans forced upon Belgian banks; the sure and prearranged seizure of the rich coal and iron deposits of Belgium and France, and the food and oil producing regions of Rumania and Russia ; the forced labor of prisoners and Belgians ; the pillaging of private industrial resources; the removal of tools and machinery from France and Belgium to Germany ; the substitution of depreciated German currency for other and sounder forms of money in occupied territories all these measures show how extensively German finance and industry are bolstered up by the spoils of war. That Germany has made a gigantic financial its crown the defence she of trying to pay for the war almost exclusively by means of bond issues rather than taxes. As the whole world knows Germany deliberately planned to finance her war by means of bond issues rather than taxes, because she expected to win in a short war and pay off the bonds from an indemnity. Early in the war the highest government officials openly and formally admitted the expectation of an indemnity, and people were urged to buy war bonds because they would be paid off in English gold. And even in late September of the past year leading newspapers and political leaders declared that a PQace without indemnity would mean defeat and ruin for the Fatherland. Of course there were other more theoretical and sophistically meaningless reasons why Germany chose the bond method. Professor Bonn, one of the most capable defenders of German ffnance, who seldom slipped, uttered this fallacy : “ During this world war the generation that has to bear the brunt of the fighting ought not to be saddled with any burdens it can be saved from.” “ Since Bismarck’s time,” was the recent grandiose defeuce of Count von Rodern, “ the principle followed by Germany has been that war should be covered first, not by taxes, but by loans.” But the main reason for this principle was the belief that the Allies were unprepared, and that Germany, with her well-equipped , army and great stores of supplies already paid for, could- win so quickly and cheaply that she would not need to resort to taxes. Subscribers to the sixth war loan were told it would be the last; and time and again German financiers have been quoted as setting a limit to the war debt beyond which the country could not go without collapsing. Perhaps they were misquoted ; but a reliable newspaper correspondent I interviewed President Havenstein, of the Imperial Bank, early last year and elicited the opinion that a total debt of one hundred billion marks would bring Germany to the point of collapse. That amount will probably be reached by this time. “ But,” the great financier was quoted as Germany will never reach that point. We shall win success long before our debt goes to that figure.” “ After all, the Central Powers hold the real security on which England lias lent the money” is the sinister and striking way in which one German professor of finance puts it—“ Courtland, Poland, Livonia, Belgium, Serbia, Rumania, Albania and Northern France. England holds nothing but their unsecured promissory notes.”

But even this cynical argument of super-financial frightfulness is easily answered. Germany is in just as bad with Austria and Turkey, whose rotten finances she must bolster up. Austria alone, of the greater Powers, has not dared to publish a statement of her Imperial Bank since July, 1914 ; and even the most plausible German professor has never attempted to answer the charge repeatedly made in Entente

countries that all the gold in the Austrian Bank was turned over to the Imperial German Bank at the beginning of the war. Even Russia has regularly published her bank reports. The two policies are worlds apart. England has made some provision for things going wrong and Germany has made none. England has at least provided for the interest on the bonds, and a sinking fund with which to pay them off. Germany must either repudiate her debts to her own people, or soak them with enormous taxes at the very time when the war has ended disastrously, when there is severe industrial reaction, poverty and general despondency. England, on the other hand, put on the relatively huge taxes when the people were in the midst of a war boom, highly prosperous, fighting to save their empire, and patriotically enthusiastic. Germany’s gold holdings are dangerously small, both in comparison with other countries’and in re 1 ation to her.ow currency and the insistent demands for help from Turkey and Austria. England has less than half as much ; but England gets several million pounds a year from her mines in new gold, and Germany cannot get any more so long as the war lasts. France has more gold in her bank than Germany. “ Ournationalwealth,” said an enthusiastic Frenchman not long ago, 11 rests on our foundation of gold as on a solid rock.” And as for the United States, they have six times as much gold as Germany. Germany will desperately need every resource in the struggle to regain her lost foreign trade ; for it will come at the very time when practically all her wealth is represented by almost valueless currency and huge masses of permanent bonds. The very marrow of her being will consist of these government loans when she most needs gold and liquid funds. Then she will realize what it means for the past to lay its dead hands on the living presentretribution enough for any nation!