The Daily News. WEDNESDAY, SEPTEMBER 30, 1914. THE FINANCIAL TEST.

Taranaki Daily News, Volume LVII, Issue 108, 30 September 1914, Page 4

The Daily News. WEDNESDAY, SEPTEMBER 30, 1914. THE FINANCIAL TEST.

In the light of recent cables it is easy to understand the success of the German war loan. Bank depositors were forced to subscribe, by the simple expedient of the Government attaching 25 per cent, of their credit balances. The merchants were forced to liquidate debts by investment in the war loan, their creditors in turn being notified that if tkey did not agree to payment in this way their firms must discontinue operations. This high-handed business was not confined to German firms; they even notified creditors in Switzerland that money owing to them had been invested in the war loan. Imagine the British Government resorting to these means to raise money-the means employed by the burglar, the highwayman! It is almost unbelievable of any solvent government. If the report be true—and it emanates from Germany—then the Kaiser's financial advisers must already be in sore financial straits. Tho world has been led to believo by Germany that her financial resources were inexhaustible, greater indeed than Britain's; but the test has come, and we see early in a war, that bids fair to bo long and crippliag, Germany obliged to place the pistol at the heads of her people in order to obtain money with which to carry on, and Britain, on the other liand, able to meet without the slightest embarrassment all the calls that may bo made is well as to lend money, without interest, to distraught Belgium. The consideration of finance will play an important part ia determining the length as well as the result of the war. The Allies have a stupendous advantage in that both Britain and France are rich, lending countries. Britain is in perhaps a better position to stand the colossal financial strain than any other nation in the world. The Statist, one of the leading financial reviews of England, has shown tnat 4008 millions of British money is invested abroad, and this produces a yearly in- ' come of 200 millions. The whole of this great sum goes to Britain not, of course, in money, hut in food and raw material. Over and above this great income is that of the shippers, bankers, brokers and others, which is computed to reach about 150 millions, and this also goes to Britain in the food and material it needs. Therefore, Britain has to receive from colonial and foreign nations an annual sum of about SSO millions without having to send out any goods in payment other than services. Beyond this amount, however, even in the worst conceivablo circumstances, a large additional sum must go to Britain in payments for goods which it exports. It is true, of course, that British trade with the Continent will be checked, at any rate as regards its trade with the enemy; ' but against this has to be placed the I fact that neither Germany nor Austria will be able to export any appreciable amount of goods to any country, and that consequently a deficiency will arise which must be supplied by the countries capable of supplying similar goods. The only countries that will be in a position to supply the good 3 usually supplied by Germany are Great Britain and the United States; and therefore against the loss of trade with the Continent must be placed tho increased trade which will be carried on with other countries. Therefore, provided that confidence is restored and the temporary damage to tho credit system repaired, British trade should be maintained at a very higk level, and Britain should be able to obtain all the food and tho material she needs by exports of goods. Last year the value of Britain's net imports was £658,000,000. To pay for similar amounts in the future, a ho will have to export goods to tho value of between £ 1100,000,000 and £350,000,000. It will bo borne in mind that last year the valuo of Britain's exports was £525,000,000, but with this great sum she not only paid for all the goods imported, including manufactures, but also paid for about £200,000,000 of securities. It is unnecessary to refer to the manufacturing capacity of Great Britain at the present moment. It is obvious that if last year her factories could supply all the tilings which the British people themselves needed, could produce enough to pay for all the food and raw material imported, and over and above this produce goods sufficient to pay for £200,000.000 of securities bought from abroad, they are able to create all the goods that will be needed to pay for the food and material she needs from abrond at a timo when she. will not be prepared to invest much capital overseas. In other words, os year's basis there it a margin of producing power to the extent of something like XiiUO.OOO.OOO. Thug on (he on* hand we have tile fact thai Bngland in able to produce goods j seeded by the world, and en the other , its world is able to produce the food ' and i»w material needed by the British ■ people, the whole question of tho vol««ne aid extent of British trade depend- j ing upo» the success of the British Fleet i in keeping tho eommasd Df the seas, i The Statist, from which we bare quoted, J Sums up the position thus;—"AH the

conditions are favorable; first, to the maintenance of British credit and to the credit system of the world; Becondly, tj the maintenance of British trade at a high level and the ability of the British peoplo to import and to pay for all the food and material they need; and, thirdly, to the raising of all the money, however great the sum that may be needed, to carry the war to a successful issue. Economy, however, is desirable. All that is necessary is that the money we havo been lending to foreign countries, and which last year amounted to £200,000,000, should now be devoted to war purposes. If a greater sura than a year is needed for the prosecution of the war, then it may be necessary to effect a certain measure of economy in order that the savings may be greater. Should, however, circumstances arise, we have no doubt whatever that out of new savings the country will be able to raise some £300,000,000 of money in the year for war purposes over and above any sums it may obtain by the sale of Bome portion of its great holding of foreign securities. Thus as far as the financial situation i 3 concerned, the position is one of great strength."