GERMAN CREDIT.

Taranaki Daily News, 22 November 1917, Page 3

GERMAN CREDIT.

A SAD DEPRECIATION. LFJ'LOT OF THE STIiAJX OF WAIL Tlie criterion of foreign exchange i.s tl.e one best applied to the credit of a belligerent counlry, because experience lias shown that, internally, the dillieullies of war iiuance can fairly easily be met .say s a writer in an exchange)! In this respect practically all the belligerent countries have had similar experiences. The outbreak of war in 1!!14 gave finance and industry a severe shock everywhere. But the industrial nature of modern war and the improvement of the .machinery of modern finance have enabled that shock to be almost forgotten. All the belligerents have been forced to alter their economic life in the direction of concentrating industry upon the one work of producing munitions of war. This concentration having been successfully effected', unemployment has boon avoided, and with an inflation of currency varying in the different belligerent, countries, internal solvency lias been almost everywhere maintained.

EXCHANGE RATES IN HOLLAND. Thus it is only in neutral countries that a just estimate of the respective credits of the belligerents can be formed. And the best, means of making this estimate is to lie found in the quotations of belligerents' currency in neutral markets The country in which the respective credit of, say. England r.-d Germany, can most fairly be estimated seems to be Holland, which is separated, only by a land frontier from Germany, and by a short sea. passage from England. One may then describe the course of exchange rates in Holland on London and on Berlin, which show the market value of British and German currency expressed in Dutch money.

While during the' first M months of the present war German currency had only depreciated in Holland by 14.7 per cent., between October 1 and December 31. I!HS, this dpreciation had increased to 25.7 per cent. This relatively rapid depreciation in the value of the Reiclismark during the last quarter of IMS is acknowledged by economists to indicate that tin- military activity of the Germans in that period was only made possible by a furt'ier decrease in productive activity in '!o:-;any which involve/ a virtual collapse of the remains of the German export trade. In August. 1013, ■Finance Minister Helfferieh stated that the depreciation nf the mark abroad was unimnortar But actions of the German Government have given thai; economist the lie. As from .Taflnr. rs. I'llfl, fr?o dealings in foreign exchange in Germany were forbidden, and such transactions i now only be arranged through the Tteiclisbank.

Yet despite the increasing ilir.v-" - ness o' lln'.-c (lovcrmncnt control. Hie depreciation in the mark has gone on apae; Through April and May. 191(1, the quotations of the tpjwU in Am*'

dam showed sortie reeovcrv from the lowest level previously touched. T'.ut in .Tune the decline began again, and continued steadily until "NTovomhor. At this point ihere was a period of relative steadiness. Hut in March, Ifli;. (i;n mark resumed its downward course, and as a rc='ilt. no doubt, of the HiitUh victories in (lie West and the declaration of war against Germany bv the TTnited States.'th-> deny 'ition in the value of the mark had by the middle of April. 101". amounted to P. 7.0 per cent. This depreciation may be stated in another wav, namelv. that a Orman buyer of Dutch goods who would have paid 1(1(1 marks f or them before the war had (quite ;arf from any rise !cli mnv have taken place in prices generally) to pav 1(!A marks for the same goods in April, l'.Uv. A STRIKT.VG COMPARISON'.

Tt may bo said, however, that a certain amount of depreciation of a belligerent's currency in a neutral cenire is inevitable, and that even British credit has not emerged from the ordeal unscathed. This seems true, but the following table shows that British money has depreciated to a very im:ch smaller extent- than that of Germany. Tt will further he observed that during the last year, while British currency recovered by 2 ))■>)• cent, in Amsterdam, German marks depreciated by a further 8 per cent.

The following table shows the depreciation in percentage of the mtes of exchange on London "and P/Crlin. as queloft in Amsterdam at the end of each month since October, - IDl5: Berlin. London. October, 1010 IS.I 7.0 Novmber 20 0 S.O December 25.7 10.0 January, IMG 27.0 n.O Februarv 25.0 S.O March ' 2n.fi 7.3 April 2'>.4 0.4 May 2-1.7 5.2 •Tune -20.1 f>.3 July -... 27.1 fi.n August ..- 25.1 4.2 September 25.2 l.fi October 25..1 -1.1 November ~ 32.2 .1.0 December 10.." :',..■; January, 1917 30.2 :i,4 February .110 2.0 March .' 1-1.1 2.S April (13) 37.C ii.S '

These figures show clearly enough that strain which will he put on German finance after the war if the country is to obtain the imports of raw materials from abroad which will lie necessary to restore the activity of German industry. Vet the stock of gold in the Reiehsbank (and gold is the only thing now left to Germany that she can export) is ev;'n now barely sufficient for internal requirements. Jt amounted on March SI, 1017. to t1'2'7,238,000. ?.y taking into account a holding of £in]l3s,ooo of Treasury notes, the Tieielisbank (which is no longer obliged to pay its notes t- i gold) was just able to maintain the proportions of one to three kid down by law as against the amount of the notes in circulation, which on that date amounted to £450,501,000. With the issue of only .£10.000,000 more notes, tin's legal proportion would have been exceeded. But (his the German Government dare not face, and much less dare it export any of the gold on which it base* its appeal I as a borrower to the Gorman investor.