The New York herald., 1878-12-20
Financial Depression In Europe.

last few years are to be accounted for by the
enormous waste Of capital in war. This
theory needs to be taken with great abate-
ment. 1t is true enough that the American
civil war; the Franco German war and the
Russo-Turkish war have engulted much
capital which might otherwise have given
employment to peaceful industries; but
this loss of capital furnishes but
partial explanation Of the all-per-
| vading distress. The nations which
were the chief sufferers by great wars are
not those which have borne the brunt OF
| financial distress 1t did not come upon
US until more than eight years after the
! close Of our civil war; if it resulted from
| the mere destruction of capital the effect
should have been felt sooner. Great Britain,
which has had no war OF any Importance
since the fall Of Sebastopol, is at present
the chief sufferer Of all. France, the nation
which was trodden down most helplessly
! by war, is that one Of the great nations
which has been visited most lightly by
| financial distress. Germany, her conqueror,
| whose losses were compensated bya colossal
! indemnity. has been one OF the chiefsufferers
! from financial prostration. The theory in
| question does not accord with the facts
If this theory were correct France should
have suffered the most crushing collapse
| instead Of escaping with the least disturb
| ance Of her industries. Great Britain,
which has sunk no capital worth naming
in war, has fallen into a state Of extreme
depression.
Various minor causes have contributed to
hle result, but the main cause is not the
destruction OF property by armies and the
payment Of war indemnities. The chief
cause is the same in all the countries
to which this widespread stagnation
has extended, and it is precisely an
enormous imitation Of values followed by
the inevitable reaction which is the sequel
of over-stimulated activity. The initiation
in our own country is too well understood
to require illustration. The imitation in
Germany is evident to all who follow the
course of foreign events. The stupendous
indemnity of thousand millions of dollars
which Germany extorted from France
swelled her circulation precisely as an
enormous emission OF paper would have
done, for it is a great fallacy to suppose that
there cannot be an excess of metallic money.
The inundation Of money in Germany
caused prices to rise, stimulated production,
pushed enterprise into daring adventures,
infamed speculation and made it reckless,
and led by necessary consequence to the
financial revulsion with which Germany
has been struggling for the last three or
four years. In France, where there was no
initiation, the consequences of imitation have
not been felt. To be sure, the Bank of
France suspended specie payments during
the war and did not resume for six or seven
years afterward; but the bank restrained
its emission of notes and maintained them
substantially at par during the whole
period. The heavy payments to Germany
tended to produce scarcity Of money, and
no more paper was put in circulation than
sufficed to maintain business on
sound basis. France has, therefore,
been q marvel of recupcration. Having es-
capped the dire evil Of imitation, her recovery
from her heavy calamities has excited the
wondering admiration Of all nations, while
the very indemnity received by her relent-
less foe brought imitation first and then its
inevitable consequence, . distressing busi-
ness collapse
Thus far all we have said will be admitted
without difficulty, but the reader is ready
to ask how the theory of initiation can be
made to account for the business dis
trcss under which England has been
.,,Aa for ha loaf
must recollect that imitation may pro-
ceed from other causes than excessive
issues Of paper money. A great influx Of
gold will produce this effect with as much
certainty as an expansion of bank notes or
government paper. 1t would not be diff
cult to prove this by reasoning, but we pre-
fer to rely on the great fact that gigantic
and mischievous imitation was caused in
Germany by the redundancy of gold
brought in with the successive instalments
of the French indemnity. From the begin
ming of our civil war up to the
year 1872 there was n great flow of
money into England. The issue Of legal
tender notes drove all the gold out of the
United States except what was necessary
for the payment of duties. That gold went
to London, the monetary centre of the
world. In the great war which afterward
arose on the Continent of Europe vast sums
of money were sent to London for safe keep
ing. An increase of money imparts stim-
illus TO trade, and it SO happened that, at
the beginning of our civil war, q vast field
was opened in England for the homo en-
ployment of capital. We refer to the i'm
portant revolution by which iron was SUBJ
stituted for wood in tho construc-
ton Of ships-a business which England
monopolized for the ensuing ten or twelve
years, while the demand for iron ships was
urgent and the profits of building them
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