Der Deutsche correspondent. [volume] (Baltimore, Md.) 1841-1918, 1916-10-14
GERMAN WAR FINANcE.
By Professor Moritz Julius Bonn,
President of the Commercial
University OF the City
of Munich.
(Continuation.)
II.
UNPLEASANT.


AS far as the decline of the mark
touches German trade with neutral
countries, it is undoubtedly unpleas-
ant. II does not affect the solyency
of the German Empire, but 1t affects
the cost of German imports. A
premium of 25 per cent. on German
currency means that Germany has to
pay rs per cent. more for her inn
ports than in normal times. This Is
precisely the problem which has con-
fronted the Allies in one form or
other ever since the autumn Of 1915,
when the rrst Allied loan had to be
contracted, because Sterling Ex-
change declined to 4.60 and the Paris
check to six francs. Without it the
costs of getting goods in the United
States would have gone on increasing
by leaps and bounds. And ever since
new credits have to be opened from
time to time, with the object OF main
tanning the exchange. As the London
Morning Post" has put it, when ex-
planning the recent rise of the dis
count rate in London: There is the
necessity for leaving no measure un-
tried which has for its object the
lessening If the strain, which Great
Britain has to bear in financing her
own imports and those of her Allies"
That is the reason why Great Britain
has consented to q loan on collateral
securities with a margin of 20 per
cent, at a rate Of over 6 per cent.
A like necessity does not exist for
Germany, as she cannot import goods
from oversea. An unfavorable ex-
change no doubt raises the pride Of
!. q n
tries and with il, cf course, the costs
of the war. But IL does restrict inn
ports to the narrowest limits pos
sible. 1t acts quite as efficiently
against suporfuous imports as the
governments anti-import legislation.
The deprecated exchange makes re-
mittances abroad more expensive for
Germany, but such payments abroad
Germany's obligations. aP
AS theN blockade made 1t pndesir-
able for Germany to float loans alb
road, she has remained a creditor ma
tion. She kept some OF her invest
ments abroad. She profits more by
the dividends than she ever did be-
fore; for a $50 dividend nets her al
most $50 marks, whilst before the
wants to sell the securities she can
make a special profit. A $1,000 bond
bought for 4,160 marks will now
realize SITS marks, or q rise OF over
20 per cent. A German could sell
per cent. Missouri Pacific for which
he had paid 70, at slightly above so,
without being a loser. Similarly for
eign subscribers have been attracted
n, ~
They get a thousand marks bond for
$172, whilst its par value is $237.5O.
No doubt, a speculative element en-
ters such investments, in so far as a
further fall in the exchange might
depreciate the annual dividend which
is paid in marks, but investors know
that such a decline is purely tenn
porary, whilst in the end the bonds
will be repaid at time when the
par has been recovered, and they will
be in a fair way Of making big
profit. Allied financiers have lately
been using this argument in the hope
of inducing Americans to subscribe
largely to French and Russian bonds,
as one can buy a thousand ruble for
$500, whilst their par value is $500.
It has not been pressed from the
German side, for Germany so far has
not been very eager to become in
| debted to foreign countries. But
whenever payments from foreign
countries TO Germany are made, the
unfavorable exchange is OF great ad-
vantage to her. The Germans and
the eAustrians, who send money home,
! gain 81 per cent. and more on their
| remittances. If their yearly savings
amount to $50,000,000, their rel
atives at home will get 100000, 900
crowns instead of 243,000,000.
SELLING FOR DEAR MONEY.
Moreover, the decline Of the ex-
change has favored German exports.
If Germany sells steel rails to Hol-
land at 1870 marks a ton, she gets rs
| forms for them at par; at present 76
| forms are not 1870 marks, but Ill
marks. Germany is enabled to sell
her goods abroad at a handsome
profit to herself, whilst the price she
has asked for them is not unreason-
! able Her industries are favored, but
speculation is handicapped. AS Ger
! man payments abroad are made more
expensive, German spectators are
discouraged from buying goods abb
| road, which they cannot ship, but for
which they have to pay Immediately.
AS long as Germany Is partly Isolated
and mainly self-supporting, the low
exchange is no serious handicap to
her. That Is the reason why she has
done very little to regulate the price
of her currency abroad. She has en-
acted legislation, regulating the sale
NJ foreign exchange, at home, so as
to make short sales difficult, but she
has refrained from taking steps sim
liar to those of the Allies. She has
undoubtedly sold many Of her for
eign securities and made an extra
profit on them on account Of the fall
in foreign exchange. But she has not
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