Der Deutsche correspondent. [volume] (Baltimore, Md.) 1841-1918, 1916-10-10
GMRAIAN wAR FINANcE.
By Professor Moritz Julius Bonn,
President of the Commercial Uni
versity OF the City OF Munich.
lContinuation.l
CURRENCY INFLATIoN.

rency imitation and the outcome Of an
oyerissue OF notes? The clearest
sign Of currency deterioration it is
said is q rising price. That, no
doubt, is true to a limited degree. II
prices rise it means that the value Of
the goods Is enhanced, whilst the
value of the money wanted to buy
them is diminished. But this does
not tell us anything of the cause of
the change. Prices in Germany have
risen considerably. Prices for bread,
milk, butter and meat have greatly
increased According to British
statistics, there has been a rise in
prices in Berlin Of about 1l6 per
cent. Is this rise due to an over
issue OF German bank notes and is
this Overissue due to the distress of
the German Government, who have
to finance the war by borrowing
money from the Bank? The Allies
have tried hard TO prove this. In
doing so they deprive themselves OF
the only argument that is to their
credit so far: the partly successful
blockade They have, no doubt,
succeeded in making conditions OF
life much harder for the German
consumer. They have conferred q
great boon on the German producer.
They have showered upon him such
blessings as enthusiastic protection
lists usually promise their supporters.
If 10,000,000 tons Of foodstuffs have
to go as far as 100000 tons do in
peace time, a rise in price is un-
avoidable. II is due to relative
scarcity, and so far the Allies may
congratulate themselves. They went
farther, of course, and tried a kind
of economic frightfulness" which,
they thought, would bring the Ger
man people to terms.
Shortage on the one hand and in
creased demand on the other hand
have brought about a big rise in
prices. II the rise were due to cur
rency imitation it would be fairly
uniform for all commodities. That
is not the case. Wherever supplies
are ample, there is but a small rise.
The price of German rails has gone
M from about $2S a ton in 1912 to
$50, a very small rise, indeed, If
general war conditions are taken in
TO account.
PRICES IN OTHER COUNTRIES.
Prices have risen in other coun-
tries as well as in Germany The
rise in London was 81 per cent, and
similar figures are given for France
1t was considerable in the United
States. In most countries there has
been q great increase in the amount
of circulating medium used. Is the
rise of prices due to currency in
1ation or is the increase of the cur
rency due to the unavoidable demand
in war time for new circulating
medium?
The statements of the Imperial
German Bank show plainly that the
note issue OF the German Empire has
grown greatly since the beginning Of
the war. The note circulation in
time of peace is about 00,000,000
to S60O,00O,O00. Since the war be-
gan It has occasionally reached ST.
750, 100000. To this must be added
q circulation of about 5000 900
to $3.50, 100000 currency notes. AS
large share of the notes has been
issued against treasury bills, the cry
has been raised Immediately that
Germany was financing the war by
printing notes. The increased cir
culation was used as a proof of this
combines private bills and treasury
bills, no absolute figures are avail
able. But as the maximum issue of
bank notes not covered by gold never
reached 5.000.000,000 marks, it is
safe to conclude that the Imperial
Government at no time secured more
than $1,OO0,0 100000 by the issue Of
treasury bills to the Bank. The
~. X q ka
tween 80 per cent. to 90 per cent. of
the war cost, betrayed from loans by
long-termed obligations. They have
made far less use OF treasury bills
than France or England. The in
creased note circulation was not due
to government exigency. II is the
result of the war boom visible in all
countries. If that we're not the case,
why did England issue currency
notes? In fact, the increase of note
circulation Is much greater in Eng
land than at is in Germany The
German note circulation, everything
included, is about three and a half
times as big as in time of peace; the
British note circulation is about five
times as great Moreover, the Ger
man note circulation has to serve a
territory greatly enlarged by the
occupation OF Kurland. Poland. Bel
GUM, etc. This territory needs about
$250,000,000 German bank notes.
At a moderate estimate, the German
note issue serves about 100000
people in time Of war, against 67,-
100000 people In time of peace.
Moreover, in time Of peace there is
gold circulation varying between
$3.50, 100000 to $500, 100000. This
circulation was Withdrawn when the
war began The gold was handed
over to the Bank. The gold reserve
of the Imperial Bank rose from
$500, 100000 to nearly 100000, 900.
AS there are no gold mines in Ger
many and as gold imports are inn
possible, the gold collected had to
come from the circulation, namely,
from the pockets of the public. It's
place had to be filed by notes. What
might be called the excess issue Of
notes over the peace circulation
(cash and notes combined) is prob
ably not more than $600.000,000. IL