Der Deutsche correspondent. [volume] (Baltimore, Md.) 1841-1918, 1916-10-12
GERMAN WAR FINANCE.
BY Professor Moritz julius Bonn,
President of the Commercial
University OF the City
of Munich.
CContinuation.)

England has always boasted that
she is the only free gold market in
the world. She has tried to sub
stantiate her claim by pointing out
that her bank notes and currency
notes are at present the only notes
which are legally convertible in gold
Up to the outbreak of the war Eng
lands boast came true. London was
the place where the gold of all parts
OF the world converged. 1t could
only do so if free effux was per-
mitted. AS an English writer has
put it lately a free market in gold
means that if a foreigner is owed
pounds sterling in London he must
be paid the full face value of what is
due to him in gold, If he wants gold.
At the beginning of the war this sys-
tenn broke down. England's creditors
were not paid in gold. During the
first week in August, 1914, in fact,
they were not paid at all. First,
there was the extended bank hOli-
day; then, when their claims fell due,
they were postponed by morator
ium. England insisted on being paid
in gold. From August /, 1914, to
the end of that year the United
States had to export nearly $780,
00O, 900 gold-almost exclusively TO
the Allies. England herself sus-
pended all payments. The morator-
ium she insisted upon was probably
a wise measure necessitated by the
circumstances No blame is due to
British statesmen for having had the
courage to take an exceptional step.
But il is perfectly ludicrous that a
I'll, i he
payment of her business debts-for-
eign debts included--for several
months, struts about the world as
the teacher of international financial
morality
Lombard Street." British
author wrote, will have to moderate
its boasts about the only free and
open market in the world" II is
quite true today that on the statute
book the notes OF the Bank of Eng
land and the currency notes are con-
vertible in gold If ii were done on
big scale panic would be un-
avoidable. For even If the bank de-
posits could be ignored the combined
issue Of the bank notes and the cur
rency notes is 100000, whilst
the total gold reserve Is only $685.
600, 900. Fifty-hve million pounds,
which legally can be converted, are
materially not convertible, for there
is not enough gold to go around.
HINDERED GOLD.
The large imports of gold, which
come from the British Colonies, are
Offset by corresponding huge exports.
Evidently these are expected to grow,
for the Bank of England has just an
nounced that in future it will not
publish detailed statements about
gold movements Exports of gold
to the United States are not hamp-
cred, for they are of great import
ance to England. New York is the
great borrowing center. Plenty Of
gold means cheap money and cheap
money rates are of very great inn
portance to a country which has ac-
quired the habit of paying her debts
by the issue of floating loans. Ex-
ports of gold from the United States
to other countries are not free. Gold
shipments to Spain from the United
States have been interfered with by
pressure from England on the insur-
ance companies. Exports to Scandi
navia do not take place from the
United States, as England wants to
keep gold from these countries. This
prevention of the effiux OF gold from
the United States explains the pre-
MUM on Scandinavian currency in
New York. Even under the present
circumstances o rate of to per
cent. would cover all costs of trans
hitting gold to these countries from
the United States; a. rate of 1913
cents the crown shows a premium of
IA per cent in favor of Scandinavia.
In this way British exports of gold
are supervised and regulated by the
government after arrival in the
United States. This regulation is
done extremely wen. 1t could not
have been achieved if England had
not borrowed up to now over $780,
100000 in the United States, besides
selling that country 1,000,000,000
to $4,000, 100000 securities.
The British Government follow the
same line at home The above-men-
toned foreigner cannot export gold.
BY an army order of July 23, 1915,
even the British officers are exhorted
not to take gold TO France. And free
movement of gold exists only to such
countries as England wants to. load
UP WIN fAOlu.
The Scandinavian exchange and
the exchange on Holland often stand
at a premium in London. British
currency is at discount in these
countries. If gold were allowed to
circulate freely the value of the 6
could not be 1910 crowns in Scan
dinavia (the par is about 1916
crowns) No London merchant who
owed 1850 crowns in Copenhagen
(par value 81, 1,000) would be willing
to pay f1,100 in buying draft on
Copenhagen If he could export 81 900
in gold. The mere fact that an ad-
verse exchange has been maintained
in these countries for some time
shows clearly, not that the inward
value of the British currency has de-
preciated, but that there is no free
market for gold. For the purpose OF
regulating the exchange without
parting with gold, England has late
4 a a.. -.