The Goldfield news and weekly tribune. [volume] (Goldfield, Nev.) 1911-1947, 1918-03-09
CERMANY,s ENDLESS CHAIN LOANS

GERMANY is financing this war by the endless chaih sys-
tenn. which relieves the people of this generation OF part 81 W.
burden by ~postponing payments ana rnuu SIS oil the
credits and currency. The German governnem fhnouob the
naner money if reonires. regardless of initiation, through "1
po;cbshonk which is The national bank of Germany, IN
through the new loan banks, called Darienhkdssen, nrange-
in practice adjuncts of the Reichsbank; ahu dVo o. g. tha
ments for rectfying the finances OF Inc empire un'" wv"
war.
Reichsbank notes must be covered" by goo III ns t1ut 10
and bills of exchange having not more tnah Weo 49,
run. After the war broke out the amount of gold ana onlher
ciaI naner became Inadequate to "cover" the volume OF new
notes and a law was passed on August 4, 1914, Prosune "a'
three months treasury bills should be regarded az pn. - Co.,
change. The cash "cover" required by law was pro'ruou 40
at the same time by establishing loan banks WIN power "
make loans by issuing notes and empowering the heic h n tn =. "
include these notes in its cash balance ana 10 urea 'no" :" ~
respects as gold.
Every loan bank note thus used enables the helchsDank
to issue its own notes for three times that amount III 'ns
way the Reichsbank nominally complies with the banking q
by treating loan bank notes as gold for one-thlrd u me os
and treasury bills as bills of exchange to provide the other
two thirds of the "cover" for its notes.
The German government is responsible to the Reichsbank
ON its treasury bills and the Reichsbank is responsible to the
public on it's notes, but it is relieved from the repayment .
them in gold for the duration of the war and an unoelerhheo
period thereafter, which will probably be forever II uer"any
is defeated.
In the banking and currency department of imperial IL
nancing the German endless chain works in this way. me
German government discounts a parcel of three months treas
uy bills with the Reichsbank and the proceeds are placed TO
the governments credit. The Reichsbank then issues It's own
notes in payment of the credit balances so created and pays
them out for commitments OF the state, ana tney IuS pass H'o
the hands of the public. Most of these Reichsbank notes are
deposited with the jOint-stock banks, where they form the
base of credits extended by the joint-stock banks.
AT this stage these Reichsbank notes become port OF the
endless chain that carries along the funded debt OF the empire.
About three months before the government issues a loan it no
titles the joint-stock banks that it will allow four and one-haf
per cent on all deposits ear-marked for the sale Of special war
loan treasury bills at a preferential rate of discount on condI-
ton that the proceeds are used to take up the war loan. These
war loan treasury bills have nothing to do with the treasury
bills hereinbefore mentioned, which form part of the basis of
currency issues. When the other banks pay their subscrip-
tons to the war loan they rediscount their bills at the Rechs-
bank. AS the government pays out the proceeds of the war
loans by checks ON the Reichsbank the other banks liquidate
these special discounts. The German government issues its
great war loans in March and September and the proceeds are
Immediately applied to payment of the treasury bills which it
previously discounted at the Rechsbank and which that insti-
tuition distributes among other banks.
Special loan banks or Darlehnkassen, already mentioned,
have been created to issue currency and make dead LOANS"
such as commercial banks should not handle. They have is
sued about two billion dollars of currency and have done a
thriving business in loans to municipalities and German states
which the imperial German government has restricted from is
suing their own loans to the public. Manufacturers of NUM-
tons and other government contractors also borrow these
notes. This forced circulation of special loan bank notes is
one of the most remarkable and risky developments of war fl
nancing. These banks are to remain open for four or five
years after the end of the war to permit the orderly liquidation
of their peculiar loans-New York Commercial.