GERMAN WAR FINANCE.

Dominion, Volume 9, Issue 2793, 10 June 1916, Page 4

GERMAN WAR FINANCE.

Dn. Helfferich, the Treasurer of the German Empire', has received the endorsement of the Reichstag to a further war'credit of £600,000,000. This will make the fifth of such credits. '-and will raise the total . war credit granted to the German Government'to £2,405,900,000, as under: £ First—September, 1914 233,000,000 Second—Jtaroh, 1915 152,300,C00 Third.—October, 1915 600,000,000 Fourth—March, 1916 530,000,C00 Fifth-June, 1910 600,000,000 £2,405,9C0,C00 The figures show that the cost of tho war to Germany is in'an. ascending scale. Besides these credits the German Government has resorted to the issue of sundry notes. It will be seen from the above figures that the first credit with the paper issues was sufficient for seven months' war costs, and the second credit bf £452,900,000 was also sufficient for seven months. The third credit of ,£600,000,000 lasted for five months, and the fourth; of £530,000,000 is apparently only sufficient for a little more than three months. Swiss bankers, who arc in fairly close touch with German finance, did not hesitate to openly declare that the fourth war loan issued by Germany was "an unqualified failure," notwithstanding announcements to the contrary made in Germany. A financial writer in the Lausanne Gazette, in' a critical investigation of the financial position in Germany, pointed out' that all loans issued prior to the war, including.Reichsbank notes in circulation and those of the Treasury, besides the bonds of the Seehandling amounted to £1,400,000,000, of which £719,000,000 represented exhausted credits, Treasury bonds or drafts, and notes of private banks. To provide any new money tho fourth loan would have had to exceed the shortdated obligations, that is' to' say, a sum in excess of £719,000,000 would have had to' be raised. To do that the writer asserted would not be possible, for "it would mean that all notes of private banks would have to be withdrawn from circulation in order to release tho Treasury drafts and bring back short-dated credit to its normal position. But those notes would have to be changed into lleichsbank notes, as happened on the occasion of tho previous loans, and resulted in a heavy increase in Reichsbank notes."

German war finance, as. lias been pointed out before, is on an entirely different basis to that of the British. The British Government has not borrowed a single sovereign without providing for interest and a generous sinking fund. The Budget for 1916-17 provides for a revenue, derived almost entirely from' taxation, of £502,275,000, an increase of £75,950,000, as compared with the year 1915-16. . If the war were to end by Marcji, 1917, and the present British taxation be continued, as it will_be, the revenue for 1917-18, assuming that it was the same as that for the current year s and that the war expenditure was eliminated, would a surplus of about £85,000,000, which would go in the reduction of the floating debt. The German Government has made no serious effort to impose additional taxation, and apart from a tax on war profits it is difficult to see from what source new taxes are to be derived, as Germany's trade to-day is negligible. Germany has been paying interest on'her war .debts by furtner borrowing, and the flood of paper money in the country is enormous. The fall in the German exchanges in all. European neutral countries and in the United States furnishes proof .of the straits to which the German Empire has hcen reduced. Brazil is unablo to rccover a sum of about £4.000.000 for coffee

supplied .before the war, and those to whom the money is due are beginning to press their Government to take action. A day or two ago it was stated by the Times correspondent at Buenos Aires that the Argentine Minister at Berlin cablcd his Government that the financial and commercial situation in Germany was such that it was advisablo to warn the National Bank to restrict its facilities.for German clients, and the bank acted accordingly..

The durati6n of the war is one of the miscalculations of the German General Staff, which has had a disastrous effect on German finance. The position in Germany gets worse every day, and national bankruptcy is not beyond the bounds of probability. The vast quantity of paper on issue now, which includes bonds and securities of all kinds, notes of the Imperial German Bank and the private banks, and the war loan banks, will' como up for redemption, ind with her shattered credit Germany will ho unable to pay the bill. To repudiate the debts.due to her own people would be the easiest and simplest thing to do, and is just what is most likolv to be done. Indeed, there is already a suspicion among the German people that this may happen, and it has militated against the success of the last two loans. A correspondent to a literary contemporary 'has discovered in Swift a singularly accurate forecast of the present financial position of Germany, contained in the following lines: Fivo hundred millions, note? and bonds, Our'stocks are worth .In value; But neither lio in goods, or lands, Or money, let me tell you. Yet though our foreign trade is lost.' Of miglity wealth we vapour; When all the richcs that wo boast Consist in scraps of paper. Germany's war finance policy was based on the expectation of a short war and the payment of huge indemnities by ner conquered enemies. The war has not been short, and the prospect of indemnities to recoup her for her colossal outlay is now beyond the realms of possibility. The result to-day is a perilously unsound -financial, position .which threatens, the. stability, of the whole finance of the country and . spells disaster, for its people. It" is well that this phase of 'the situation should:be borne in-mind : when estimating the relative .positions-of the opposing , nations as the war progresses. It is not merely, on the battlefields that, the pressure of the struggle'is ' being' "final breakdown- of Germany ■■ may be greatly- accelerated by .the financial drain on. the. pockets, of the German people, with its unpleasant attendant possibility of" repudiation by the Government of its' obligation to repay the money now borrowed. The. people of Germany can have, little faith in scraps, of paper offering no better 1 security than the signature of their own Government.