THE WAR AND THE MONET MARKET.

Star (Christchurch), Issue 805, 23 December 1870, Page 4

THE WAR AND THE MONET MARKET.

The Times has the following upon the probable effect of the war on the money market : —

The end of the war can hardly arrive without an addition being witnessed of at least 200 millions sterling to the existing debts of European States. Already more than a quarter of that sum has been raised, and Prussia and Bayaria are again seeking supplies, while in the background there ia the huge amount to be provided by France in the shape of indemnity and also for the means of reparation from the Tuin of the war, together with the requirements to establish a return to specie payments. How will the London money-market be affected by these needs ? Extraordinary as the impending operations seem, there is no reason to anticipate any serious disturbance from them. Germany and France can both, when peace shall have been concluded, raise from their own people whatever they may want, and as regards Germany this facility is even now so great that her stocks are issued at a price too high to attract any capital from this country. Of course, if we were to subscribe largely to French loans our rates of discount would at once be influenced, but just according to the pressure thus occasioned such investments would be checked and resales would be induced. It may be argued, however, that on the conclusion of peace and the resumption of all the ordinary exchange operations, if money should be in great demand in France and Germany, specie would forthwith flow from this side to find employment at the higher terms there offered until the rates of the London market were brought nearly to those of the Continent. This would undoubtedly be the case, and hence the question to be considered is whether any such demand for currency at the Continental centres is likely then to be experienced. The war over, the heavy amounts of coin distributed among the armies would gradually find their way back to the uses of commerce, together with much of that at present secreted by the peasantry, so that the available circulation, instead of becoming more restricted, might experience a considerable increase. But the mode of payment of any indemnity that may ultimately be exacted from France by Germany is a point for inquiry. Whatever the amount may be— 4o, 60, or 80 millions— Germany would not be likely to accept- it'in the form of French Eentes. It will most probably be required in cash, and in speedy instalments. Perhaps, of the 53 millions of bullion held by the Bank of France at the beginning of the war, about half may yet rem, am. The balance of the indemnity would have , to be raised by' loan, on terms that would .attract the hoards of the general population, or by buying up these hoards at a premium by means of increased note issues. In either case the active currency would be : increased instead of diminished, and although the supplies drawn forth Would have to be sent to Berlin, their influence, so far as Europe might be concerned, would be the same. Moreover, it may be presumed that much of the amount sent from France to Germany would soon find 4 its way back to France in discharge of the yariouß vouchers given by the German ' army for requisitions made during the invasion. Under the ' circumstances a return to specie payments in France could not be looked for until the nation had experienced a long period of recovery, and therefore the necessity for providing for that contingency need not form part of immediate calculations. The chief remaining want of the country would be the means of supplying the void which, must now have been created in the stocks pf all kinds of imported produce, and ipr this purpose, as well as for the restoration of buildings, railways, and other" public undertakings, great efforts will have to be ii-a.de by the aid of municipal, provincial, and other forms of credit. YEtence the: drain of gold ffom;ithe country must be expected to be he'avy 01 until the population shall have again recovered their wealthproducing: power ; but there is ground to believe that tlie latent amounts which 1 " can be drawn forth, judging

from the estimates, long current as toi the quantities spread among the French population, will be fully equal to the need. As to the momentary effects of our own debts to France, consequent on our large purchases of cotton and other produce consigned originally to French ports, but diverted hither, it is to be borne in mind that this produce is as available as gold, and that we have also large holdings of Bentes and of various Continental stocks lately bought and paid for, and which will always be useful for exchange transactions. Looking at the whole of these considerations, the apprehension of sudden changes or difficulties in the money-market as a consequence of peace may apparently be dismissed. Indeed, a prolongation of the conflict might be more calculated to produce such changes, by delaying the power of France to raise money at home, and compelling her for a time to resort to this or other markets for indispensable supplies. Finally, the question remains,— Horn is France, with such additions to her debt as must now be contemplated^ to meet thd pressure they must create wpon her through future years ? On such points there is always needless fear. England and Holland, the two most deeply indebted countries of Europe, present examples of the most solid wealth, and in the United States there never were such evidences of financial power as those which have been exhibited since the creation of their enormous mass qf federal obligations. The annuities charged upon posterity represent, in their amount of principal, a tangible and marketable property, the value of which in the main is liable to be influenced only by the ' degree of faith that may be entertained in the willingness or ability of future generations honestly to recognise the liabilities to which they bave succeeded. If the French people Bhow a patriotic determination under all circumstances to maintain the public credit, there is no reason why they should not, after the termination of their struggle, by devoting themselves to the peaceful development of their wonderful resources, rapidly attain a height of prosperity beyond any they have yet realised; and to this view j may be added the expression of a conviction that should they happily have the courage to venture upon unqualified free trade they would, before ten years had passed, become, as regards i their universal wellbeing and their superiority of power in accumulated riches, the admiration or envy, as the case might be, of their now triumphant German neighbours.