GOLD LEAVING GERMANY.

Star (Christchurch), Issue 11507, 1 October 1915, Page 4

GOLD LEAVING GERMANY.

FORCED PAPER MONEY. £IOO WORTH £75. 1 - | The following article, written by tin* city editor of the "Daily Mail," give* the news of one of the most prominent financiers in the C.tv of London:— Financial straits m Germany must soonar o;r later begin to tell upon the war .spirit of her people. The sever.; hampering of her industries, the ruin of so mo 0 f them, the depreciation of her paper currency, the necessity of making payments in gold—all such influences as these muai tell. That the British Nary has in great measure stopped G&rmar.y's import and export trade has punished her severely, but from a purely financial point or view it has not been an unmixed evil for her. W bat she does not import she has not to pay for, and that means enforced economy. As a country largely self-supporting, she can supply her own necessities, using paper as tho medium of exchange. " With diminished! imports she can conserve her gold. A big gold reserve nuans credit and, in. th;n last resort, the means of payment. > We in this country oould reduce our imports with similar salutary effect, the financier jx>inted out, by taxing them. That would bring about economy and would add to our war funds. The result of turning our motor works into munition factories is that we are buying cars from the United' States. All imports should be taxed. Many a staunch free-trader in the City desires the taxation, of imports for war purposes. PAPER UNBACKED BY GOLD. But Germany, although benefiting I from enforced economy, must soon bej gin to bend under her severe financial i strain. Apart from any borrowing in ! her money market she has already | raised £070,000,000 by two war Loans—- ! the last, of unlimited amount, produced i £458,000,000, and she is prepared for | the issue of another nest month. Loan j success in Germany is not difficult to ; achieve. The Government, through its j specially created loan-banks, lends the people paper money in order that they may subscribe to the loan in paper and the ■Government makes its disbursements in paper. But this flooding of the oonntry with pnppr cannot go on. The gold backing of the paper, erven if it exists to the amount boasted in the returns of the IWchsbank, does not suffice. That is shown by the fact that German cur-, rency is quoted at a discount all aver the world. In the United States it is difficult to get any quotation at all now. The latest quotations from various centres show that money which Germany herself regards as worth £IOO is regarded by the rest of the world as not worth £75. 'This depreciated paper ha® to be accepted by the German farmer, for instance, at its face value in exohange for the foodstuffs with which he suppias the troops. That he will not go on accepting it, having regard to its continued depreciation seems to our financial authority oertam. The farmer will begin to see that there is grave doubt of nis ever getting; the money for the paper which is forced 1 upon him. NEUTRALS GETTING THE GOLD. The City authority finds it impos .ib'o to believe that the large gold reserve which Germany boasts in her Reichs-j bank returns really exists, in spite or all the scraping together of gold which she is practising at home and abroad—she evidently gets much of the _ gold/' leakage from this oountry. In his expert eyes the returns, with their steady increase week after week in gold holding, prove too much; such a steady increase is impossible. For one thing, the neutral countries with which Germany can still trade nondemand gold and get it, as the returns of their banks show. A year ago the Bank of the Netherlands he.d thirteen millions sterling of gold; it now holds thirty millions. Sweden and Norway held, eight millions; they now hold nearer ten. Switzerland held seven millions; she now holds nine, and so on. The increase must be due to German payments of gold, and yet her gold holding goes on steadily increasing—according to her own returns. She has had to begin to pay out gold, and when once an outflow of gold begins it has a habit of assuming large proportions.