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For instance, a Dutch speculator might have bought 10,000 for 100,000 guilders and at the same time 300,000 marks for another 100,000 guilders: this was in the early part of 1916 when it was doubtful which side would win the war. On Jan. i 1921, if he realized his holdings he would have gained about 10,000 guilders on his sterling but lost 70,000 guilders on his marks. Should, however, this speculator have been tempted by the greater depreciation to have bought Austrian crowns and French francs, he would have lost half his money on the realization of his francs and practically the whole when he sold his crowns. It was, however, chiefly in their mark investments that neutral states lost a large proportion of their war profits.

Another very favourite speculation was the Russian ruble. Speculation in this currency started very early in the war and continued long after the establishment of the Soviet Government. To a great extent it took the form of buying actual ruble notes, and large masses of these came to Europe partly via Scandinavia and partly through Siberia. Many of them found a home in America, but large quantities remained in Sweden and in England. It was somewhat strange that this buying of ruble notes should have continued notwithstanding frequent announce- ments made by the Bolshevik leaders that it was their intention to issue fresh notes in sufficient quantities to destroy effectually their value as a purchasing instrument. It was only when it was realized that the Soviet Government were printing so-called " Imperial " notes in limitless quantities, using for that purpose the original plates and producing a spurious article quite un- distinguishable from the original, that the speculators at last realized that their rubles were not only absolutely worthless at the moment but that there was but slight prospect of their having any value even in the distant future.

It was not however until the Anglo-American exchange was decontrolled, and restrictions as to dealing in certain exchanges were definitely removed in the belligerent countries, that specula- tion became general. Decontrolled exchange without a gold basis presented all the elements dear to the speculator an un- limited supply of the article, violent and frequent fluctuations, ease in buying or in selling to any extent, no fear of being " cornered," and an international market. The volume of spec- ulative business soon became much larger than that of transac- tions done for legitimate trade purposes. But foreign trade could still be carried on without the merchant running exchange risks unless he decided to do so. A system was elaborated by which for any bona-fide trade transaction a merchant enjoying good credit could purchase or sell his foreign exchange at a rate based on that of the day on which he did his transaction, for future delivery at dates that synchronized with his requirements. It was only when trading with countries whose exchange could not be sold in the ordinary way for immediate delivery, that he was unable to arrange for his future deliveries.

The Ter Meulen Plan. To avoid this difficulty, a scheme was drawn up in the autumn of 1920, known as the " Ter Meulen Scheme " (from the name of its originator, a partner in the firm of Messrs. Hope & Co. of Amsterdam). It was accepted by the League of Nations and was intended to assist impoverished nations which under existing circumstances were unable to attract funds for the financing of essential imports. Up to the end of 1921 this scheme was not in actual opera- tion, but the plan proposed was recognized as one which would have an important bearing, if adopted, on the business of foreign exchange.

The Ter Meulen Scheme was as follows, the text of the League of Nations articles (Nov. 1920) being here slightly abbreviated:

INTERNATIONAL CREDITS SCHEME

An International Commission shall be constituted under the auspices of the League of Nations.

The Commission shall be appointed by the Council of the League of Nations and shall have discretion to appoint agents and sub- Commissions.

The Governments of countries desiring to participate shall notify to the Commission what specific assets they are prepared to assign as security for commercial credits to be granted by the nationals of exporting countries.

The Commission, after examination of the assets, shall deter- mine the gold value of the credits which it would approve against the security "of these assets.

The participating Governments shall then be authorized to issue bonds to the gold value approved by the Commission. The bonds shall be in such form, with such date of maturity and rate of inter- est, as the Commission may decide and shall, in particular, enumer- ate the assets pledged against the bonds. The denomination of each bond and the specific currency in which it is to be issued shall be determined by the participating Government in agreement with the Commission, in accordance with the conditions applicable to the particular transactions in respect of which they are issued.

The service of these bonds which will be obligations of the issuing Government shall be specifically secured out of the revenue of the assigned assets.

The assigned assets shall be administered by the participating Government or by the International Commission as a majority of the Council of the League of Nations may determine on the pro- posal of the International Commission.

Out of the revenues from the assigned assets there shall be pur- chased foreign currencies sufficient to provide (a) cover for the coupons falling due in the next year, (b) a sinking fund calculated to redeem at maturity 10% of the bonds outstanding, (c) a reserve in such foreign currency or currencies as the International Commis- sion may determine for the redemption of any bonds sold as a conse- quence of failure by the importer to fulfil his contract. Any surplus remaining after the provision of these services shall be at the free disposal of the participating Government.

The participating Government will be free either to pledge its own bonds as collateral for credits for approved imports on its own account or to lend the bonds to its nationals as collateral for credits for approved imports on private account.

Each bond shall before issue be countersigned by the Commis- sion in proof of registration.

The fundamental purposes of the scheme being to facilitate and expedite the import of such raw materials and primary necessaries as will enable the borrowing countries to reestablish production especially for export, bonds secured on the assigned assets shall not be utilized as collateral for credits for the import of other commodities.

For each borrowing country the Commission will draw up, in consultation with the participating Government, a schedule of approved imports which will be regarded as falling within the defini- tion of raw materials and primary necessaries.

Particulars of each transaction must be registered with the Com- mission, which, before countersigning a registered bond will satisfy itself that the credit is for an approved import and that the period for which it is proposed to be granted is a reasonable one.

The same conditions as govern the pledge of the bonds as the collateral for credits for imports on private account shall apply in cases where the participating Government pledges its own bonds as collateral for imports on Government account.

After having received bonds duly countersigned the importer will pledge them with the exporter.

Pledged bonds shall be dealt with as follows: (a) In the absence of any failure by the importer to fulfil his contract with the exporter, the coupons on their due date and the bonds as they are released shall be returned to the importer who shall return them to his Gov- ernment forthwith, (b) In the event of the importer not fulfilling the terms of his contract, the exporter (or his assigns) may either hold the bonds until maturity, or if he prefers he may at any time sell them in accordance with the laws and customs of his country, providing that before the bonds are sold a reasonable opportunity shall be given to the issuing Government to repurchase them by paying to the exporter the amount of his claim. The pro- ceeds of such sale shall be applied by the exporter towards cover- ing his claims against the importer. Any surplus not required for this purpose shall be accounted for by the exporter to the partici- pating Government, (c) Any coupons or bonds returned to the par- ticipating Government or purchased by such Government shall be forthwith cancelled in accordance with the regulations to be pre- scribed by the International Commission; cancelled bonds may sub- sequently with the approval of the Commission be replaced by other bonds either in the same or in a different currency in accord- ance with the conditions governing the original issue of bonds.

Bank Notes. An unusual form of speculation sprang up dur- ing 1918-9. Orders were received in England, France and the United States from neutral countries for the purchase of English, French and American bank-notes at rates of exchange very much more favourable to the sellers than those current for ordinary bank credits. The French and the American Governments very soon forbade the export of their bank-notes but the British Government, after giving the matter mature consideration, decided that more advantages than disadvantages were to be gained by permitting the export of Bank of England notes, even if the ultimate destination of these notes were found to be the