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Rh expressed in terms of that currency, had increased. With few exceptions, neutrals as well as belligerents (the United States standing alone in this respect) had ceased to be on a gold basis, and in any case the value of gold itself in terms of commodities had diminished to about one-half. International trade had been dislocated, and diverted from its normal channels. The inability of Europe to export during the war had forced normal customers to look elsewhere, and to develop production at home or in new centres overseas; and Europe's need for imports had compelled realization of her foreign capital holdings, which were thus no longer available as a credit basis. Instability and depreciation of exchange impeded both buyer and seller. With half the world producing less than it consumed and having insufficient exports to pay for its imports, credits alone could bridge the gulf

TABLE V. Notes in Circulation (000,000' s omitted), 1913 and

Country

Notes in Circulation.

1913

1919

Belligerent Countries of Europe.

Belgium (Franc)

1,067

4,786

Bulgaria (Leva)

189

2,299

France (Franc)

5,713

37,327

Germany (Mark) ....

2,562

62,036

Greece (Drachma) ....

311

1,412

Italy (Lira)

2,783

18,814

Portugal (Milreis) ....

91

382

United Kingdom.

35

449

Austria-Hungary (Krone).

2,494

54-481

Finland (F. Mark) ....

113

1,124

Rumania (Leu)

571

6,603'

Neutral Countries of Europe.

Denmark (Krone) ....

151

489

Holland (Gulden) ....

3'7

1,099

Luxemburg (Franc) ....

6-2

224

Norway (Krone)

1 08

454

Spain (Peseta)

1,924

3,856

Sweden (Krone)

234

748

Switzerland (Franc) ....

318

i, 06 1

Countries Outside Europe.

Argentina (Peso) ....

777

1,278

Australia ....

9.9

56-8

Brazil (Milreis) ....

899

1,748

British India (Rupee)

645

1,829

Canada ($). ....

211

44 2

Japan (Yen) ^ ....

426

1,336'

New Zealand ....

1-7

7-8

South Africa ....

2-4

9-o 2

United States of America ($)

1,069

4,212

Uruguay (Peso)

21-5

69-3

1 Includes notes of National Bank of Rumania and notes issued during the German occupation; excludes kronen, ruble notes, etc. 2 March 1920. 'February 1920.

between seller and buyer, and credits were rendered difficult by the very causes which made them necessary.

Such being described as the position in 1920, the Conference came to its recommendations. And the Report premised that, first and foremost, what the world still needed was peace. "Finance" was, after all, only a reflection of commercial and economic life; as the wealth of the world consists of the products of man's work, the sum total of human prosperity could only be increased by an increase of Production; and all that organized international action could provide would be conditions favour- able to Production, the most important of which lay outside the financial sphere. Social content, and the "will to work," must first be restored. Yet, even if a maximum Production were to be attained, it still required a financial system which would facilitate exchange and distribution, and herein lay the problems which the Conference had met to consider. The financial state- ments presented by the various countries showed that, on the average, about 20 per cent of national expenditures was still being devoted to armaments, and the Conference affirmed that " the world cannot afford this expenditure." There must be an agreement to reduce it. In nearly three out of four of the countries represented, and in nearly n out of 12 of European countries, budgets in 1919-20 did not balance, and many of them showed no prospect of doing so in the near future. Where na- tional expenditure was higher than existing revenue, fresh tax-

ation must be imposed. Government subsidies; concealing the real cost price of commodities, must be abandoned. Loans required for urgent capital purposes must be raised out of the real savings of the people; and since these savings had so largely been pledged ahead for past war-credits, the first step must be to fund undigested floating debts. Currency inflation (which had substantially represented undertaxation or the existence of an unscientific system of taxation) must be stopped, and it was desirable to take any possible steps towards the restoration of an effective gold standard; but deflation must be carried out gradually and with great caution, and the Conference regarded it as useless to attempt to fix the ratio of existing fiduciary currencies to their normal gold value, nor would it recommend any scheme of "stabilization" for the value of gold, believing that neither an international currency nor an international unit of account would serve any useful purpose. Attempts to limit fluctuations in exchange by artificial control on exchange operations were futile and mischievous; but in countries where there was no central bank of issue one should be established, and if the assistance of foreign capital were required for its pro- motion some form of international control might be necessary.

TABLE VI. Comparison of Foreign Trade in 1913 and 1919 (value in dollars).

Imports

Exports

Value

Value

Countries

1919

1919

1913

1919

as %

1913

1919

as%

$(ooo,ooo's)

of

$(ooo ooo's)

of

1913

1913

EUROPEAN

United Kingdom

3,206

6,401

200

2,554

3,454

135

Germany

2,567

1,487

58

2,407

392

16

France.

1,625

4,044

249

1,328

1,114

84

Belgium.

895

665

74

701

271

38

Italy

704

1,835

261

485

539

III

Switzerland

370

660

178

265

612

231

Spain

252

176

70

204

257

126

Sweden.

227

612

269

219

379

173

Denmark

206

528

256

171

163

95

Portugal

96

114

1 20

38

57

'SO

Finland.

96

164

171

78

44

56

Bulgaria

36

55

153

18

33

183

Greece.

34

293

862

23

136

590

EXTRA-EUROPEAN

U.S.A..

1,757

3-733

212

2,448

7,751

317

India. .

733

935

127

809

1,237

'53

Canada.

659

906

"37

436

1,195

274

Argentina China.

479 416

60 1 900

125

216

501 294

948 878

189 298

Australia

380

364

96

365

576

158

Japan.

362

1,120

310

313

1,072

343

Brazil.

326

357

109

318

584

183

South Africa

195

205

105

132

209

158

New Zealand

104

130

125

1 02

229

224

Peru

30

53

177

44

H7

267

The Conference recognized that time would be needed for financial reconstruction, and some countries could not resume economic activity without foreign assistance; but a warning was given generally that external credits should not be accorded directly by foreign Governments. It was suggested that an international organization should be formed for arranging cred- its for states which needed the means of paying for essential imports, and such states would have to notify what assets they were prepared to pledge as security; bonds issued against such a state guarantee might be used as collateral for credits intended to cover the cost of commodities (the Ter Meulen plan: see EXCHANGES, FOREIGN). Meanwhile, international commerce should, as soon as possible, be freed from artificial impediments.

Finally, the Conference drew the attention of the League of Nations to the advisability of providing various miscellaneous reforms, unification of laws relating to bills of exchange and bills of lading, reciprocal treatment of branches of foreign banks in different countries, publication of financial information in a clear comparative form, an international clearing-house, and other such matters; and an international understanding was also advocated under which, while effective systems of taxation