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 SIR EDWARD HOLDEN

In view of the attention now being paid to the influence of economic factors on the length and result of the war, it may be well to look at Germany's economic preparations for war, and the prospects of the measures adopted by them to stand the strain of a war which so far has proved far different from the expectation of the German Government.

Economic events in Germany immediately before and after the outbreak of war were significant. On July 18 last, the Dresdner Bank caused a great commotion by selling its securities and by advising its clients to sell their securities. This was recognized as the first semi-official intimation of a probable European conflagration and Berlin became apprehensive. War was declared between Austria and Servia on the 28th, people were seized with panic and great runs took place on the Reichsbank for gold, and on the Joint Stock Banks of Germany for gold or notes. The Reichsbank lost 10 millions sterling of gold or thereabouts, and to prevent further loss a measure was passed prohibiting the bank from paying any more of its notes in gold. To meet the difficulties of the other banks, the Reichsbank discounted during the month of August about 200 millions sterling of bills. Of this amount 117 millions were drawn out in notes, with which the banks were enabled to meet the runs.

Germany next proceeded to establish War Loan Banks, War Credit Banks, and War Aid Banks all over the country under the patronage of Corporations, Municipalities, and private financiers, and to make use of the Mortgage Banks already established. The Reichsbank had the right to issue notes to any amount, provided it held as cover practically one-third in gold and two-thirds in bills of exchange. As the 238