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 Reichsbank was to play an important part in war finance, they were careful to keep down the issue of their notes as much as possible, as they knew that criticism would be directed against them. They, therefore, proceeded to issue, and were continuing to issue, notes through the various war and credit banks. Government securities, other securities, and produce are pledged with the war banks, advances to the extent of 75 per cent, being made on the first-named, and on the other classes to the extent of 45 per cent. These advances were made in war bank notes, which were legal tender and perform all the functions of money. The mortgage banks were under the control of Chambers of Commerce and Municipalities, and made advances on the mortgage of properties by an issue of notes which were legal tender and performed all the functions of money.

In this way the country was gradually being supplied with the currency required for carrying on the war, but, knowing that the eyes of the world would be fixed on their gold position, they were careful to maintain a difference between the Reichsbank notes and the notes of the two other classes of banks. The Reichsbank note, although it is no longer payable in gold, was issued on the basis of gold and bills of exchange, while the notes of the war and credit banks had no relation whatever to gold, and were issued on the basis of securities and properties.

The mobilization of the German Armies was financed by the notes of the Reichsbank for from four to six weeks, so that by the end of August, with the war and other demands, the total discounts and loans of the Reichsbank amounted to about 243 millions sterling and the total notes issued to about 212 millions. By this time the pressure on the bank was becoming too great, the war loan was issued and a sum of about 223 millions, partly on Bonds and partly on Treasury Notes, was raised. By the end of the year the whole of the loan was paid up and the debt to the Reichsbank discharged. This first loan was subscribed for to the extent of about 40 millions sterling by persons who obtained loans through the war banks, and 40 millions by depositors in savings banks, leaving about 143 millions to be subscribed by Joint Stock Banks and other people. Thus they saw people pledging their securities and properties and with the proceeds taking up the loan.

The Reichsbank at the end of December, on the basis of its gold, was able to issue a further 200 millions sterling of notes. The money for financing the war would therefore be obtained