Page:Great Speeches of the War.djvu/281

 One of the objects of the war bank notes was to drive gold from circulation into the Reichsbank. Any one examining the statement of the Reichsbank during the last three or four months would see that these notes formed a considerable amount of the bank's reserve. It was to be presumed that in this plan of mobilization the war banks would be able to increase their advances and their issues on the creation of every new War Loan. The charge to be made for the accommodation granted was from ½ per cent, to 1 per cent, over the Reichsbank rate, which was 6 per cent, up to December 15, and has been 5 per cent, since that date. The fact that there were to be margins of 25 per cent, on Government securities and of 45 to 55 per cent, on other securities showed that the "mobilizers" realized that they must provide against the possibility of heavy depreciations. The Reichsbank had 486 offices throughout the country, and each office, no doubt, would have the faculty for taking in the war bank notes and putting out Reichsbank notes. This meant nothing more nor less than an issue of Reichsbank notes on the basis of the securities of all these war banks. A most important feature of this mobilization scheme was that from August 1 the Reichsbank declined to pay its notes in gold. They made greater use of the mortgage banks, the notes of which were identical in power and use with the notes of the war banks. Another part of their scheme was to relieve the pressure on insurance companies by forming an insurance bank, which advanced 40 per cent, on the value of policies. These advances were paid in notes, which were exchanged for Reichsbank notes in the same way as war and mortgage bank notes. All these banks were authorized, in the first instance, to issue in the aggregate about 70 millions sterling of currency notes, but this amount was afterwards increased to about 140 millions. There was one great defect in these mobilization schemes. They may have for the time supplied all the currency needed for the wants of the people and for subscriptions to the War Loans, but the defect was that the Reichsbank note, which had hitherto been paid in gold, had now become inconvertible. This caused the note to fall to a discount.

To see how this depreciation in the note was brought about, I examined the exchange between Amsterdam and Berlin. If the imports into Germany from Holland were equal to the exports from Germany to Holland, we should have what is