called the par of exchange—i.e., 59.26 florins would be equal in value to 100 marks. There would be debts in Amsterdam due to Berlin equal to the debts in Berlin due to Amsterdam. These would be settled by the merchants in Berlin, who had sent goods to Holland, selling cheques on Amsterdam to merchants in Berlin, who had purchased goods from Holland. Suppose the goods which were shipped to Holland from Germany were less in value than the goods shipped from Holland to Germany, then, evidently, there would be more buyers in Berlin of exchange on Amsterdam than sellers, the price would begin to move from par, and the buyer in Berlin would have to take less florins in Amsterdam for his 100 marks. The only check to this fall would be the export of gold. If he could not obtain gold, the exchange would fall further, and the merchant who bought the exchange would have to give more notes to the seller. Consequently the cost of the commodities would be higher, and the note would buy less than it would have bought if it had been exchangeable for gold. Since the beginning of this war the merchants in Berlin had to pay 100 marks for 54.20 florins on an average, showing a loss of over five florins per 100 marks, or about 8½ per cent. The exchanges show during the whole period of the war that the exports from Germany to Holland have been less than the imports from Holland to Germany. The exchanges have continuously been below par, the prices of the goods have increased correspondingly and the consumers have had to give more notes. Consequently, during the whole time, the notes have been at a discount. In the case of the Scandinavian imports and exports to and from Germany we find the same thing. The exchanges with Stockholm, Christiania, and Copenhagen have all fallen, showing in each case that merchants in Germany have not been getting par value for their goods. The par of exchange between New York and Berlin was 95.28 cents for four marks. There were more sellers of exchange in respect to goods shipped to Germany from America than buyers of exchange for goods shipped from Germany to America, and four marks had been worth as little as 86 cents in New York, which meant a loss of about 9½ per cent. If there was a rise in price for any other reason it would cause a still larger loss on the note.
These are the inevitable results of refusing to pay out gold, but the designers of these schemes knew that, whatever happened, they must economize their gold. Nevertheless, they
