Those who have been following German bank developments during the past two decades are not li to forget the crisis of 1901, and the vigorous denur tion of the German banks' participation in indust concerns. But the severe commercial depression of period was succeeded by great expansion of for trade, by the erection of new factories, and, especia by increase of output. There was no break ing association of bank and industry. The future of German banking system will depend upon the indust development of Germany and her economic position the world. In determining this position, the final i of the war will, of course, be an all-important fac But Germany's policy of 'peaceful penetration' stitutes a chapter sui generis in the recent history commerce; and, if we are to combat this policy exerted from the financial side, it is essential to see German bank as an expression of the national minċ part of a system which recognises no sharp lines division between industry, finance, and politics. as, after the 1901 crisis, there was a growing demand money in Germany, due partly to the effort to inten large-scale production, and partly to competition raw material, so after the present war we know t her industry will require credit in an easily access form. In self-defence our own banks will be compe to take measures to protect our industry from a sys which, before the war, was threatening our commer citadel. The report (dated May 1918) of the Committee Bank Amalgamations in England, shows no real c sideration of the question, How will these la financial combines affect financial conditions overs and our commercial expansion as a whole? The w and the facts which it has brought to light, in reg to the influence of Germany's Grossbankentum on wo politics and international trade, should produce so effect on English banking development. It is worthy note that in France, where German 'penetration,' dustrial and commercial, has been of a most insidio character, the charge is now being levelled against t French banks that they refused to give adequate supp to the national trade and industry, especially to n ventures. M. Albin Huart, in his brilliant essay, 'L'Organisation du Crédit en France' (1913, pp. 232–3), while strongly defending the French system as a whole, yet declares that only at her peril can France close her eyes to Germany's 'politique bancaire.' French exporters, he says, have been at a great disadvantage, as compared with their German competitors, because they have not been supported by credit facilities backed up by a vigorous national spirit. These factors have made the German bank abroad l'organe de la pénétration du commerce et des produits allemands dans les régions les plus reculées.' ? Some of our leading banking publications have long realised that greater enterprise on the part of British banks would have resulted in more attention to the financial needs of manufacturers. So far back as February 1900, the 'Journal of the Institute of Bankers,' while laying stress on making security the first consideration, was equally emphatic in declaring that there are many ways quite consistent with sound banking, by which the increase of our export trade can be encouraged.' A study of Germany's banking system would seem to suggest the following points as worthy of consideration by English bankers. (1) More specialised attention should be given to the foreign exchange department. Such a department should be an important adjunct of every great English banking house; and officials should be specially trained to deal with this business and with international finance generally, because branches of foreign banks, working exchange operations almost as a special preserve, attract other profitable business which our banks lose. (2) In Germany young men enter upon a banking career in the full conviction that there is ahead of them a wide scope of activity of ational significance. The big banks in Germany, however false their ideals from a cosmopolitan point f view, produce big men. In the sphere of interational finance the Riessers, Gwinners and Havensteins how a mastery to which special study has contributed much as natural gifts. (3) Closer co-operation between he banks of the British Empire would be a step in he direction of counteracting foreign competition, and would react favourably on the Empire's international trade as a whole. The recent German amalgamat are not a precautionary measure to face the orde war, but a continuation of the process of econ organisation to deal with post-bellum conditions. ( a strong united front will enable us to meet Ger competition. (4) For about half a century Germany shown more skill than any other European countr turning to advantage what is called Kreditpolitik, particularly in using the London market to give effe this policy. German bankers are now devoting 1 attention than ever to devise means for restoring national finances and expanding the export trade the Deutsche, Dresdner and Disconto are to be allowe continue operations in London after the war, and t reinforced by the Darmstädter-such is the rumou the City-we shall have the four renowned D's manently fastened on the heart of British finance; they may be confidently expected to work harder 1. ever, not only to exploit all opportunities which London money-market will afford them, but to pror German interests along national lines.' The prop five-years' embargo is not likely to create any f notion on the part of the German banker concerning meaning of this expression. A. D. MCLARE gam Ons. orda eco Art. 6.-THE CURRENCY NOTE IN RELATION ΤΟ et G1. First Interim Report of the Committee on Currency and ing 3 The Federal Reserve Board Acts: Amending Act tori No. 25. 65th Congress (June 21, 1917). and tra 4. Speech delivered by Senator Owen, Feb. 25, 1918, on all introducing a Bill amending the Federal Reserve Act so as to establish a Federal Reserve Foreign Bank. 1918. 5. Memorandum explaining the desirability of supplementDing the existing laws in Greece relating to the Forced ant Currency and to the Exchanges by adapting thereto that rd portion of the United States Federal Reserve Act relating to their Banking System. Ionian Bank, London, 1917. Gold and Man-Power; and The Dragoumis Act, 1910, versus the Peel Act, 1844. Being speeches delivered by Falconer Larkworthy, C.O.R., at the Annual General Meetings of the Ionian Bank in 1917 and 1918. an 1. Die Entwerthung des Geldes. By Rudolf Dalberg. Berlin: Puttkamer and Mühlbrecht, 1918. L&Die Entwerthung der deutschen Valuta im Weltkrieg. By D. W. Bloch. Basel: Finckle, 1918. DURING the present war England has passed from a metallic to a paper currency. The process of substitution has been so imperceptible and so frictionless that we are only now becoming conscious of the change, although it was practically accomplished before the end of the year 1916. And we are as yet without any clear consciousness of its significance. Generally speaking, every war of modern times, that is since the invention of paper money, has produced a similar revolution, and quite naturally. But it is remarkable that a State so identified as Great Britain has been with a metallic currency and with the gold standard should have made the transition to a paper currency with so little protest and should have adapted itself to a comparatively strange currency habit with such ease or such indifference. Still more remarkable is it that the Vol. 281.-No. 458. 8 H change was not, in its inception, either desired or designe We have stumbled upon a paper currency as blindly we have stumbled upon an Empire; and even in th process of the change we have held up our hands ar protested our allegiance to the pound sterling. Th too without the slightest suspicion on our part of sel deception or inconsistency. The explanation of suc incongruity lies in the fact that events, the econom experiences and necessities of the moment, have shape and determined our policy. We have been led on, ste by step. As each new situation arose, it has been defineċ and its problem has been solved solely by practical nee and without regard to theory or symmetry of policy. At the outbreak of the war a tremor of nervousne ran round the whole earth. This nervousness evince itself, as it always does, in a tendency to hoard. Cu rency media began to disappear, and men rushed to dra their talents from the bank and wrapped them in napkin. In the five days preceding the 1st of Augu 1914 the Bank of England paid out 27 millions to help t meet the rush; and on that day its balance stood at 17 millions with no abatement of the demand. The Banl therefore, appealed to the Government, and the Govern ment met the appeal by passing the Bank Note an Currency Act, authorising the issue of Currency Note and the suspension of the Bank Act. In order to appl the provisions of the Act to the needs of the moment, scheme was evolved for assisting the banks throughou the United Kingdom. Under the terms of that schem the Bank of England undertook on behalf of the Govern ment to advance to these various banks amounts o Currency Notes up to the extent of 20 per cent. of thei deposit liabilities. It is almost a literal fact that the issue which resulte was an issue of Currency Notes pure and simple, and tha the Bank Act itself was never really suspended. For although at the outset (on Aug. 7-8) Bank of England notes to the extent of 3,043,000l. were issued, it wa simply due to the physical impossibility of printing and despatching Currency Notes in sufficient quantities to meet the instant need. These Bank notes were used simply as substitutes for the Currency Notes; and within three days, as soon as the available stock of the latter |