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Sir Edward Holden's proposal is that the Act should be repealed practically in accordance with the system which has been adopted by the German Reichsbank. The principles which he enumerates, as those on which other national banks of issue work, are as follows: One bank of issue, and not divided into departments.
This was a very much larger amount than had appeared in the Reichsbank's return prior to the war, and was the result of the vigorous campaign carried on in Germany during the war for the surrender to the Reichsbank not only of gold coin but of gold ornaments of every kind.
The net result of these various measures was to reduce the gold reserve of the Reichsbank by more than half, the figures falling from $575,000,000 to $275,000,000 in September, 1919. It would be possible under the Treaty to take the whole of this latter sum for Reparation purposes. A sum of $25,000,000, $50,000,000, or even $100,000,000 might be taken for a special purpose.
Germany, when the war began, immediately relieved the Reichsbank from any obligation of meeting its notes in gold, and frankly went on to a paper basis. England has already shipped well over 200 millions in gold to America to finance her purchases there and those of her Allies.
But perilous though it actually was, it would have been intolerable but for the precautionary measures adopted in July and the ingenious devices applied by the Reichsbank immediately after. The first step taken was to substitute short-terms credit for long. The gold in the Reichsbank increased steadily, and from 1,009,000,000 marks on July 7, 1913, it rose to 1,356,000,000 by July 7, 1914.
He acknowledges that though Germany had a gold standard "too much anxiety used to be shown when the gold export point was reached," and that "it was also feared that to export gold would incur the wrath of the Reichsbank."
In addition to gold there was in the Reichsbank a sum of about $5,000,000 in silver. There must be, however, a further substantial amount in circulation, for the holdings of the Reichsbank were as high as $45,500,000 on the 31st December, 1917, and stood at about $30,000,000 up to the latter part of October, 1918, when the internal run began on currency of every kind.
The various "War Memories" that have now been published in Germany do not touch on this point. As has already been mentioned, the "Federal Reserve Board," which corresponds to our Reichsbank, had issued a warning against the raising of loans for belligerent States. In this way the American source of funds was practically cut off. Already foreign securities were in general unwillingly handled.
In 1875 came the great Reichsbank Act, which consolidated all the banking power of the empire. Then came her scientific tariffs which put up the bars here, and let them down there, according as Germany needed export or import trade in any quarter of the earth. The German people, on a soil poorer than that of France, worked hard and long hours for small wages.
In June, 1913, the Reichstag voted to double this to 250,000,000 marks in gold, the addition to be known also as the Spandau tower reserve, but to be placed in the Reichsbank and not counted in the bank reserves. There was also to be coined 125,000,000 marks in silver.
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