missing £16,000,000 is so purely imaginary that it cannot merit any serious credit. The theory assumes, however, a very different form when the error of the £10,000,000 is corrected. In that case we have an extra issue of £44,000,000 in bank-notes, corresponding to a loss of £38,000,000 in gold and silver; and there the two figures get sufficiently close to each other for it to be possible that there really is some relationship between them, without being forced to resort to the possible but improbable solution of thesaurising.

Consequently, with all these various considerations before us, it seems reasonable to suppose that the natures of the bills employed to pay the war indemnity were of three main classes, and were grouped approximately in the following proportions:

Before we proceed to sum up the case, and to try to draw from it the teaching it contains, there is one more detail which is worth explaining.

We have alluded to the coining in Paris of a certain quantity of Hamburg silver. To make the story of it clear, it is necessary to remind our readers that, according to the constitution of the Bank of Hamburg, which dates from 1619, accounts were kept by it in a money called marc-banco, and credits were opened by it in that money on the deposit of silver, coined or uncoined, the value of that silver being calculated pure. By degrees the marc-banco, though only an imaginary money, grew to be the universal denominator employed in the home and foreign business of Hamburg; it acquired an importance greater than that of the effective money of many German States. But when the Empire was established, and it was decided to introduce a gold standard into Germany, it became essential to suppress the marc-banco,

for it had the double defect of representing silver and of forming a separate value outside German monetary unity. So it was abolished by law and ordered to disappear, - the plan adopted being that the Bank of Hamburg should liquidate its deposits by paying off, in pure silver, the marcs-banco in circulation. It was, however, stipulated that this right should cease on 15th February, 1873, and that after that day, all persons who held securities in marcs-banco should lose the old right of receiving pure silver, and should only be entitled to half a thaler for each marc-banco, that being the value of the silver represented by the latter. Now the French Treasury had bought, as we have seen, £21,000,000 of bills in marcs-banco, and consequently possessed the right of claiming silver for such of them as fell due before 15th February, 1873, while all the rest from that date were payable in thalers. The thaler was "liberative," while the marc-banco was not; but the pure silver which the marcbanco represented could be coined into five-franc pieces, and be delivered to the German Government at the rate of 3 francs 75 centimes per thaler. The result was that, being by far the largest holder of marcs-banco paper, the French Treasury was able for a time to control the Hamburg market, and it naturally used for its own advantage the power which this position gave it. The Hamburg Bank was utterly unable to deliver the quantity of silver for which France held acceptances in marcs-banco; it was absolutely in the hands of the French Minister of Finance; that functionary appears, however, to have acted very fairly, to have only asked for silver in moderation, and to have profited by his power solely to obtain conversions into thalers on good conditions. The result was, as we have said, that £3,732,000 of Hamburg silver came to the Paris mint, partly through Govcrnment importations on marcs-banco bills, partly through private speculators, who followed the example of the Treasury, and pressed the Hamburg Bank for metal.

Such are, in a condensed form, the essential features of the history of this extraordinary operation; and now that we have completed the account, we need no longer delay the

expression of our admiration of the consummate ability with which it was conducted. Its success may be said to have been, in every point, complete; we cannot detect one sign of a grave hitch or of a serious error in it. It does the highest honor to the officials of the French Treasury, and proves that they possess a perfect knowledge of exchange and banking both in their minutest details and in their largest applications.

When we look back upon the subject as a whole, three great facts strike us in it: the first, that France is vastly rich; the second, that the trade of Europe has attained such a magnitude that figures are ceasing to convey its measure ;. the third, that the aggregate commercial action of nations is a lever which can lift any financial load whatever. As we see the transaction now, with these explanations of its composition before us, we cannot fail to recognize that it has been rather European than purely French. All purses helped to provide funds for it; all trades supplied bills for it. In every previous state of the world's commerce such an operation would have been impossible; fifty, thirty, twenty years ago, it would have ruined France and have disordered Europe; in our time it has come and gone without seriously disturbing any of the economic conditions under which we live. France, out of her own stores, has quietly transported to Berlin a quantity of bullion larger than the whole ordinary stock of the Bank of England; and yet she shows no sign of having lost a sovereign. She has paid in her banknotes for £170,000,000 of transmission paper, and yet the quantity of her bank-notes in circulation is now steadily diminishing. Such realtities as these would be altogether inconceivable if we did not see their cause behind them; that cause is simple, natural, indisputable; its name is the present situation of the world's trade. The vastness of that trade explains the mystery.

But yet with these advantages to help it, the operation had, in addition to its enormous size, certain special difficulties to contend with. As one example it may be mentioned that among the elements of perturbation and of

consequent impediments to remittance, the French Government had to keep in view the fact that, at the very moment when it needed all the monetary facilities it could obtain, the German Government was locking up gold in its cellars, in order to provide metal for the new coinage it was preparing. This was a most unlucky coincidence; but it existed, and it had to be met. The German plan was to hold back the issue of the new money until £30,000,000 of it were ready to be exchanged for the old silver currency; consequently, no silver could be expected to leave Germany until some months after the date at which the gold had been brought in there; and during the interval France knew that she must suffer from the withdrawal of so much bullion from the general market. But she found assistance in an unexpected way; silver did flow back to her at once from Germany, without waiting for the issue of the new gold currency. France paid Germany £9,572,000 in French silver; but this was of no use to the latter; on the contrary, it was an embarrassment to her, for she was on the point of exporting a quantity of her own silver, which would become superfluous as soon as the new gold got into circulation. So, for this reason, a considerable portion of the French five-franc pieces came back immediately to France, and helped to reconstitute her store.

And all the other difficulties were, more or less, like this one. At first sight they looked grave and durable, but they diminished or disappeared as soon as they were seriously attacked; the whole thing turned out to be an astonishing example of obstacles overrated. The unsuspected wealth of France, assisted by an extent of general commercial dealings which was more unsuspected still, managed to get the better of all the stumbling-blocks and impossibilities which seemed to bar the road. France has lost £400,000,000, one half of which she has delivered to her enemy, and yet she is going on prospering materially as if nothing at all had happened. But it is now quite clear that she never could have managed all this alone; she could have found the money, but never could she, single-handed, have carried it to Germany. It is

there, far more than in subscriptions to her loans, that the world has really helped her; she has bought back the stock that foreigners subscribed for her, but she could not do so without the bills they sold her. If she had been left to her own resources for the transport of the indemnity to Berlin she would probably have been forced to send two thirds of it in bullion, and to empty her people's pockets for the purpose; the vastness of the world's trade and the unity of interests which commerce has produced, permitted her to use other nations' means of action instead of her own.

Viewed in this light, the payment of the five milliards becomes an enormous piece of admirably well-arranged international banking, in which nearly all the counting-houses of Northern Europe took a share. That definition of it is worth knowing, and we may be glad that the information given in M. Say's report has enabled us to arrive at it.

APPLICATION OF THE INDEMNITY.

FROM KOLB'S "THE CONDITION OF NATIONS" (TRANS. BY MRS. BREWER), PP. 296-299.1

When the North German Confederacy was formed, notwithstanding the transfer of the proceeds of the customs and of other indirect imposts to the Confederacy, and in spite of considerable contributions by the different States, the revenues did not suffice to cover the expenditure, especially that of the establishment of a larger sea force. A deficit was the result, and loans had to be raised.

The war made the contraction of a further debt unavoidable, both for the States of the North German Confederacy

1 London: George Bell & Co., 1880.