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T H E I N T E R - A L L Y DEBTS




T H E INTER-ALLY DEBTS
An Analysis of War and
Post-War Public Finance
1914-1923

By
HARVEY

BANKERS




NEW

E.

TRUST

FISK

COMPANY

YORK-PARIS

1924

Copyright 1924 by
B A N K E R S T R U S T COMPANY




NEW YORK

All rights reserved

Foreword

T

HIS book has been prepared in response to many requests
for information regarding the cost of the World War, how
this cost was met, and more particularly for information about
the debts between the allies, which are going to be of great
international importance for many years to come.
We have analysed the accounts of some twenty nations,
using for the purpose, wherever possible, their official statistical publications. In some cases official statements were
especially prepared for us. As all statements were in national
currencies—pounds, francs, lire, drachmae, dollars and so on,
it became evident early in our study of the problem that to
make the figures comparable they must be expressed in one
currency. We decided to state them all in dollars, converting
each foreign currency at the rate of exchange current before
the war, i.e. practically at exchange parities. However, in
view of the fact that prices in each country were inflated by
war financing, but in varying degrees, it also seemed desirable,
in order to make them comparable^as to purchasing power, to
adjust the figures to the price level of 1913, that is, to put
the statistics all on a pre-war gold basis. Thus the reader
will find most of the statements given at their face or currency
value just as published by the several governments, only
expressed in dollars at par of exchange instead of in national
currencies, and he will also find them expressed in "1913",
or gold, dollars.
We hope the book may fulfill the purpose for which it was
created, and be of value to our friends. We also wish here
to express to the officials of the various governments who have
furnished us with the necessary statistics, our appreciation of
their helpful co-operation.
BANKERS T R U S T COMPANY

April, 1924



New York and Paris

Contents
CHAPTER

I
II
III
IV
V
VI
VII
VIII
IX
X
XI
XII
XIII
XIV
XV
XVI
XVII
XVIII
XIX
XX
XXI
XXII

PAGE

Eighty Billion Dollars
The Cost of the War
The War Expenditures of Each Great Power
How the War Was Paid For
The Revenue Receipts of Each Power
Borrowing in Home and Foreign Markets
Market Borrowing of Each Belligerent
The Inter-Ally Loans, 1914-1917
The United States Becomes Financier for the
Allies, 1917-1920
Great Britain as Borrower and Lender, 19171920
French Loans From and To Foreign Nations,
1917-1920
Financing Belgium, 1914-1923
Loans for Relief, 1918-1923
Payments Under the Treaty of Versailles
The Status of National Debts in 1923
The Wealth and Income of the Belligerents
The Wealth and Income of the British Empire
National Wealth and Income of France
National Wealth and Income of Italy
The Wealth, Income and Foreign Indebtedness of Russia
The Wealth and Income of the United States
The Wealth, Income and Foreign Investments of Germany




1
11

21
40
45
7i
79
120
150
189
208
217
237
242
2 54
261

271
283
289
293
305
313

Statistical Tables
PAGE

322
Expenditures of Each Belligerent
323
Receipts of Each Belligerent
Pre-War Status
Debts of Each Belligerent
324
325
For the Six Years, "Currency" dollars
13
For the Six Years, " i<m" dollars
19
Year by Year, " 1913" dollars
16
Expenses Classified, " 1913 " dollars
Cost of the War First Part 'Tiirrptirv flnllars
326
First Part, "1913" dollars
328
Second Part, ''Currency" dollars
329
Second Part, " 1913" dollars
Six Years, "Currency" dollars
330
Six Years, " 1913" dollars
33*
Year by Year Receipts, "1913" dollars
43
How the War
First Part, "Currency" dollars
332
Was Paid For
First Part, " 1913" dollars
333
Second Part, "Currency" dollars
334
Second Part, "1913" dollars
335
M dollars
" Currency
336
"1913" dollars
1917
337
Basis New York Exchange
338
"Currency" dollars
339
National Debts
"1913" dollars
[1920
34°
Basis New York Exchange
341
"Currency" dollars
342
"1913" dollars
1923
343
Basis New York Exchange
344
April, 1917
121
November, 1918
Inter-Nation
345
In 1920
Debts
346
In 1923
348
Wholesale Price Index Numbers, 1914 to 1923
350
Payments Due Annually by Great Britain Account of Debt to the
35»
United States
352
Estimated Wealth of the States of the United States
All money statistics are expressed in dollars. Unless otherwise noted,
foreign currencies have been converted at exchange parities. Such figure*
are stated as "currency " dollars, or simply as dollars. Where the expression "1913" dollars is used, it means that the actual or currency figures
have been re-stated in terms of the purchasing power of money in 19*3For detailed explanation, see pages 14 and 319.




THE

INTER-NATION

I N D E B T E D N E S S IN




1923

THE INTER-NATION INDEBTEDNESS IN 1923
In dollars at par of exchange—00,000 omitted
THE
H
BORROWERS
|

Great CanUnited
Britain ada France Italy Russia States

THE
LEADERS

British Empire
Gieat Britain

69.7
67,3

. . . .

143.5
57.S
0.7
1.9
3.7

Total British Empire .

733.6

South Africa
British South Africa Co. .
Crown Colonies

Armenia
Austria
Belgium
Belgian Congo . . . . .
Czpcho-Slovakia
Esthonia
Finland
France
. . . . . . . .
Franco Polish
Germany
. . . . . . .
Greece
Hungary
.
Italy
Latvia
Liberia
Lithuania
.
Nicaragua
Poland
Portugal
Roumania . . . . . . .
Russia
Serbs, Croats and Slovenia
Ukraina
United States
Grand Total

1.9

69.7

43,8
17.3
6.7

6,3

1.3

. 3,927,6
IO9.0
0.6
3,568,6
o.t

7.5

0,1
711,0

62,6
34.8

5.7

.

.

a

20,7
99.6
.
135.9
4.323.0
,
137.9

166,2
0.2
163.9
3.2

96,6
3.4
c
d

18,8
14.3
153.4
38.4
454.5 1.315,6
17.3
363.3
110.9
30,0
16,8
9.0
9.0
3,990.7 7,020,6
2,4
c
299.3
16,5
2.8
2,0
2,015,0 4.747.5
6,0
/ g ,

/

1,3
203,8
30,5
6

327.9
1.165,7
348,9

7,3
0,3
420,6
09.6
450.7
43.8
241 9 S.736.8
55t,8
61.6
e
6,0
0,3

13.7
33.6

182.4

7.3

3.4
e
3,8

3.8

TL.171,4 109.8 3463.7 390,0 1.265.3 II.86I.O

aJ82,ooo.
6J55.000.
cSs.ooo.
/J31.O00.—These are whole figures.




359,8 133,8 t.365.3 4.661.0 7.313,1

110.8
2.0

63..1

.

359.8 133.8 1.365,3 4,661,0 6,489,5
439.8
67.3
143.5
57.8
9.7
3.7

4.5

,

Grand
Total

d$2 7,000.

<58,000,

28,261,1

The Inter-Ally Debts
CHAPTER

I

Eighty Billion Dollars
HE war cost $80,680,000,000 gold. The purchasing
power of the currencies of every combatant nation was
affected in varying degrees by inflation caused by the use
of paper money and bank credits in financing the war. Taking the figures of each nation as reported from year to year
and reducing them to dollars at par of exchange, the expenditures for war totalled $208,600,000,000 in currency. To
arrive at a uniform basis of statement, we have divided the
figures for each nation for each year of the war by the wholesale price index number of that nation. Thus we have obtained a statement for each nation in terms of 1913 prices.
The sum of these figures, $80,680,000,000, may be called the
gold cost of the war.
How can we realize the magnitude of such a sum ?
Eighty billion dollars would reproduce all of the railway
mileage of the world and there would still be over twenty
billion dollars to spare for some other use—enough to build
and equip a railway system as great as that of the United
States.
In 1914 English economists estimated the wealth of the
people of Great Britain to be about seventy billion dollars.
All of the property of every kind in England, Wales, Scotland and Ireland, the railways, the docks, the shipping trav-




[1

IO]

BANKERS TRUST COMPANY

ersing every sea, the entire navy, the great factories, the coal,
tin and iron mines, in short all tangible property of every
sort and kind, is represented by this seventy billion dollars,
and yet the war cost ten billion dollars more than this, and
ten billion dollars is equivalent to the entire tangible wealth
of Australia and New Zealand.
Another comparison—the pre-war combined wealth of
France and Italy was just under eighty billion dollars. The
war caused the unprofitable consumption of goods of a value
in gold equivalent to all of the property of every kind of these
two great nations of nearly eighty million people; an
amount equivalent to the accumulations of centuries, wasted
in four and one-half years of insensate strife.
It is hard to realize, but it is a fact, that eighty billion
dollars is fifty per cent, more than the total cost of government in Great Britain for the two and a quarter centuries
which elapsed from the Revolution of 1688 to the beginning
of the Great War. It cost, to meet the expenses of Great
Britain for two and a quarter centuries, in round figures,
fifty-three billion dollars.
During this long period of 226 years there were eight
major wars, fought at great expense—expense so great that
the thinking people of the times were appalled thereby. There
were the wars of William III costing around $150,000,000;
the wars of Anne costing over $250,000,000. The Spanish
Right of Search War and the war of the Austrian Succession
piled up another $200,000,000 or more. The Seven Years
War cost over $350,000,000. Then came the American war
costing over half a billion dollars, and finally the Great French
Wars lasting from 1792 to 1815, costing around six billion
dollars. Later on, in the '50s, the Crimean War cost some
$350,000,000; and finally the Boer War which lasted from



THE INTER-ALLY DEBTS

[3

1899 to 1903 cost nearly a billion and a half of dollars. Beside
these major wars there were many costly military expeditions, the growing cost of civil government and the ever
present burden of the public debt, and yet the total expenditure of this long period was only about five-eighths of the
gold cost of the Great Wan
Coming home for a final comparison, we find that the
expenses of the United States government from its foundation
in 1791 through the year 1913, a period of a century and a
quarter, were twenty-four and a half billion dollars—less
than one-third of the gold cost of the Great War and yet,
during this long period, we fought England in 1812, Mexico
in the '40s, the very destructive Civil War in the '6os, also at
various times many Indian campaigns, to say nothing of the
Spanish War in the '90s.
The expenses of civil government were steadily growing.
Our pension roll called for heavy expenditures. To the current expenses of government we could add the Louisiana
purchase, the acquisition of Alaska, the purchase of the
Virgin Islands, wThat we paid Spain for the Philippines, and
the cost of constructing the Panama Canal, and even then,
the figure would be far under a third of the total gold cost of
the Great War.

How JFar is Paid For
Economists tell us that the wTar was paid for as it was being
fought. This is unquestionably true, taking the world as
a whole. You cannot today feed, clothe, and equip a soldier
with things to be produced in the future. The generation
which fought the war furnished the men who fought the war
and produced food and clothing for them, and the ships,
aeroplanes, guns and explosives with which they fought.



IO]

BANKERS TRUST COMPANY

However, within a nation as between individuals, and in
the world at large as between nations, it is true that the
financial burden of the war may continue for generations.
The man whose father or whose grandfather helped to pay
for the war by buying government bonds may be for many
years in receipt of an income raised from taxation in part
paid by himself, but largely paid by other citizens.
In like manner, a nation which in part fought the war by
obtaining munitions from another nation, in exchange for its
bonds payable in the future, did not itself pay for this part
of the cost of the war and will only feel the burden when it
redeems its bonds and as it pays interest on them. While
such payments are in progress, the citizens of the borrowing
nation will feel the burden in their tax payments. They actually will be paying for the war for long years after it ended;
not, of course, paying the original cost, but repaying to their
ally the equivalent in value of the goods originally obtained
on credit.

The Inter-Ally Loans
On the side of the Allies the inter-nation credit operations
due to the financing of the Great War and its aftermath
amount to more than twenty-eight billion dollars. Of this
amount twenty-six billion dollars represents the loans from
ally to ally with unpaid accrued interest added. The remaining two billion dollars represents post-war loans made by the
Allied Powers to various nations, some of them former
enemies, for relief and reconstruction.
There were three important stages in the development of
these loaning operations. The first stage was from the latter
part of 1914 to April 7, 1917. That is the period prior to the
entrance of the United States into the conflict. During this



THE INTER-ALLY DEBTS

[5

period the loans between the Allies totalled over eight billion
dollars. Then followed the two and one-half years until the
armistice. During this period the loans increased by nearly
fifteen and a half billion dollars, reaching $21,599,000,000.
Then came the post-armistice loans which with unpaid accrued interest brought the total up to $28,261,000,000.
The burden of the loans devolved about equally upon the
United States and Great Britain, amounting as the books
stood in 1923 to $11,861,000,000 by the former and to $11,171,000,000 by the latter. Loans by France totalled in 1923,
$3,464,000,000. This is the gross status. However, both
Great Britain and France were borrowers as well as lenders.
Therefore, on balance, the figures stand as follows: the
United States in 1923 was a net creditor for $11,858,000,000,
while Great Britain was a net creditor for $4,682,000,000. All
of the other nations, some thirty in number, were net debtors.
It is difficult to reduce the figures to a gold basis, but careful computations as of the close of 1919 when the currency
total of the loans stood just under twenty-five billion dollars,
indicate that, valued in " 1 9 1 3 " dollars, the loans represented
an outlay of thirteen billion dollars, ao amount only two billion dollars less than the pre-war national wealth of Canada.
Adding this amount to our estimate of the net gold cost of
the war, approximately eighty-one billion dollars, we arrive
at a gross cost of ninety-four billion dollars. On this gross
basis about 3 per cent, of the receipts of the belligerents for
war purposes came from taxation, 8 3 ^ per cent, came from
borrowing at home, and about 1 3 ^ per cent, came from borrowing abroad. This latter borrowing was chiefly by the
Allies from each other. Of course, these latter loans, if and
when paid, will cancel out, leaving the real net cost of the
war at the eighty-one billion figure.



IO]

BANKERS TRUST COMPANY

The Loans Not Made in Mo?iey
It should be borne in mind that these loans were merely
measured in terms of money. In fact they were loans pf indispensable commodities which the combatants could not obtain
at home. Actually the loans were made in clothing, in food,
in cotton, in nitrates and chemicals, in steel and copper, in
engines of war, in ships and other munitions.
From the beginning a very important source of most of
these munitions was found in the United States and in other
countries of North and South America. Japan was another
important purveyor of war goods, while nearly every other
nation of the world, large or small, ally or neutral, was
combed for needed supplies.

Great Britain as Bankerfor the Allies
During the first part of the war Great Britain was the
banker for the Allied Powers. She financed her dominions
first, then France. Then she joined with France in financing
Russia, and, later on, when Italy came out on the side of the
Allies, she helped Italy to obtain needed commodities. Her
net advances during this period aggregated $3,824,000,000.
As it was necessary to go to America for many of the
goods required, and as America insisted on being paid in real
values, or if she gave credit, in being well secured for her
advances, it was necessary to obtain gold and good convertible
assets for the purpose. Therefore, Great Britain, in consideration for the use of her good offices and banking and trade
facilities to obtain goods from America, insisted that Russia,
France and Italy should send to the Bank of England all the
gold that they could spare from their banking reserves. This
gold was successfully used to stabilize the New York ex


THE INTER-ALLY DEBTS

[ 7

changes, which indirectly resulted in the stabilization, or part
stabilization, of other aljied and neutral exchanges.
In 1915 France and England joined their credit to place
a great loan for five hundered million dollars in the United
States. When England and France asked for further loans,
American bankers required collateral. The borrowers appealed to their peoples for loans of negotiable securities.
These were furnished in great amounts, largely in the form
of American railroad stocks and bonds. Many other corporate securities suitable for the purpose also came to light, as
well as municipal bonds and the bonds of neutral states.
Some of these stocks and bonds were sold in American
markets. These were bought outright from their British and
French owners. Other securities were deposited in New York
with the Bankers Trust Company or the Guaranty Trust
Company to protect issues of English and French notes, $120
of collateral being deposited for every $100 lent. The securities forming this collateral were borrowed from their owners by
the French and English governments. Their owners received
interest bearing receipts which entitled them to receive the interest as collected and an additional percentage for their use.
Before the war English people are thought to have owned
foreign investments valued at twenty billion dollars. The
French people had similar investments aggregating over
eight billion dollars. It is calculated that for war purposes
the English people sold securities to the value of five billion
dollars and that the French people parted with securities
valued at one billion dollars.

The United States Becomes Allied Banker
On April 6, 1917, the United States joined forces with the
Allied Powers. Almost the first act of the American Congress



IO]

BANKERS TRUST COMPANY

was to authorize loans to powers at war with the enemies of
the United States to the extent of three billion dollars. From
time to time this authorization was increased until a maximum of ten billion dollars was reached. This money, or
rather the munitions of war which it would buy, was poured
out freely. By their own admission, at the time we came into
the situation, the Allies were at their wits end to know which
way to turn in order to obtain needed supplies.
When the United States opened her pocketbook all was
changed. The outcome we know. Our help ended the war.
We supplied in almost unlimited volume the munitions
required to enable the Allies to go on fighting while we were
enrolling and training men.
When the armistice was signed, we had all but two million men in France. Within six months we would have had
twice that number there. T o conserve shipping to get these
men across we bought great quantities of munitions in
Europe* We paid higher prices for these goods than we would
have needed to pay at home, even with the cost of ocean
transportation added, but it was better to do this and save
shipping for the men.

The Post-Armistice Loans
The war ended suddenly. Up to that time we had furnished our allies with goods valued at $7,077,000,000. In addition we had the vast supplies of goods accumulated abroad
and even greater supplies in warehouses at home. T o have
thrown these goods on the market might have ruined farmers,
manufacturers and other business men at home, and perhaps
broken some banks. European nations, especially our late
enemies, needed these supplies badly.
Under the acts of congress authorizing the loans to our



THE INTER-ALLY DEBTS

[ 9

allies such loans could only be made to nations at war with
our enemies and on no account could such loans be made to
an enemy.
What was to be done? Should we withhold the loans and
let our home people " g o broke" and Europe starve; or should
we make the loans and stretch the law; for congress could not
be made to appreciate the difficulty and would not amend the
loan acts so as to legalize loans for reconstruction and for
relief to neutral or former enemy nations.
The administration decided to act as if war were still in
process. Technically this was so, for the loan acts provided
that the legal ending of the war was to be determined by
proclamation of the President. Such proclamation was not
made until the Harding administration came into power. The
loans were made to Belgium for her own needs and to Great
Britain, France and Italy. By the latter nations the pork and
corn and wheat not needed by themselves were passed on to
Austria and other impoverished countries.
Thus it was that after the armistice loans were continued
for two years. Such loans amounted to over two billion dollars. In all the United States lent to the Allies just under ten
billion dollars. We also sold surplus war materials to foreign
nations taking in payment $595,000,000 of their obligations.
Through the American Relief Administration we furnished
relief supplies valued at over $84,000,000, for which we took
bonds. We also sold foreign nations large quantities of grain
on credit through the Grain Corporation, to a value of nearly
$57,000,000. These latter arrangements were sanctioned by
special legislation supplementary to the legislation authorizing loans of ten billion dollars to prosecute the war.
With the exception of Cuba's debt to the United States
and of some settlements of book accounts connected with the



IO]

BANKERS TRUST COMPANY

interchange of army supplies, and some settlements for surplus war materials, none of these loans has been paid and
little interest has been paid upon them. The only large loans
which have been put in the way of payment are the loans
made by England to her dominions, and England's and Finland's debts to the United States.
England and Canada had large reciprocal loans whifch
have been fully settled. The other dominions have put their
war debts to England into serial bonds, while England and
Finland have made a similar arrangement with the United
States. This leaves unsettled the debts of the continental
nations to England, France and the United States and some
moderate amounts due to Italy, and then there is the great
debt of Russia to England and France and her smaller debt
to the United States.
In the following pages we have first taken up the consideration of what the war cost. We have then endeavored to
show how it was financed, giving attention in turn to taxation, internal borrowing, external market borrowing, and
finally to the inter-nation borrowing.
In concluding chapters we consider the resources of the
nations upon which reliance must be placed, in part at least,
to find the ways and means of paying their debts. Other
things being equal, nations with large foreign investments are
in a better position to pay foreign debts than those not so
fortunately situated.
However, when budgets are balanced and the world once
more is at work in a normal way, even nations not now blessed
with large savings invested abroad may be expected gradually to save and to accumulate savings with which to liquidate their debts to other countries. Time will be the essence
of all inter-nation settlements.



CHAPTER

II

The Cost of the War

I

N this book we are dealing with the direct tangible cost of
the war to the national treasury of each belligerent. However, it must be kept in mind that this is only part of the real
cost. The economic value of lives prematurely snuffed out
on the field of battle, or as the result of wounds, from contagion, or from massacres; the reduction of vitality due to
wounds and malnutrition; the stunting of the lives of children
and of children yet unborn; the destruction of priceless relics
of the past, of books and of works of art; the demolition of
buildings, railroads and highways; the sabotage of agricultural lands, mines and factories; all enter into the economic
cost of the war.
The recurring annual burden of the interest upon the
public debt and of pension payments to soldiers and their
dependents will continue for generations yet unborn.
But this does not by any means complete the inventory
of the economic cost of the war. We must also take into consideration what the accountants call the accrued renewals—
the neglected upkeep—during the war years, of public works,
public utility plants, transportation and communication
plants, highways, and buildings of all kinds.
The disorganization of the currencies of many countries
has brought ruin to holders of government bonds and to those
living on the income from other pre-war and even war time
investments, and to all living on fixed incomes, whether from
annuities, pensions, or salaries. Then there is the world-wide
dislocation of business.




[»

IO] BANKERS TRUST COMPANY

It is not necessary to go further. Enough has been taken
into the account to show that the cost of the war has been
unbelievably large—in fact an amount beyond the power of
computation by anyone however much of a statistical wizard
he may be.

The Direct Cost of the War
This book deals with the direct cost of the war to the
national treasuries of the belligerent powers, exclusive of all
indirect expenditures or losses, such as those just enumerated.
Our estimate of this cost is $80,681,000,000 "1913" dollars;
divided $56,184,000,000 or 69.64 per cent to the Allied and
Associated Powers, and $24,497,000,000 or 30.36 per cent to
the Central Powers. These are the expenditures of nations
which took a more or less active part in fighting the war. We
have not included in our studies the other nations of the
world, either those nominally but not actively at war, or the
neutral nations.
Counting as separate nations the group of governments
composing the British Empire, there were at one time or another during the progress of the war sixteen active belligerents
on the side of the Allied and Associated Powers and four on
the side of the Central Powers. What the war cost each of
these nations in " 1 9 1 3 " dollars is shown in the table on the
following page.

Analyzing the Data
A study of the table raises important questions which
must be answered before we can intelligently consider matters
of detail.
What did the war cost? It would seem to be a perfectly
simple matter to answer this question. Assuming the account



THE INTER-ALLY DEBTS[22
OTHE C O S T OF T H E

WAR

COVERING THE SIX FISCAL YEARS 1914 (OR 1 9 1 4 - 1 5 )
TO 1919 (OR 1919-20) INCLUSIVE
(In " 1 9 1 3 " dollars—000,000
I
II
III
Total
6 NorExpendi- mal Exture
Direct
Cols. II. pendi- Cost
Ill & IV ture

Nations

omitted)
V
IV
VI
Gross
Loans Cost Deduct
Loans
Cols. Ill from
to
&
Allies
Allies
IV

VII
Net
Cost

A L L I E D A>TD
ASSOCIATED P O W E R S

British Empire
Great Britain

. . . .

Canada
India
New Zealand . . . .
Union South Africa. .
cCrown Colonies, Protectorates, etc. . .
Total British Empire..
c Belgium

. . . . . . .

cGreece
. . . . . . .
Italy
. . . . . . . .
Portugal . . . . . . .
Rumania
. . . . . .
Russia
cSerbia
United States
. . . .
dated Powers . . .
CENTRAL POWERS

38.83s

586
576

19,257
864
952
20
213
26

580

6S4

36.851

10,578

4.886

-104

4.693
548
Z.ISO

1.413
3,291
2.333
799
60 3

3.312

61S
5,020
324
2,942
1,476
468
411
S.903
145
2.777

1,380
16,228
IS5
7,431
1.390

643

310
I3.56T
366

20,114

98.238 30.563

21,228
662

10,104

-69
4,489
-86

159

3.909

113
61
76
66

5.045

1,104

26,273

3.335

662
11,208
- 6 9
4,489

12,296

A 56,184

-40

23,048

663

-86

292

21,234
751
1,050
20
137

-104

-104

174
-201
7,366

221

24,143
864
1,111
20
213
26

1,936
74
X.27S

174

40

5.041

7,658
221
17,337

2.389
227
198

An,482

67,666

-201

9,282

-143

3,211
- 5 6
134
-201
5,369

-6

17,139

£9.919 £57,747

.
.
.
.

Z0,S4S
246
33.176
1.613

5.410
473
3.382
933

5,438
— 227
18,605
681

Total Central Powers.

35.883

10,097

£24,497

hi, 289

25,786

H I , 106 £ 2 4 , 6 8 0

40,659

/»80,681 £ 1 2 , 7 7 1

93,452

£11,035 £82,427

tf Austria-Hungary
cBulgaria . . . .
Germany
. . .
cTurkey
. . . .

.
.
.
.

.
.
.
.

Grand Total. . . .

TX34.III

5,438

1,289

-227

19,894
681

7 "
47
348

4,727

-274

19,894
333

For notes see Statistical Tables.

books of the various belligerents to have been properly kept,
apparently all one would need to do would be to turn the statistics into dollars, add them up and find the answer to the
question.




IO]

BANKERS TRUST COMPANY

Unfortunately, the problem is not so easily solved. Aside
from the fact that the statistical records are imperfect, there
are several other matters which must be settled before we can
arrive at a final figure which will be of any value.
One of the most difficult questions to determine is that of
a common denominator. We are dealing with several different
currencies,—francs, pounds sterling, dollars, marks, crowns
and others. These currencies all depreciated from the prewar status. Even the purchasing power of the dollar declined
in a marked manner, to 84 cents in July, 1916, to 54 cents in
July, 1917, and to as low as 37 cents in April, 1920. The franc
dropped to 70 per cent, in July, 1915; to 54 per cent, in July,
1916; to 37 per cent, in July, 1917, and to 17 per cent, in April,
1920. The other currencies suffered in like manner.
As
shown by Statistical Table X X V I I , it will be seen that the
depreciation was quite uneven, but on the whole, for the
war period, not dissimilar.
Even the mark did not break
badly until 1920.
Manifestly, the first step in obtaining figures which are
really comparable is to reduce these varying currencies to a
common basis. This we have done, first by dividing the figures for each year by the average wholesale price index number for the year, thus putting the statistics for each country
on the 1913 price basis. We then have turned the adjusted
cost figures into dollars at par of exchange—the pound at
$4,866, the franc at 19.3 cents, and so on. The dollar figures
used in this chapter and throughout the book, wherever
designated as " 1 9 1 3 " dollars, were arrived at in this manner;
they are dollars of 1913 purchasing power.
Having expressed the figures in " 1 9 1 3 " dollars, we are
still faced with the problem of analysing them in such a way



THE INTER-ALLY DEBTS

[ 24

as to arrive at the real cost of the war and not at some misleading result.
In this book we have assumed the cost of the war for any
year to be the annual expenditure over and above the pre-war
rate of expenditure. Our statistics are arrived at on this basis.
In the case of a nation lending to an ally, the cost of the war
is the total expenditure for the prosecution of the war, inclusive of any loan or loans made to allies which is outstanding
and unpaid. But, on the other hand, the cost to a nation
borrowing from an ally is the total expenditure of that nation
for war less any such outstanding and unpaid loans. Manifestly, when considering the expenses as a whole, these interally loans cancel one another and the total cost of the war is
the direct expenditure, exclusive of loans to allies.

Allocation of the Costs
As shown by the table on page 16 military expenses and
other special war expenditures, including the interest on
the war debts, accounted for substantially all of the direct
cost of the war, that is the cost exclusive of loans to allies.
Out of the total direct expenditures of $80,681,000,000,
$68,990,000,000 or 85.5 per cent, went into military expenses,
$5,144,000,000 or 6.37 per cent, into other special expenses
due to the war, and $6,242,000,000, or 7.74 per cent, was used
in paying interest on the war debts. The war caused only a
slight increase in civil expenditures.
It should be borne in mind that we are dealing with
" 1 9 1 3 " dollars.
It is noticeable that the military expenses of the Central
Powers were nearly 25 percent. less in the second part of the
war than in the first, while this class of expenses for the Allied
Powers was about 25 percent, heavier in the second part of



T H E COST OF THE

WAR

EXPENSES CLASSIFIED

(In "1913" dollars—000,000 omitted)
FIRST P A R T
EXPENSES

Allies

Central
Powers

Public Debt Charge . . .
Military, including Pensions
Other Special War Expenses
Civil Government
. . . .

07O
30,518
9SO
345

Direct Cost
Loans to Allies

33.713
4.357

12,060

Gross Cost
Expenditures. Pre-war Basis

27.070
16.345

Total Expenditures

43.315

. . . .

Percentage of Period . . .
Percentage Each Part to
Total




548

SECOND P A R T

Alt

Allies

1,518
33.335
1,344

3.131
25.838
2.682

Central
Powers

w
>
=
5

ENTIRE PERIOD

n

All

Allies

Central
Powers

4.734

35.66s
3.900

3,I4T
22,634
L.4«3

6,24a
68,990
5.144

All

I,6io

4.T01
46.JS6
3,662
3,065

34.783
5.3IO

33.47 r
7.125

12,428

45.899
7.461

56.184
11483

34.497

80.681

13.033
5.571

40,092

3I,3I6

40,596
14.317

12.764

4.526

53.360
IM43

67.666
30.562

35.786

93.453

10,097

40.659

18.593

61,90S

54.913

17.290

72,303

98,328

35.883

134.1"

13.807

364
-rjjo
953

-/.JOJ

1,820

69.06

30.04

100.00

76.0s

44.09

jr.81

46.J6

S3-9*

1.503

9.837
I.21S

— JJO
336

33.9s
4S.19

200.00

S3S4

73-34
i 00.00

—1,760
1.289

305

13.771

26.76

100.00

100.00

100.00

M
*

w

a
G
n
o
v
>
2!

THE INTER-ALLY DEBTS

[ 17

the war than in the first. This shows the tremendous effort
put forth by the Allies to win the war, and a weakening in the
effort of the enemy. The increase in special expenses due to
the war is attributable largely to heavy expenses incurred in
obtaining food for the civilian population. Cereals, meats,
sugar, and other food supplies were bought by the various
governments and then in many cases resold to their citizens
at a loss. Other special expenses were due to the beginning
of reconstruction and to aid extended to those who had suffered losses of property, while war pensions to disabled soldiers began to figure in the accounts.

Loans to Allied Governments
In addition to their direct expenditures for war the belligerents lent to their allies $5,310,000,000 in the first part
of the war and $7,461,000,000 in the second part; a total of
$12,771,000,000. These are " 1913" dollars. The loans at face
value, that is in "currency" dollars, amounted to $7,906,000,000 in the first part of the war, and $15,754,000,000 in the
second part, or $23,660,000,000 in all. This latter amount is
the sum "nominated in the bond" but the money which the
borrowers received had a purchasing power of only $12,771,000,000. Perhaps this fact fairly may be taken into account
when settlements are made.
The burden of the lending for the Allied Powers in the first
three years fell on Great Britain and in the second three years
on the United States, although in that period Great Britain
was also a heavy lender, while France made substantial loans
in both periods. Germany was the banker of the Central
Powers.
For the figures for the entire six years and the effect of
loans made and of loans received upon the exchequers of the



IO]

BANKERS TRUST COMPANY

several nations which were at war, reference may again be
made to the table printed on page 13.
It will be noted that the " N e t Cost," that is the cost, plus
loans made and less loans received, in the case of the Allied
and Associated Powers, fell first upon Great Britain for $21,234,000,000, 36.77 per cent, of the total Allied figures; secondly upon the United States for $17,139,000,000, 29.67 per
cent, of the total; thirdly upon France for $9,282,000,000,
16.07 P e r c e n t * of the total; and fourthly upon Russia for
$5»369,000,000, 9.29 per cent. Then came Italy for the sum
of $3,211,000,000; Canada for $1,050,000,000, and Australia
for $751,000,000.
On the side of the Central Powers, Germany expended
$19,894,000,000 and Austria-Hungary $4,727,000,000, out of
a total of $24,680,000,000.
The inter-ally loans are more fully discussed in a later
chapter.

Year by Year Cost of the War
The annual distribution of the war expenses for each
group of belligerents which we have just been considering is
set forth in " 1 9 1 3 " dollars in the table on page 19.

Where the War Burden Fell the Heaviest
It requires only a glance at Statistical Table V I to see that
during the first part of the war the burden of the Allies was
borne by four nations. These were, in order of their disbursements, expressed in " 1 9 1 3 " dollars: Great Britain, with total
expenditures for war of $11,884,000,000; Russia, with disbursements for war of $5,822,000,000; France, with disbursements for war of $5,233,000,000; and Italy with disbursements for war of $2,076,000,000.



THE

YEAR

BY

YEAR

COST OF T H E

WAR

(In "1913" dollars—000,000 omitted)
TOTAL
EXPENDITURE

NORMAL E X PENDITURE

&

Per
Cap- tional
ita
Income
First

Year

Allied and Associated Powers
Central Powers
All Belligerents

Second

Year

9,263 21.11
4,308 20.01
13,571

23.07
26.43

23.36 24.07

DIRECT COST OF
TIIE W A R

% In- Loans
to
Per
crease
Cap- tional over Allies
ita
InNorcome mal

11-33

12.89

7.000 11.73

3,856
O.iS
2,236 15.33
6,092

10.78

Allied and Associated Powers
Central Powers

1 5 , 5 3 0 35.66 39.28
7 , 0 3 7 48.8? 43.17

5.143

1.857

12J0

9,082 21.43
4,801 33.34

All Belligerents

13,883 24.44

11.17

10.00 74.07
13.72 120.41

364

87.03

479

11,11

2 2 , 5 6 7 30.00

40.44

7.000

it.6a

1 8 , 5 2 2 38.Q4
7 , 2 4 8 50.33

43.21
44-47

5.959
1.857

11.27
12.89

All Belligerents

2 5 , 7 7 0 41.78

43.58

7.816 11.67

14,807

23.66 26.77

Fourth

Year

9 , 7 7 5 22.58
5,032 34.94

Year

Allied and Associated Powers
Central Powers

2 2 , 3 5 1 40.50 29.43
8,926 61.98 54-76

AH Belligerents

31,277

189.44 3 . 1 4 7

6,571

11.63 11.98

10,387 24.49 26.98
5 , 1 8 0 33.97 31.78
1 5 , 5 6 7 27.39

28,40 222,38
210.82
290.31

1 7 , 9 5 4 30.11

229,71

31.40

0.54

23.63 I7.J7 234.88
47.80 42.23 370.63

3.939 16,850 30.96 22.50
186 7 , 0 6 9 49.09 43.37

7.358

19,804

28.75 21.71 269.13

4."5

38.83 21.23 317.40 3,563
ISO
30.39 26J84 231.04

3t.t7
30-39

4.408 ii.ii
I.S94 13.15

13,992
4,376

All Belligerents

2 7 , 3 8 2 53-40

32.7 9

6,303 11.69

18,368 3644

93-87
201.92
278.94

1 2 , 5 6 3 27.67 30.71
5,391 37.44 33.07

10.23

45-05

Year

1.684

9.78 10.69 80,11
17.02 15.04 131.99

1.857 12.89

20,962 57.04
6,420 44.58

Sixth

IQ8.33

4,120
2,451

S.50I

Allied and Associated Powers
Central Powers

Year

23.34

25.05 164,04 3,788
30.87 270.97
359

% InPer
crease
Cap- tional over
ita
In- Norcome mal

12,921
6,883

34.02

Fifth

215

23.61 176.59 1.305
29.45 258.53 3 7 9

Allied and Associated Powers
Central Powers

Third

&

&

Per
Capita

S.I43
1.857

GROSS COST OF
THE W A R

23,919

34.80 26,28 325.07

1 6 , 5 5 4 45-02
4,526 3t.43

22,34

291.45

2,712

21,080

306.31
380.67

25.09
27.77

41.80 25.62

375.52

238.96

334.48

Allied and Associated Powers
Central Powers
. . . . .

11,600
1,944

J/.JO 16.99
20.68 16.47

4408
775

ti.li

8.24

6,558
1,169

18.23
12.43

0.06
9-9J

148.77

634

7,192
1,169

19.98 10.92 163.16
12.44 9-01 150.84

All Belligerents

13,544

28.95 16.91

5.183

10.32

7,727

17.04

0.00

14Q.08

634

8,361

18.43




150.84

10.77

161.28

IO]

BANKERS TRUST COMPANY

In these years Germany spent for war $8,727,000,000, a
little more than two-thirds of the expenses of the Central
Powers, while Austria-Hungary spent $3,963,000,000.
In the second part of the war as shown by Statistical
Table VIII, the burden bearers for the Allied and Associated
Powers were the United States, Great Britain, and France,
providing respectively $16,671,000,000, $12,259,000,000, and
$5>975*°oo,ooo. Italy followed next with $2,413,000,000 and
Russia next, for eight months only, with $1,836,000,000.
Germany carried practically the entire burden for the
Central Powers for these years.
We have included the loans in giving the foregoing figures.
Although the fighting ended in a little over four years, the
expenses due to war conditions, as always happens in the case
of large w*ars, continued at a high scale during the first peace
year and really did not settle down to a peace basis for still
another year.




CHAPTER

III

The War Expenditures of Each Great Power

A

S we have seen, the burden of the war financing fell upon
a few nations. Therefore it will be of interest to learn
the nature of the expenses which each of these burden bearers
had to meet.
From what sources the money came with which to pay the
bills, whether from taxation, from home or foreign market
borrowing, or from assistance given by Allied or Associated
Powers, we shall learn later on.
T h e relative cost of the war to the leading combatants is
shown by the table printed below. It will be observed that
apparently the direct money burden of the war to the Allies
fell heaviest upon the British people, then, in order, upon
the French, the people of the United States, the Italians and
THE RELATIVE COST OF THE WAR TO THE GREAT POWERS
(In "191dollars)
Per Capita; Per Cent Pre-War National Wealth; also Average Annual
Expenditure for War per cent. Pre-War National Income, and
Cost in Men per cent. Pre-War Population.
Gross Cost
of War
Per Capita
ALLIES

Gross Cost
of War, %
National
Wealth

Average
Annual Cost
Battle
of War, %
Deaths, %
National
Population
Income

Great Britain. . . .
France
Italy
Russia
United States. . . .

524-85
280.20
124-59
44-01
176.91

34-49
1936
20.59
13.11
8.67

36.92
25.59
I9.I8

24. IO
15 SO

I.44
2.3I
.92
.98
•OS

Austria Hungary . .
Germany

108.76
292.57

18.13
24.71

24.18
3J-58

I.60
2*35

CENTRAL POWERS




[21

IO] BANKERS TRUST COMPANY

the Russians. In relation to national wealth and national
income the burden was lightest for America.
T H E BRITISH EMPIRE'S WAR EXPENDITURE
T h e direct cost of the war to the national and colonial
groups composing the British Empire, in " 1 9 1 3 " dollars, was
$21,228,000,000, exclusive of loans to Allies. Including such
loans the cost was $26,273,000,000, say about 38 per cent, of
the total expenditures for war of all the Allied and Associated
Powers. Deducting loans from Allies the cost was $23,048,000,000.
T h e expenses were distributed as in the following table:
W A R T I M E E X P E N D I T U R E OF T H E BRITISH
S i x FISCAL YEARS: 1915 TO 1920 INCLUSIVE

(In dollars—000,000 omitted)

EMPIRE

.

In "CurIn
Per Cent, Expenses Per Cent,
rency"
"I9L3T'
of
of
Pre-War
Dollars Dollars
Total
Total
Basis

Purpose

Public Debt Charge . . . 6,218
3.207
Military'
38,177 20,985
4,690
2,520
Other Special War Expenses
5,094
Civil Government
. . . . 8,018

8.70 1,242
5^95 2,868
6.84
13-82 ' 6,468

Direct Expenditure
Loans to Allies

. . . . 57,103

U.74
27.ll
61.15

31,806

8,981

5,045

86.31 10,578 100.00
13-69

Total Expenditure
. . . . 66,084
Deduct
Expenses Pre-war Basis . 10,578

36,851

100.00 10,578 100,00

GROSS COST OF THE WAR

Deduct
Loans from Allies

.

. . . .

NET COST OF THE WAR

.

.

10,5/8

55.506 26,273
5,742

3,225

49,764 23,048

Direct Expenditure as above . . 57,103
31,806
Deduct Expenses, Pre-war basis .
10.578
10.57S
Gro«3 Cost of the War, exclusive
of Loans
46,535
31.338
For the expenditures of each nation composing the British Empire, see Statistical Table*.




THE INTER-ALLY DEBTS

[ 23

GREAT BRITAIN'S EXPENDITURE FOR THE WAR
Following the outbreak of the war, the British parliament
from time to time voted blanket appropriations, technically
known as "Votes of Credit." These were to be expended by
the government in the manner best calculated to win the war.
How these sums were expended was a state secret until the
close of hostilities, when the disposition to which they were
put was made public. The total payments charged to votes
of credit from August, 1914, to March 31, 1919, amounted to
HOW GREAT BRITAIN SPENT MONEY TO WIN THE

WAR

S i x FISCAL YEARS, 1915 TO 1920 INCLUSIVE

(In dollars—000,000 omitted)
In "CurPer Cent, Expenses Per Cent,
In
rency"
"1913"
of
of
Pre-war
Dollars Dollars
Total
Total
Basis

Purpose

Public Debt Charge . . . 4,870 2.313
32,465 17.577
Military
849
Military Pensions
. . . .
349
Other Special War Expenses 4.172 2,173
Civil Government
. . . . 2,782
1,537

8.02
6O.Q6

1.21
7*54
5*33

575

2,143

12.26
45-67

1,974

43-07

. . . 45.138 23.949
8,770 4,886

83.06 4,692
16.94

100.00

Total Expenditures . . . . 53.908 28,835
Deduct
Expenses Pre-war Basis . 4,692 4,692

100.00 4,692

100.00

Direct Expenditures
Loans to Allies

GROSS COST OF THE WAR

.

Deduct
Loans from Allies . . . .
NET COST OF THE WAR

. .

Direct Expenditures as above . .
Deduct Expenses. Pre-war Basis .
Gross Cost of the War. exclusive of
Loans




49,216 24,M3
5,403

2,909

43,813 21,234
45.138

4.69a
•
40,446

33.949

4.693

19.257

IO] BANKERS TRUST COMPANY
GREAT

BRITAIN

GOVERNMENT EXPENDITURES

(In "Currency" dollars—ooo.ooo omitted)
Years Ending March 31

1914

191 s

1916

1917

1918

1919

>930

Debt, Interest and Management
619
924 I.3I3 1,615
93 i°5 294
Military . . . . . . . 376 1,677 4,657 6,488 7,96o 8,320 3,362
119
Military' Pensions . . .
484
246
flOther Special Expenses
due to the War . . .
199
616
466 M39
770 982
Advances to Allies and
Dominions
669
252 1,537 2,650 2,373 1,288
Civil Government . . 346 362 353
759
485
344
479
6TotaI Expenditures .
Debt Reduction—Net .
Balance in Exchequer .

815 2,595 7.457 10,567 12,994 12,422 7.871
9
62
128
102
46
51 406 125
875 3,001 7,582 10,695 13,096 12,484 7,917

GREAT

BRITAIN

GOVERNMENT EXPENDITURES

(In "1913" dollars—000,000 omitted)
Years Ending March 31

Debt, Interest and Management
Militarv
Military Pensions . . . .
uOtherSpecial Expenscsdue
to the War
Advances to Allies and
Dominions
Civil Government . . . .

1914

191$

1916

1917

1918

T9»9

1930

93 100 219 364 435 579 617
3/6 1,582 3,476 3,816 3.755 3.665 1,283
56 108 I84
188

346

238

341

537

339

375

1,147 1.559 1,120
226
202
263

567

255

460

274

214

290

& Total Expenditures . . . 815 2.449 5,565 6,215 6,129 5,472 3,004
cSec comments in text.
iOnly the net result of government services is taken into our tables. If these
services show a loss, such losses are treated as a deduction from government receipts.
See Government Receipts, page 47*




INTER-ALLY DEBTS

$40,958,000,000 "currency" dollars out of a total net expenditure for the six years of war financing of $53,908,000,000
"currency" basis. This evidences the amount of discretion
and the vast responsibility vested in the government, or shall
we say, imposed upon the government by parliament.
The table on page 23 gives in "currency" dollars and in
"1913" dollars in parallel columns the war expenditures and
their distribution.
Direct expenditures accounted for 83.06 per cent of the
total while loans to Allies amounted to 16.94 P e r c e n t *
WHAT

THE W A R

COST

FRANCE

The direct money cost of the war to the national treasury
of France plus loans to Allies was not less than $33,557,000,000 in currency; $11,208,000,000 in " 1 9 1 3 " dollars. For two
reasons it is possible that the cost may have been higher.
One reason is that the expenditures of independent commissions handling the purchases of supplies for the army
and navy, also of commissions entrusted with the duty of
regulating the markets for food, apparently have not been
brought into the accounts. The other reason is that for the
fiscal years 1914 to 1919, inclusive, the French government
has published only the figures of appropriations made for
the expenses, but has not published any statement of actual
expenditures. The appropriations exceed the total published
receipts from all sources, including borrowing, by $3,934,000,000 currency dollars. It seems Improbable that the
actual expenditure could have been greater than the total
receipts, therefore in our statements we have gone on thia
assumption and adjusted the appropriation figures by deducting the apparent surplus appropriation from the item
of military expenses.



BANKERS TRUST COMPANY

IO]

A s thus adjusted the war expenditures of France were as
follows:
T H E W A R T I M E E X P E N D I T U R E S OF

FRANCE

S i x FISCAL YEARS; 1914 TO 1919 INCLUSIVE

(In dollars—000,000 omitted)
Per Cent J Expenses Per Cent,
In "CurIn
of
rency"
of fl Pre-war
"1913"
Total
Dollars Dollars
Total j Basis

Purpose

Public Debt Charge . . . 5,186
23,841
Military
6
Military Pensions . . . .
Civil Government
. . . . 4,575
Reconstruction
2,152

2,076
10,502
2
1,906

12.79 I 1.498
I
64.72 1,866
.01
1,656
n-75
3-93

29.84
37-17

Direct Expenditure . . . . 35,760
Loans to Allies
2,817

15,124

93-20 5,020
6.80

100.00

1,104

Total Expenditure
. . . . 38,577
Deduct
Expenses Pre-war basis . 5,020

16,228

100.00 5,020

100.00

GROSS COST OF THE WAR

33,557

II,208

. . . . 5,397

1,926

Deduct
Loans from Allies

NET COST OF THE WAR

.

. . 28,160

Direct Expenditure as above . .
Deduct Expenses, Pre-war Basis .
Gross Cost of the War, exclusive of
Loans

638

32-99

5,020

9,282

35.760
5.020

15.134
5,020

30,740

10,104

Even before the war France had a relatively high debt
charge and heavy military expenses. T h e average per capita
burden for the interest and management of the public debt
of France for the three pre-war years was #6.25 as against
$4.87 for Belgium, $3.60 for Austria-Hungary, $2.86 for
Italy, $2.09 for Great Britain, and only 87 cents for Germany-




INTER-ALLY DEBTS

[27

The military burden of the French people pre-war was
was $7.77 each, of the British people $7.76, of the German
people $5.19 each, and of the Italian people $4.92 each. The
people of the United States had a burden of only 23 cents each
for the interest charge on their public debt, but they were
taxed on the average $4.49 each for their military establishment and pensions to soldiers who participated in former
wars and their dependents.
The pre-war debt charge of France absorbed 3.42 per cent
of her national income, while her military expenses required
another 4.26 per cent of her people's earnings. Great Britain's debt charge required only 0.88 per cent of the national
income, but her military expenses called for 3.27 per cent of
that income. Germany's debt charge before the war was only
0.56 per cent of her national income, but her military expenses absorbed 3.36 per cent of that income. Italy's debt
charge burdened her.national income to the extent of 2.64 per
cent, while her military expenses required an additional
4.54 per cent.
It is evident that France entered the lists heavily handicapped as compared with Germany and much more heavily
burdened than either of her greater allies; unless we except
Russia whose combined debt charge and military expenses
pre-war absorbed 8.38 per cent of her national income, although her combined debt charge and military expenses were
only $3.61 per head of her population of 174 million souls.
Next to Great Britain the war cost France, per capita, more
than any other ally and was a greater drain upon her annual
national income. She about tied with Italy as to the cost in
proportion to national wealth, say about 20 per cent as compared with 34.50 per cent in the case of Great Britain.



IO]

BANKERS TRUST COMPANY

In addition to her direct cost, France suffered very heavy
losses in the destruction of property in the territory where the
fighting occurred, also in wear and tear upon her roads and
railroads and in many other ways.
FRANCE
GOVERNMENT EXPENDITURES A

(In "Currency" dollars—000,000 omitted)
Years Ending December 31

X0i3

ipi4

ipiS

1916

19*7

1918

1919

Debt, Interest and Management
Military
Reconstruction
. . . .
Advances to Allies . . .
Civil Government . . .

252 263 354 663 958 1,388 1,561
350 1.330 3,203 5,085 6,156 7.984 4 022
95 1,854
I
66 133
3
394 1,068
174 676 487
19
906 1,646
289 298 447 5*8 760

fcTotal Expenditures . .

891 1,911 4.181 7,008 8,494 10,767 10,151

FRANCE
GOVERNMENT EXPENDITURES a

(In "1913" dollars—000,000 omitted)
Years Ending December 31

Debt, Interest and Management
Military . ^
Reconstruction
Advances to Allies . . . .
Civil Government . . . .
dTotal Expenditures . . .

1913 1914

1915

1916

19*7

1918

1919

257 253 353 366 410 438
1,305 2,288 2,705 2.349 2,355 1,130
5»
2
28 521
1
35
35o
19 124 359 186 116 300
291 319 276 290 267 462
289
891 1.873 2,986 3,728 3,242 3,176 2,851

252

0These figures arc the appropriations made for each year and not the actual
expenditures. In our summary tables, as explained in the text on page 35. we have
adjusted these figures to balance with the total receipts from all sources.
fcThat is expenditures exclusive of those for public services. If these show a toss
they are treated as a deduction from income. See Government Reccipu, page so.




THE INTER-ALLY DEBTS

[ 29

ITALY'S WAR EXPENSES
T h e war cost Italy in " c u r r e n c y " dollars $18,632,000,000.
This amount, adjusted for inflation, comes down to $4,489,000,000 in " 1 9 1 3 " dollars. The distribution of the expenses
was as follows:
WHAT T H E WAR COST ITALY
FISCAL YEARS 1915-1920 INCLUSIVE

(In dollars—000,000 omitted)
Per Cent, | Expense Per Cent,
In
In "Curof
Pre-war
"1913"
rency"
of
Total [ Basis
Dollars Dollars
Total

Purpose

Public Debt Charge . . . 2,378
Military
15,349
Military Pensions
. . . .
436
a
Other Special War Expenses
Civil Government
. . . . 3,213
Liberated Territories . . .
198

777
5,407
116

IO.46
72.76
1.56

1,083
48

' ' 14-57
65

Total Expenditures . . . . 21,574
Deduct
Expenses Pre-war Basis . 2,942

7,431

GROSS COST OF THE WAR

Deduct
Loans from Allies

a

1,062

618

21.01
3&-10

1,262

42.89

100.00 2,942

100.00

2,942

.

18,632

4,489

. . . .

3,9 11

1,278

14,721

3,2 H

NET COST OF TOE WAR

. .

a See text.

The effect of price inflation in swelling the apparent cost
of the war is noticeable here as elsewhere.

Expenses Not Included in Table
In a report on the finances of Italy made to the League
of Nations under date of April 30, 1922, Professor Riccardo
Bachi, the distinguished Italian economist, states that, " F o r
certain administrative and techical budgetary reasons, the




IO] BANKERS TRUST COMPANY

figures for actual expenditure prior to 192021 do not comprise
the total amounts expended in those years, as certain large
items did not appear in the budget—for example, important
items such as food subsidies, fuel and maritime transport."
ITALY
GOVERNMENT EXPENDITURES

(In "Currency" dollars—000,000 omitted)
Years Ending June 30

t9M *9IS

Public Debt—Interest . .
Military
Military* Pensions . . . .
izOther Special Expenses
due to the War . . . .
Civil Government . . . .
Liberated Territories . . .
6Total Expenditures . . .

1916

1917

tptft

19*9

1930

102
1/7

176 280 424 593 791
"4
622 1,595 2,825 3,984 4,669 1,654
93 343

211

269

246

257

3<> 478 1,627
3*
94
103

49c 1,005 2,017 3,362 4,837 6,186 4,166
ITALY

GOVERNMENT EXPENDITURES

(In " i Q i y dollars—000,000 omitted)
Years

Ending June 30

19*4 1915

Public Debt—Interest . . . I02
Military
177
Military Pensions
aOther Special Expenses due
to the War
Civil Government
211
Liberated Territories . . . .
fcTotal Expenditures

. . . . 490

106
576

1916

103

932

1917

101S

19*9 1930

120 116 157 176
1,207 1,088 1,235 368
25

9*

92

126 361
27 21

93 1 1,179 I,437 *,32I

1,636 926

249

144

no

a During the war there were very large expense® of special commissions operating
trading accounts, especially in wheat and other food stuffs. Such supplies were sold
to the public much below cost. However, as the figures have not beta published,
they cannot be included in the table.
frExclusive of expenditures for government services which are taken net. If they
show a loss, such loss is treated as a deduction from income. See Government Receipts,
page 54.




THE INTER-ALLY DEBTS[40

RUSSIA'S

WAR

EXPENDITURES

The end of the war so far as Russia was concerned, came
on October 8, 1917. Then it was that the provisional government, the legal successor of the Russian Imperial Government, fell, and with it disappeared the juridical party engaged in the war.
Three years and three months of war had cost Russia, according to the careful estimates made by Doctor Boris EliachefF, the best authority on this subject, $19,954,000,000,
currency values, or say $7,658,000,000 in " 1 9 1 3 " dollars.
These expenses were pro-rated as follows:
T H E W A R T I M E E X P E N D I T U R E S OF

RUSSIA

FISCAL YEARS 1914 TO SEPTEMBER 15, 1917

(In dollars—000,000 omitted)
In "CurIn
Per Cent, Expense Per Cent,
rency"
of
Pre-war
of
"1913"
Dollars Dollars
Total
Basis
Total

Purpose

Public Debt Charge . . . 2,432
Military
15,55*
Civil Government
. . . . 7,582

1,515
6,381
5,373

II. 17
799
47.06 1,504
39-62 3,600

13-53
25-48
60.99

13,269
292

97-85 5,903
2.15

100.00

Total Expenditures . . . . 25,857 *3,56i 100.00 5.903
Deduct
Expenses Pre-war Basis . 5,903 5,903

100.00

Direct Expenditures
Loans to Allies

. . . 25,565

GROSS COST OF THE WAR

292

.

Deduct
Loans from Allies . . . .
NET COST OF THE WAR

. .

19,954

7,658

3,625

2,289

16,329

5,369

Before the war the debt service required 13.7 per cent, of
the total expenditure, 25.8 per cent, went to meet the expense




IO]

BANKERS TRUST COMPANY

of national defense, and the civil expenses accounted for the
remainder of the budget, about one-half being required for
the conduct of the state monopolies.
T h e cost of the war, in currency dollars, may be apportioned as follows: say $14,000,000,000 to increased expenses
of the army and navy, about $1,600,000,000 paid to the families of soldiers, and $430,000,000 given to refugees. About
$1,000,000,000 were expended on the railways, of which
amount around $180,000,000 went for new construction and
RUSSIA
GOVERNMENT EXPENDITURES

(In "Currency" dollars—000,000 omitted)
Years Ending December 31

1914

1915

1916

Public Debt—Interest . . . .
Military
Civil Government
Loans to Allies (Gold to Great
Britain)

226
891
M43

499
3,876
1,357

6,020
2,271

Total Expenditures.

2,260

. . . . .

653

1017
(8M mos.)
1,054
4,764

2,812

195
5,732

97

9,139

8,727

RUSSIA
GOVERNMENT EXPENDITURES

(In "1913" dollars—000,000 omitted)
Years Ending Deccmtx-r 31

Public Debt—Interest
Military
Civil Government
Total Expenditures

. . . .

1914

1915

226
891

406
2,185

435

1,143

1,231

2,509
1,626

2,260

3,822

4,570

For the receipt* for these yean see tables on page 56.




1916

tpI7 v
(8 H mos.)

448
I,o88
1,373
2,909

THE INTER-ALLY DEBTS

[ 33

around $300,000,000 for new rolling stock. Nearly $100,000,000 were expended in the improvement of rivers and harbors,
while the sum of over $50,000,000 was expended in improving
the postal and telegraph systems. The interest on the public
debt amounted for the war period to $1,633,000,000 more than
on the pre-war basis, and gold lent to Great Britain to aid
in keeping the American exchanges stable called for an outlay
of $292,000,000.
It should be kept in mind by the reader that all of these
Russian figures are estimates made by competent investigators who had open to their observation many sources of information now closed and possibly destroyed. While the
figures are not taken from audited accounts, it is believed that
they closely reflect the true state of affairs.

WAR

BURDEN

OF THE U N I T E D

STATES

From the beginning of hostilities, the United States was
the leading source of supply for many raw materials required
by the combatants. Large supplies of manufactured goods
also were obtained by them in our country. While our markets were open to all nations alike, it is probable that the bulk
of these munitions of war went to the Allies, for the blockade
of North Sea ports made it difficult for Germany to obtain
goods from abroad even through the channel of the neutral
Dutch and Scandinavia states.
After our entry into the conflict, all of our vast material,
as well as human resources, were of course used to win the
war for the Allied cause. From the facts given in the closing
paragraphs of the preceding chapter, some idea may be
formed of what our co-operation meant to our associates in
terms of goods and services.



IO]

BANKERS TRUST COMPANY

Let us now observe what our effort meant when expressed
in terms of money. The figures are as follows:
W A R T I M E EXPENDITURES OF T H E U N I T E D

STATES

FISCAL YEARS 1 9 1 6 - 1 7 TO 1919-20 INCLUSIVE

(In dollars—000,000 omitted)
j!
Cent,
In
In "Cur.
Per Cent. Expense Perof
rency" "1913"
of || Pre-war Total
Dollars Dollars Total j. Basis

Purpose
Public Debt Charge .
Military
Military Pensions
. .
Special Expenses due to
War
Civil Government
. .

88l
1,863
20,944 10,133
. . I,o62
546
the
458
927
. . 6,189 3,056
. .

Dircct Expenditure . . . . 30,935 15,074
Loans to Allies
. . . .
9,523 5,041

4-38 \
92
50.38$ 1,060
2.71 1 708

3.21
37-01
24.72

2.28 1
4
1S.I9 | 1,000

0.14
34-92

74.94 j 2,864 IOO.OO

Total Expenditure . . . . 40,508 20,115 IOO.OO | 2,864
Deduct
Expenses, Pre-war Basis . 2,864 2,778
COST OF THE WAR

. . . .

37,644

Direct Expenditure as above . .
30,085
Deduct Expenses, Pre-war Basis .
3.864
Coat of the War, exclusive of
Loans
a8,iai
uAverage of the years 1915 to 1916 x 4.

IOO.OO

17,337
15.074
3.778

12,396

T h e decrease in the purchasing power of the dollar is
noticeable and yet, nominally at least, our currency was on a
gold basis. W h a t effect the liberal use of bank credits in
financing the war might have had upon our price conditions,
and therefore in swelling the nominal cost of the war, had the
fighting continued a year or two longer, is an interesting
speculation.




T H E I N T E R - A L L Y DEBTS

[ 35

UNITED STATES
GOVERNMENT EXPENDITURES

(In "Currency" dollars—000,000 omitted)
Years Ending June 30

1914

Public Debt—Interest
and Management . .
23
Military
256
Military Pensions . . . 184
Other Special Expenses
due to the War . . .
Civil Government . . . "238
Direct Expenses
Loans to Allies

191s

1916

1918

191?

1919

1920

23
260
176

23
279

198
616 1,024
25
660 7,026 ",239 2,019
235
171
324 332

3
266

171

16
191
469 251
3 " 1,382 2,213 2,283

. . . .
. . . .

701

728

720
247 1,183 9.032 14,861 5,909
885 4,739 3,478 421

aTotal Expenditures . .
Balance in Treasury . .

701
162

728
104

720 2,068 13,771 18,339 6,330
179 967 £624 1,226 360

863

832

899 3.035 14,395 19,565 6,690

oGovernment services taken net; losses, if any, show as a deduction from income.
See Government Receipts, page 61.
60n account of change in method of accounting, the amount of cash brought
forward on July 1, 1919 was $1,685 million or 5t,o6i million in excess of the amount
shown here as carried forward.
UNITED STATES
GOVERNMENT EXPENDITURES

(In "1913" dollars—000,000 omitted)
Years Ending June 30

1914

Public Debt—Interest and
Management
23
Military
256
Military Pensions . . . . 184
Other Special Expenses due
to the War
Civil Government . . . . "238
Direct Expenses
Loans to Allies
oTotal Expenditures . . .

19 ts

23
260
176

1916

21

1917

16

1918

106

1919
308

45I

234

III

5,620
162

254
155

434 3,190
126
"3

266

224

204

701

728

654

778 4,263 7,431
582 2,534 1,739

701

728

3

654

11

102
739

1920

889
146

1,107 1,006
2,603
185

1,360 6,797 9,170 2,788

oGovernment services taken net; losses, if any, ihow as a deduction from income.
See Government Receipts, page 61.




BANKERS TRUST COMPANY

IO]

GERMANY'S

WAR

EXPENDITURES

The war cost Germany $47,048,000,000 currency dollars;
$19,895,000,000 " 1 9 1 3 " dollars. For the six years of war
financing the purchasing power of the German government's
mark averaged 42.28 per cent, of its pre-war value. This compares with 42.96 per cent, for the British government's pound
and 33.40 per cent, for the French government's franc.
Italy's lira, as used in government purchases, bought on the
average only 24.09 per cent, as much as it would have bought
in 1913, while the average buying power of our dollar as used
in meeting government expenses was 47.39 of its purchasing
power in 1913.
In considering war time financing, it is well to bear these
percentages in mind. The debacle of the mark is absolutely
a post-armistice phenomenon. It was not until the last part
of the last fiscal year of the period of war financing that the
purchasing power of the mark was seriously reduced.
Prices in July, 1919, were lower in Germany than they
were in France or Italy. In October they were much higher
than in any of the Allied countries, although their prices were
all rising. By April of 1920, when prices reached their maximum in these countries; 664 for Italy, 588 for France, 313 for
Great Britain, and 265 for the United States; Germany's
prices had jumped to 1,567, about five times what they were
in April, 1919. However, the average of prices for the fiscal
year 1919-20 was only 736.
The war time expenditures of Germany are shown by the
following table. For purpose of comparison we have added a
column giving the pre-war expenses. It will be noted that
in " 1 9 1 3 " dollars the direct war expenditures were nearly
seven times the pre-war rate of expenditure.



THE INTER-ALLY DEBTS

[ 37

GERMANY'S WAR TIME EXPENDITURES
FISCAL YEARS 1914-15 TO 1919-20 INCLUSIVE

(In dollars—000,000 omitted)
Purpose

In
In "CurPer Cent.! Expense Per Cent,
of
| Pre-war
rency"
of
"1913"
Total | Basis
Dollars Dollars
Total

a Public Debt Charge . . . 6,213
Military
31,412
Military Pensions . . . .
540
Other Special War Expenses 4.500
Civil Government . . . . 5.618
Direct Expenditures
Loans to Allies

2,512
16,248
139
1,482
1,506

. . . 48,283 21,887
2,04/

1,290

Total Expenditures . . . . 50,330 23.177
Deduct
Expenses, Pre-war Basis . 3*282 3.282
COST OF THE WAR

. . . 47,048

JO-84 J
354
TO.10 1 2,118

.60 I

TF-JP

O.5O J

8IO

10.79
^4-53
24.68

94-43 S 3,282 100.00
5.57 |
100.00 j 3,282

100.00

19,895

Direct Expenditures . . . . . .
48,283
31,887
UtdHtl Expenses. Pre-war basis .
3.382
3.38a
Gross Cost of the War, exclusive of
Loans
45,001
18,605
olndudes some payments for amortization.

T h e growth in the debt charge was progressive but,
stated in " c u r r e n c y " dollars, was especially great in the second half of the war. However, the purchasing power of these
payments when received by the bondholders fell off very
badly in the last year of the period under review.
T h e military expenses do not require special comment.
Germany loaned to her allies over $2,000,000,000 currency
values; $1,290,000,000 in " 1 9 1 3 " values. T h e other special
expenses due to the war, in the case of Germany, were chiefly
for the loss incurred in providing foodstuffs for the consumption of the people at prices below cost to the government.




IO]

B A N K E R S T R U S T COMPANY
GERMANY
GOVERNMENT EXPENDITURES

(In "Currency" dollars—ooo.ooo omitted)
Years Ending March 31

aPublic Debt—Interest
and Management . .
^Military
Military Pensions . . .
Other Special Expenses
due to the War . . .
Civil Government . .
cfTotal Expenditures. .

1916

tgts

1914

n o 320
58
440 1,802 5.585
29
25
164

622

1,552

9,000

5,599
24

23

1920

I,6ll

1,998
4,286
408

7.187
31

282 1,028
86
785

116
84

147

I9»9

1918

1917

864 2,210
795

3.721

662 2,088 6,130 6,613 12,388 10,488 12,623
GERMANY

GOVERNMENT EXPENDITURES

(In "1913" dollars—000,000 omitted)
Years Ending March 31

aPublic Debt—Interest and
Management
^Military .
Military Pensions . . . .
Other Special Expenses due
to the War
Civil Government . . . .
rfTotal Expenditures . . .

1914
58

440

164

1915

96
1,569

25

128

662 1,818

1916

1917

1918

19*9

221
3,860

1930

406 826 692
3,652 4,790 3,084
16
12
13
17

271

80

184

300

58

56

547

418

371
341

56

505

4,236 4,314 6,593 4,501 1,7*4

a Include some payments for amortisation.
^Assumed to include loans made to her allies which totaled for period of the war
$1,290 million.
cAssumed to include loans made to her allies which totaled for the period of the
war, $2,047 million.
rf Government receipts taken net, losses, if any, show as a deduction from Income*
See Government Receipts, page 70.

Civil expenditures did not develop any unusual features
until the fiscal year 1919-20 when the first effect was felt
of the change in governmental methods due to the transfer by
the state governments to the imperial government of certain




THE INTER-ALLY DEBTS

[ 39

functions formerly exercised by the states. Under the old
regime the states reserved to themselves the privilege of levying direct taxes, contributing each year a small amount to the
imperial treasury. The states also operated the railways within
their borders as state monopolies. After the republican form
of government was adopted, but under the old term of Reich,
that is Empire, the states were divested, in favor of the imperial government, of many of their former sources of revenue.
In taking these over, the imperial government also became
liable for the cost of collecting the taxes. This change also involved the provision of office accommodations and fittings.
Heavy expenditures were made in this year for the newly created Ministiy of Labor, while the progress of post-war inflation made necessary provision for advances in salaries of government employees and in payments to pensioners to offset
the high cost of living. Thus started the effort to match incomes paid in paper money of increasing volume and decreasing purchasing power with increasing living costs which has
been a predominant phase of German government finances
ever since. Expenses due to fulfilling the peace treaty appear
in the accounts for the first time in the fiscal year 1919-20.




CHAPTER

IV

How the War Was Paid For
A R seems to be almost as inevitable as death. Yet
when it comes, like death, it comes as a surprise. The
nations engaged never really are ready for the conflict, in particular they are never financially ready. Therefore some quick
method must be used to mobolize the financial resources and
through them the industries upon the immediate and proper
functioning of which the success of the conflict frequently
depends. .
Armies must be fed and clothed, the dependents of the
soldiers likewise must be provided for. Industrial establishments must convert their plants from making articles used in
times of peace to manufacturing munitions of war. If the war
is across seas, shipping must be requisitioned and converted
as carriers of troops and supplies. In short, over night, the
whole nation must turn from its accustomed methods of living
to others calculated " t o win the war."
In such circumstances it is almost compulsory, in the first
instance, at any rate, that resort be had to some form of borrowing. Later on, when there is time to make or to develop
financial plans, steps can be taken to lay on heavier taxes.
When this time arrives the nation which has an established
taxing system capable of quick expansion has a great advantage over a nation which, in order to meet the emergency,
must install new methods of taxation.

Financial Methods Used
On the "1913" dollar basis the total receipts for the period
of war financing were derived 31.23 per cent from revenue
40]




THE INTER-ALLY DEBTS

[ 50

in its various forms and 68.77 per cent from borrowing. However, if we deduct from the revenue receipts, an amount
equivalent to that which was being raised before the war,
we find that, as shown by Statistical Table X , the receipts to
meet the increased, or war, expenditures were derived 96.8
per cent from borrowing and only 3.2 per cent from increased
revenue receipts.
Treasury Bills: The method of procedure simultaneously
evolved in all the countries engaged in the Great War first
was to print interest bearing treasury bills maturing within a
year of the date of issue. Sometimes they matured in thirty
days, again in sixty or ninety days, six,nine or twelve months.
By the continental countries these treasury bills were offered
for discount to their respective state banks, which banks in
turn handed over to the national treasuries their own noninterest bearing circulating notes, that is to say what we popularly call bank notes—money. Thus the banks took interestbearing paper for non-interest bearing paper which latter
paper their respective national treasuries passed out to soldiers and civil servants for their pay, to contractors for supplies and to creditors of all kinds in payment of debts due
to them. In England the procedure was different but the result was substantially the same. There the currency notes
were issued by the Bank of England as agent for the national
treasury against the direct deposit in trust of treasury bills
and other collateral securities.
In Italy there is no national bank, but the three leading
banks of issue accepted treasury bills from the government,
to which they issued their currency notes. The government
also made a direct issue of paper money.
In the United States the banks bought treasury bills, or
as we call them "certificates of indebtedness/' jThese they



IO]

BANKERS TRUST COMPANY

had discounted by the federal reserve banks, obtaining their
circulating notes or an open credit as they preferred.
In addition to this method of liquifying their resources for
war exigencies, the various governments also offered their
treasury bills directly to the public. These bills not only
proved to be a popular form of investment for the banks and
other financial institutions, but they also werelargely purchased
by individuals. This was especially true in France where,
under the name of "national defense bills," they obtained
a great vogue—a popularity in fact which they still enjoy.
Permanent Loans: The next step in war financing was to
keep the market from becoming congested with this short
term paper by funding such paper at intervals into bonds
having a term of years to run before maturity. Therefore,
again with substantial unanimity, the nations about once a
year offered for sale great funding loans, agreeing to accept in
payment the short treasury bills. However, the long loans
were not wholly paid for in short government paper but also
yielded in each case a substantial sum in cash.
Taxation: No governments except those of Great Britain
and the United States, had the courage to ask their nationals
to pay markedly heavier taxes.
It was comparatively easy for Great Britain to increase
the incidence of the income tax and in this way to swell her
income. The continental nations, except Italy, did not have
this flexible tax. In France a general income tax was adopted
by Parliament in 1914, but it was practically impossible to
inaugurate it under the early war conditions, so that the
national treasury derived but little benefit from its imposition
until late in the war period.
When the United States came into the war in 1917, congress immediately increased the rates for the recently inau


THE YEAR BY YEAR RECEIPTS FOR WAR
(In "1913" dollars—000,000 omitted)
BORROWING

Deduct
InReceipts Pre- creased
War Basis
Receipts
or
% NaReceipts
C
c*
%
%
e
%
Per
tional
Per
for War
Amt. Re- Amt. Re- Amt. Re- Amt. Re- Amt. Re- Amt.
Amt. Capita
Capita Inceipts
Amount
ceipts
ceipts
ceipts
ceipts
come
£NUE

First Year
oAllles . . . .
Central Powers
Ml Belligerents
Second Year
oAllies
Central Powers
All Belligerents
Third Year
Allies
Central Powers
All Belligerents
Fourth Year
aAliics
Central Powers
All Belligerents
Fifth Year
a Allies
Central Powers
All Belligerents
Sixth Year
aAllies
Central Powers
All Belligerents

.
.
.

6,175

.
.

5,131

,
.

4,585
1,590

4,021
1,110

4,761
1,271
6,032

Home

Foreign
Market

28.00 13.047 56.65 4 1 1
. 2,216 24.83 6.SS0 73.73 69
. 8 , 8 7 1 27.76
480
19.627 61.42

.
.

6,170
1,504
7,674
7,658
547
8,205

Total
Borrowing

48,20 4.354 4$.76
162 1,7e>
4,929
J7oj 2,418 36.33 69 i.6t 4 * 3 4-34, 7 0 2
215
S.ot 2
331
7
44-737 7 3 40-03 1.67 628 4-55 , 6 3 1
6.
1,627
23*04 60.33 4 7 1 3-04 10.40 1 1 , 4 8 1
9.383
S.471 77-73 78 1,11 3 7 9 3.3Q 5 , 9 2 8
13-77
22.76 14.854 63.90 5 4 9 2.44
8.90 17,409
3,006
24.60 11,102 37.35
1,302 6.21
3,393 11.84 14,596
76.56
6Q O.qs
17.54
5.549
5
359
4.05, 9 7 7
22.67 1 6 , 6 5 1 62.507 1 4.78 I O.96 20,573
1.2
2,6S

6,655

.
.

From
Allies

1.78

3.919

1.50

2,979

o.77

60

12.67
0.6 7

16,377
6,709

9.32 23,086

Total

sr.So 9 , 5 1 4 21.73 23.74
5.245
62.95 4,292 2Q.Si 26.33 1.870
13,806
35-27
23.70
24-51. U 5
7
74.06 1 5 , 5 0 2 35-57
30.10
5.245
84.23 7.038 4X.87
1,870
43-18
22,540
77-24
3S.93
40.37I I 5
7,
19,
75.403 5 7 39.63
43-90
6.045
82.46 7 , 2 4 8 50.33 44-46
1.870
26,605
42.31 44-13 9 1 5
77-33
7,
71.10
23,032
S.636
41.75
30.34
8,925
61.98 34-75
1,870
75.17
72.249 5 7 46.03 34767,506
31,

20-535 3 3 S0.9S33 o.n 2,170 10.38 1 4 , 7 2 6 70.47 20,896
13.
23.437 8 0 74.4869 j.08 65 l.OI4 , 9 1 4 76.57, 4 1 8
4.
6
1 7 . 3 1 3 63.3892
0.34 2,335 8.18 19,640 71.90 2 7 , 3 1 4
65.16 3 . 6 5 9 3I.I3
-64 — -34 9 9 4.25 4,094 34.84 5 2
11,7
4
28.1s 1.299 66,866 9 3-55 28 1.44 , 3 9 6 71.85
1
1,943
4.958 36.20
5
0.04 527 3.83 5,490 40.09 1 3 , 6 9 5
59-91
28.10

RECEIPTS

56 Jo
44.57
53.32
31.32
20.67
29.28

31.04

4.491

1,906
30.37
32.68
6,397
17.22
4.474
16.47 788
17.115.362

11.60
12.00

4,269
2,422

11.95 6,691
1
11.440 , 2 5 7
12.905 , 1 6 8
II.83

15,425

13331 3 , 3 1 2
5
12.09 , 3 7 8
18,690
13.07
9.82

17,396

10.40

24,451

11.38
13.24
11.91

20,917

12.00 , 0 5 5
7

n.33

8.38
10.72

16,405
4,512

7,278
1,155
8,433

oln figuring percentages and per capitas, Indian statistics eliminated, as the large population of India would give a misleading result
t i n figuring percentages and per capitas United States statistics eliminated in this year, as they only cover a period of three months.
cThe pre-war receipts were almost wholly from revenue.




IO]

BANKERS TRUST COMPANY

gurated income tax. Other direct and indirect taxes also were
imposed, so that the pressure of war costs was immediately
felt by the people, many of whom for the first time were
called upon directly to pay taxes to the federal government.
The table printed on page 43 shows the year by year
financing of the war by each group of belligerents, while the
Statistical Tables give similar statistics for the entire period
of war financing for each of the active belligerents.




CHAPTER

V

The Revenue Receipts of Each Power
1914-1920
T T may now be of interest briefly to review the sources of the
revenue receipts of the chief powers during the war period.
Let us see first of all how the nations composing the British
Empire raised their revenues. We will begin with the Mother
Country.
GREAT

BRITAIN'S T A X - P A Y I N G

RECORD

Early in the war period those charged with the management of England's government finances decided to adopt for
their guidance the principle that the revenue receipts at
least should provide for the ordinary peace budget, also
for the interest upon the debt and for an annual sum to be
applied to its reduction. This ideal was fully realized and in
addition there was a good surplus of revenue receipts for use
toward meeting the military and other special war expenses.
As we have remarked in another connection, "the provision
of a sinking fund, while the debt wras a growing one, may be
criticised as chimerical, but doubtless it served a useful purpose as a fund to regulate the market for the war bonds; also
the fact that, at the time of incurring the debt, provision was
made for its ultimate payment, probably had a real value
m establishing confidence in the obligations of the nation."
The main dependence of the English exchequer for revenue during the war was the income tax and its running mate,
the "excess profits" tax. These two taxes yielded 57.22 per
cent, of the total revenue receipts. The income tax demon-




Us

IO]

BANKERS TRUST COMPANY

strated its flexibility and its quality by the quick manner in
which it responded to the needs of the hour. The machinery
of collection was functioning and therefore an increase in
rates was almost immediately reflected in larger receipts.
Not only were the rates of taxation increased, but at the same
time the exemptions were lowered.
The war profits tax, or as it was technically called "excess
profits duty,"was the principal new tax imposed. It was contended by the government, and in this contention they were
upheld by a growing body of public opinion, that unusually
large profits due to scarcity conditions created by government
demand for munitions of war, and other unusual profits
brought about by war conditions, should to a great degree
be turned over to the government to assist it in meeting the
war bills. This tax, originally placed in 1915 at 50 per cent,
was increased in 1916 to 60 per cent and in 1917 to 80 per
cent. It stood at this point until 1919 when it was reduced
for a short time to 40 per cent. It was raised again in 1920
to 60 per cent, and finally removed in 1921. This tax has
been characterized as "well intentioned" but unsound. Notwithstanding the fact that it produced about 25 per cent of
the total war revenue, it is claimed that the tax brought many
evils in its trail. It is said to have been passed on to the consumer and so to have become an indirect tax on commodities.
It is said to have led to demands for increased wages and salaries, to have aided in inflation of credit and currency and to
have materially increased the cost of necessary war materials.
As an illustration of the spirit which pervaded Great
Britain at about the time this tax was first laid and the income and other taxes were increased, it may be of interest to
call to mind that increases of taxation were demanded of the
government by the people themselves—at least one deputa


THE INTER-ALLY DEBTS

[ 47

GREAT BRITAIN
GOVERNMENT RECEIPTS

(In "Currency" dollars—000,000 omitted)
1918
»9U 1915 1916

Yearn Ended March 31

Exchequer Balance
Tax Revenue
Customs . . .
Excise
. . . .
Estate Duties . . .
Property and Income
Excess Profits .
Other

31

406

173
193
133
230
65

^ Total Tax . .
Post Office . . . .
Sundry

51
188
206
138
338
51

290
298
151
624
1
48

129

344
274

347

152

997

681
53

189
154
1,165
1,072
56

921 1,412 2,501 2,983
17
47
35
37
62
286
123
38

794

30
21

Total Revenue .
Borrowing—Net . .

124

976 1,509 2,661 3.316
5.667 7 , 9 1 0 9,652

845

1.975

Total Net Receipts
Total Resources .

845 2.951 7,176 10,571 12,968
876 3,002 7.582 10,695 13,097
GREAT BRITAIN
GOVERNMENT RECEIPTS

(In "1913" dollars—000,000 omitted)
1914 191 s 1916 1917 1918

Years Ended March 31

Tax Revenue
Customs
Excisc . . .
Estate Duties
Property and Income
Excess Profits
Other. . . .

.

130
3R9

48

794
30

869
16

21

Total Revenue. . . .
Borrowing—Net




230

178
194

65

Total Tax
0
Post Office . . .
Sundry .

_ Total Net Receipts
_

173
193
133

. .

36

217 202
222 162
89
112
466 587
1 400
35

32

1919

164
89

220
127

72
550
505
27

624
611

65

34

1920
277
24»
76
667
539

48

1,053 1,472 1,407 1,681 1,855
22
29 -7
22
26
72 135 139 550
47

«45

921 1,126 1,566
1,863 4,291 4,885

845

2,784

1.564 1,849 2,398
601
4.769 3,649

5,417 6,451 6,333 5,498 2,999

BANKERS TRUST COMPANY

IO]

tion of business men, and probably others, waited upon the
prime minister and the chancellor of the exchequer and demanded "an immediate increase in taxation/'
The tables printed on page 47 give in detail in "currency"
dollars and in " 1913 " dollars the revenue collections of Great
Britain for each year of the war. It may be well to note here
that in the case of Great Britain, as well as of all other nations, the receipts from government services and from government monopolies are net figures, that is, receipts less
expenses of conducting the services or monopolies. If, unfortunately, these government business operations resulted
in losses, instead of profits, the losses are treated as a deduction from income. This is done because in this book we are
endeavoring to show the costs of government and the resources
from which these costs are met. A loss on a government business can hardly be considered an expense of governing a
country, therefore it becomes a direct charge on the taxpayers and adds the amount of this business loss to the taxpayer's burden of providing the funds for conducting the
government. If, fortunately, the government monopoly or
service results in a profit, the burden of the taxpayer is correspondingly lightened, although less efficient service than
would come from private operation of the monopoly may indirectly prove disadvantageous to the taxpayer.
REVENUE

COLLECTIONS

IN

FRANCE

T h e war period brought about some radical changes in
the methods of taxation in use in France.
Just before the war, there was put upon the statute books
the first general income tax law ever passed by parliament.
This happened in July of 1914. The breaking out of the war



THE INTER-ALLY DEBTS

[ 49

before the machinery for the operation of the law could be
properly devised and set in motion deferred the time of its
effective application. It was not until the post-war period
that it yielded any worth while return.
Besides this general income tax, there were in use not less
than three other forms of taxing incomes. The old direct
taxes on real estate were converted into taxes on the income
from real estate. The old taxes on doors and windows, trades
and professions were succeeded by taxes on the income from
industrial, commercial and agricultural profits and the income
from salaries, wages, pensions, annuities and professional
activities. The old tax upon transferable securities was made
a straight tax upon the income from such securities.
The war profits tax, now repealed, yielded relatively large
returns.
Another new tax was the "special tax on payments"
which was first enforced in 1918 and in 1920 was superseded
by the tax on "business turnover."
These were the principal new taxes which the war brought
into being. For the rest of the added income from taxation recourse was had to increasing the ratesof taxation under certain
of the old forms of imposts with which the people were familiar,
namely, the registration and stamp taxes, customs duties,
excise and consumption taxes. These were supplemented by
the profits from the state monopolies, the chief of which are
tobacco and matches. The post office, telephone and telegraph are also state monopolies.
The foregoing facts in regard to the revenue receipts for
the war period have been deduced from the table in "currency" dollars printed at the end of this section. It will be
noted that, actually and proportionately, revenue receipts



IO] BANKERS TRUST COMPANY

gained in importance, while the receipts from borrowing
diminished.
When we consider the purchasing power of the war time
revenue receipts of France, the story is a different one. The
increase in prices more than overcame the increase in revenue
so that, as shown by the table in " 1 9 1 3 " dollars, all classes
of revenue receipts when calculated on this basis diminished,
with the exception only of the tax on stocks and bonds and
the new tax on payments. The detailed figures follow, statistics for the last pre-war year being given for comparative
purposes.
FRANCE
GOVERNMENT RECEIPTS

(In "Currency" dollars—00,000 omitted)
Y e a r s E n d e d D e c e m b e r 31

1913

1914

Tax Receipts
Customs
146 112
Excise
176 M 7
Succession . . . . . . 161 118
Income and Profits . . a 122 ai 18
Other . ;
69
75
Total Tax . . . . .
Government Services and
Monopolies—Net
Post Office—Tel. & Tel.
Monopolies. . . . . .
Total Services and Monopolies—Net . . . .
Miscellaneous

680

Total Revenue . . . .
Borrowing—Net . . . .

860

Total Receipts . . . .

564

191 s 1916
147
141
90
106

1917

138

229
219
178
246

292
196

101

1918

139

270

58

106
66

542

681

181
81

113

889

985

285
416
362
336

170

1,569
- J J *

21
92
" 3
67

4
87
91

64

719

-8

84
76

91

709

-13
94

80
88

103

-45

90
89

102
57

102

141
5
350

849 1,068 1,144 1 , 9 2 4
6,600 7 , 5 0 3 8,782

1,081

3.634

4,562

896 i,8oo

4,343

5,411

36

7,668 8,647 10,706

cOld direct taxes—changed to tax on Income after January I, 1915.




1919

INTER-ALLY DEBTS
FRANCE
GOVERNMENT RECEIPTS

(In

"1913"

Y e a r * E n d e d D e c e m b e r 31

Tax Receipts
Customs
Excise
Succession
Income and Profits
Other

dollars—00,000

omitted)

1914

1916

1917

144

in

1913

1915

146

. .

Total Tax . . . . .
Government Services and
Monopolies—Net
Post Office—Tel. & Tel.
Monopolies
Total Services and Monopolies—Net
. . . . . .
Miscellaneous
Total Revenue
Borrowing—Net

. . . .

Total Receipts

. . . .

no

176

144

105
101

161

1x6

64

75

67

75
42

680

553

387

4

-6

GI22

ail6

21
92

36

90

706

1,061

50

54

63

860

362

60

86

113
67

73
54
56
-35

42

65

47

68

65
53
72
33

75
53

69

31
339

291

1919
80
117
102

94
48

441

- 5 -13 -38
40
30
39
17
30

34
34

506
451 4 0 7
2,596 2,427 2,519

896 1,767 3»I02| 2 , 8 7 8

X91S

2,926

338

2
98

541

2,213

2,467

2,551

3,008

«01d dircct taxes—changed to tax on Income after January I, 19*5.

THE

WAR

REVENUES

OF

ITALY

Although Italy did not definitely become an active participant in the war until M a y , 1915, the preceding months
had been a time of preparation for war, so that we have included the fiscal year ended June 30, 1915, as a war year for
Italy so far as her finances were concerned.
A s early as November, 1914, war financing was being
actively discussed in Italian governmental circles and Finance
Minister Rubini then resigned his portfolio because he was op-




IO] BANKERS TRUST COMPANY

posed to his colleagues' policy of meeting the expenses for
military preparations by loans instead of by taxation.
Although the revenue receipts in currency for the fiscal
year ended June 30, 1915, were identical with those for the
previous fiscal year, this result was made possible only by
an increase in miscellaneous revenues, including improved
net returns from the state monopolies and services. Tax
revenues declined about eight per cent. However in October,
1915, a decree was issued creating new taxes and increasing
other taxes for the duration of the war. From 1916 on, tax
collections steadily increased. For the first three years of the
war period they exceeded the pre-war collections by about
25 per cent., for the second three years by over 170 per cent.
The principal gains were in receipts from the income and
excess profits taxes.
Professor Riccardo Bachi, the distinguished Italian economist, in a formal paper on Italy's war financing prepared
for the League of Nations, says that "during the war and the
period immediately following the policy adopted in respect
of increased taxation was necessarily somewhat confused and
hasty, and often resulted in rough and ready measures intended solely to obtain more money, irrespective of whether
the nature of the tax itself were reasonable and the incidence
equitable. An increase of revenue had to be obtained with the
least possible delay, and a well considered and rational transformation of the system of taxation was not possible." Professor Bachi explains that for various reasons it was not found
to be possible until quite recently "to work out a scheme for
a more reasoned and general reform of taxation."
Italy for years monopolized for the benefit of the government the manufacture and sale of tobacco and of salt. In
1916-17 she added a monopoly of matches and in 1917-18 of



INTER-ALLY DEBTS

[S3

playing cards. The yield from these monopolized commodities was remarkable. This was especially true of tobacco, the
sale price of which was raised several times.
The success of these so-called "industrial monopolies"
led to the active discussion of a scheme whereby the government was to take over the trade in certain commodities in
common use, such as coal, coffee, mineral oils, and the like.
However, this program was strongly opposed in commercial
and industrial circles, with the result that the only "commercial monopolies" arranged for were for the sale of coffee
and its substitutes and of electric lamps. These commodities
did not figure in the accounts until the last year of the period
of war financing. Subsequently they were superseded by
taxes on consumption and manufacture.
Italy also maintains a state lottery from which a considerable revenue is derived.
The Italian government owns and operates the railways
the telegraph and telephone systems, and of course conducts
the postal service of the kingdom. These government services
yielded little net profit at any time during the war period and
in the later years were distinctly unprofitable.
There are other apparent sources of income shown in the
Italian financial statements which run into large figures. In
pre-war statements they formed a negligible percentage of the
revenues, but in each war year they figured more heavily,
and for the second three years almost equalled the receipts
from taxation. These would appear to be adventitious receipts but in the absence of any official explanation we can
only guess at their nature. Probably a part of these receipts
in 1919-20 may have come from the sale of surplus munitions
of war. In part they may represent the profit obtained
from the realization on foreign loans between the face value



ioo] BANKERS TRUST COMPANY

of the loans and the proceeds in lire. Possibly they may represent the profit side of government purchases and sales of
food for the populace, although most such operations, as we
have already seen in the chapter on the cost of the war, resulted in heavy losses. T h e figures are so large that it would
be of interest to know just what they represent.
Notwithstanding the substantial nominal increase in
Italy's revenues for the war years over the pre-war basis of
receipts, their purchasing power was only about the same as
that of the pre-war revenue receipts.
Tables giving detailed figures for each year, both in
"currency" dollars and in "1913** dollars, follow. T h e statistics for 1914 are given for comparative purposes.
ITALY
GOVERNMENT RECEIPTS
(In " C u r r e n c y " dollars—000,000 omitted)
Years Ended June 30

Revenue Receipts
Customs and Corn Duty
Excise
Successions
Income and Profits . .
Other

1914

1915

1916

1917

66

40

54

49

60
64

67
91

74
95

84
118

87
16
IIO
182

Total Tax Revenue .
Government Monopolies .
Government Services—Net
State Domain
Sundry

289
106
10

269
HI
-3

340
135

486
164

Total Revenue
Borrowing—Net

458
32

Total Receipts




. . . .

ti

3
50

u

3
78

14

10

3

199

9i

34
3

311

1918
103
84
18
182
229

1919
102

97

26
269
283

1930

99
134
32
341
345

777 951
305 488
-18 -224
3
3
4
556 724 1,426

616
224
8

998 1,408 1,791 2,644
458
547 1,33° 2,364 3.429 4,395 1,522
687

490 1,005 2,017

3,362 4,837 6,186 4,166

THE INTER-ALLY DEBTS[64
ITALY
GOVERNMENT RECEIPTS

(In "I913" dollars—000,000 omitted)
Years Ended June 30

Revenue Receipts
Customs and Corn Duty.
Excise
Successions
Income and Profits . .
Other
Total Tax Revenue .
Government Monopolies .
Government Services—Net
State Domain
Sundry
Total Revenue
Borrowing—Net
Total Receipts

1914

66
54

11

37
45

10

1917

1916

35
37

8

67
91

69

49
69

289
106
10

249
103

198

3
50
458
32

. . . .

1915

490

88

—3
3

72

79
6

2

" 7

424

402

507

778

931

1,180

1918

39
37
7
47
78

208
70
14

1

133

426
1,010

28
23
5
50

62

168
61
2
1
152

1919

1920

27
26

22

7
7i
75

7
76
76

206
80

211
108

1
192

30

So

1

317

384
474
937 1,163

587
338

1.637

925

1,436 1,321

RUSSIA'S WAR FINANCING
T h e Russian pre-war budget was sometimes called a
"drunken b u d g e t " because the alcohol monopoly produced
such a large portion of the government's revenue.
Only about a month after the declaration of war this
revenue was swept away by an ukase prohibiting the sale of
alcoholic drinks. T o offset this loss by increased taxation,
an income tax was created in 1915 and increased by the provisional government in 1917, while a war-profits tax was
introduced in 1916 and increased in 1917. Other new taxation was mainly indirect, and when productive, affected
chiefly articles of large and general consumption, rather than




ioo] BANKERS TRUST COMPANY

articles o f l u x u r y . T h e yield from increased taxation a little
more than offset the losses from the discontinuance of the
income from the alcohol monopoly.
Russia met 26.40 per cent, of her war time expenses from
revenue receipts, but the cost of the war, that is the expenses
of the war period in excess of the pre-war basis, was met
almost wholly from the proceeds of loans, as shown by the
following tables. For comparison statistics for the last prewar year are also given.
RUSSIA
GOVERNMENT RECEIPTS

(In "Currency" dollars—000,000 omitted)
1917

1913

1914

1915

1916

1.135

624

592
799

756
613

359

2,570
35«

Total Revenue. . .
Borrowing

1.759

1,391

1,369
4,363

1,139

2,928

868

8,000

5,799

Total Receipts. . .

1,759

2,259

5,732

9,139

8,727

Years Ended December 31

Tax Receipts . . . .
Other R e c e i p t s . . . .

780

( 8 H rnos.)

RUSSIA
GOVERNMENT RECEIPTS
(In " 1 9 1 3 " dollars—000,000

omitted)

1913

1914

1,135

624

592
799

504
281

390
-5J

856
33

Total Revenue. . .
Borrowing
„

i,759

1,391
868

785
3,037

339
4,231

889
2,020

Total Receipts. . .

1,759

2,259

3,822

4,570

2,909

Y e a n Ended December 3 1

Tax Receipts . •. . .
Other Receipts . . .




1915

19X6

THE INTER-ALLY DEBTS
UNITED

STATES W A R

[ 64

TAXES

As we have noted when considering the cost of the war,
the shadow of the war coming to the United States began to
be cast as early as the fiscal year 1915-16, in which year military expenses were noticeably larger than they had been
theretofore.
In the following year the expenses of the nine months
which preceded the declaration of war by the United States
increased 31 per cent over the expenses for the corresponding
nine months of 1915-16. The tax receipts were one hundred
million dollars higher in the 1915-16 year than they had been
m the year previous, while in the pre-war nine months of the
1916-17 year they increased another fifty million dollars.
An important share of the increases in tax revenues in
these two periods came from the newly instituted income tax
which only began to function in 1913—14. The income tax
with its associated tax, the excess profits tax, was destined
to be the main support of the government, so far as revenue
collections were concerned, during the coming war. Of the
total tax receipts of the government for the years of war
financing, 66.55 P e r c e n t c a m e fr°m this source.
As would have been expected, customs receipts were not
as large on the average as in the pre-war years, but excise
taxes heavily increased. These two groups of taxes accounted
respectively for 6.25 per cent and 17.77 per cent of the tax
receipts of the war period.
Then there was another classification of taxes which, with
the excise taxes, the government reports group together
under the comprehensive heading of "miscellaneous internal
revenue." Exclusive of the excise taxes, these taxes accounted
for the remaining 9.43 per cent of war tax receipts.



ioo] BANKERS TRUST COMPANY

An analysis of the excise taxes and other miscellaneous
internal revenue receipts may be of interest. Prior to the
fiscal year 1919-20 the government derived a large and growing revenue from taxes on spirits and on fermented liquors.
For the three years before 1917 these taxes yielded on the
average $232,500,000 a year.
In 1916-17 the yield was
£284,000,000, in 1917-18 $443,839,000, and in 1918-19
$483,051,000. In 1919-20, the last year of the period of war
financing, returns from these sources dropped to $139,871,000.
This was due, of course, to the adoption of the prohibition
amendment to the constitution, the law giving effect to
which was signed by the President on January 16, 1920. The
yield from taxes on tobacco in its various forms rose from a
pre-war average of $83,000,000 to $156,000,000 in 1918,
$206,000,000 in 1919, and $296,000,000 in 1920.
A new form of taxation introduced in 1916-17 was the
taxation on the transfer of estates, death duties or succession
duties as they say in Europe. Beginning with a yield of
$6,077,000 in 1917, these taxes so increased in value to the
government that in 1920 the income derived therefrom was
over $103,600,000.
Stamp duties of various kinds were a new, or shall we say
revived, source of revenue, for they had been tried [before.
An entirely new group of taxes was tiiat dealing with
transportation and communication receipts and admissions
to places of amusement. Railroad fares and freight receipts,
telegraph and telephone receipts, express companies' receipts, and the receipts from admissions to all kinds of entertainments were affected. The income produced was quite
worth while, jumping from $101,711,000 in 1917-18 to over
$379,000,000 in 1919-20.
Manufacturers' licenses on sales of automobiles and ac


THE INTER-ALLY DEBTS

[ 64

cessories brought in a good revenue, "soft drinks" and other
articles of food dispensed at "soda fountains"—or soda bars,
shall we say—also proved to be productive. The former
group brought in over $216,000,000 in 1920, jumping from
$51,000,000, in 1918, and the latter group yielded over
$110,000,000 in 1920, the first year in which collections were
worth while, the yield in 1918 having been under a million
dollars and in 1919 only a little more than six million dollars.
So much for the war taxes.
The other revenue receipts were not important. The postal service yielded a small surplus, but this was due solely to
a temporary increase of rates. The Panama Canal was operated at a slight loss. Sales of disused government property
aggregated $368,000,000, but as this property had cost far
beyond the amount realized, the receipts from this source
could hardly be classed as revenue. Revolving funds used
by the Grain Corporation and the Housing Corporation
returned to the treasury $353,000,000, but again this sum
was not properly a revenue receipt, although classed as such.
All the various adventitious receipts aggregated $1,043,000,000 for the war period.
All forms of revenue receipts, exclusive of borrowing,
yielded $16,556,000,000 for the four years of war financing,
or 41.78 per cent of the total war time receipts of $39,628,000,000; the'remaining 58.22 per cent being borrowed. The
form taken by the borrowing will be discussed in a later
chapter. The revenue receipts were $13,719,000,000 in excess of the pre-war basis of income from this source, which
for the same period of four years would have been $2,837,000,000; thus the revenue receipts for the wTar period were
nearly five times what the yield would have been on the prewar basis.



ioo]

BANKERS TRUST COMPANY

The foregoing statistics are all in "currency" dollars.
The purchasing power of the dollar shrank during the war
not quite as much as that of the pound sterling, the franc,
the lira and the mark, but still very perceptibly. Therefore,
we must not be surprised to find that the $39,628,000,000
receipts in "currency" dollars for the war period, 1917 to
1920 inclusive, had a purchasing power measured by 1913
prices of only $20,928,000,000.
Before leaving the subject of the revenue collections of
the United States during the war, it may be of interest to
note that with us very much the same thing happened as in
Italy. Taxes were laid hurriedly and the mistake was made
of multiplying the forms of taxation and thus complicating
collections. On the other hand, it is evident that we were
fortunate in having already adopted into our fiscal system
the principle of taxing incomes. The comparative ease with
which taxes on incomes can be increased, once the machinery
for their collection has been set in operation, commends this
form of taxation as one of the most convenient and desirable
from the standpoint of the state. During the war the mistake
was made of adopting schedules which were extremely confusing and unnecessarily complicated. This largely was due to
the fact of our lack of experience with this form of taxation.
The excess profits tax which was done away with in 1918
came in for much adverse criticism. Secretary of the Treasury
Glass, in an official statement characterized it in 1917 as
so complex that it had proved to be impossible to keep up
the administrative work of audit and assessment. He also
criticised it because of the unevenness of its incidence. The
tax also came in for criticisms similar to those which were
applied to the like tax in England, that it tended to extravagance and to an effort to pass it on the consumer.



THE INTER-ALLY DEBTS

[ 64

UNITED STATES
GOVERNMENT RECEIPTS

(In "Currency" dollars—ooo.ooo omitted)
Years Ended June 30

1916

Treasury Balance„at beginning of year
Tax Receipts
Customs
Excise
Successions
Income and Profits . .
Other
Total Tax
Miscellaneous Revenue . .
Government Services—Net
Post Office
Panama Canal
. . . .
Total Services—Net .
Sundry
Total Revenue
Borrowing—Net •
Total Receipts
. . . .
Total Resources . . . . .

1918

1917

104

179

213
336

226

125
52

360

48
2,839

1,035

1919

157
3,879

726
29

415

6

28

48

Z930

967

"1,685

1,226

i83
652

183
776

324
763
104

82
2,601
382
4,024
430

206

3,957
575
5,723

168

45
—11

88

-45

7
30

34
41

84
104

-42

761

1,106

34
795

1,750

4,160
9,268

4,642
13,238

6,648
-1,184

2,856

13,428

17,880

899

3,035

14,395

19,565

6,690

~~7

— 12
-I$
25

3

—10

3

799

5,464

UNITED^STATES
GOVERNMENT RECEIPTS

(In "1913" dollars—000,000 omitted)
Years Ended June 30

Tax Receipts
Customs
Excise
Successions
Income and^Profits . . .
Other . . . . . . . . .
Total Tax
Miscellaneous Revenue . .
Government Services—Net
Sundry
Total Revenue
Borrowing—Net
Total Receipts




1916

194
305

114
47

660
26

1917

149

273
4
2 37

18
681
32
—5

1918

98

349

26

1,518

84

2,075
110

1919
91
388
41
1,301
191

2,012
215
42
52

23
692

20
728

18
22
2,225

2,321

3i

1,151
1,879

4,956
7,I8I

6,619
8,940

-17

723

1920
143
336

46

1,743
253

2,521
74
-19
352

2,928

2,928

ioo]

BANKERS TRUST COMPANY
GERMANY'S W A R - T I M E

REVENUES

The remarks and statistics which follow are based upon
a Memorandum on the Financial Position of the Reich presented to the Reichstag on July 29, 1920, by the Minister
of Finance, Dr. Wirth.
The war found the Germans by their own admission badly
prepared financially, because so far as the imperial government wras concerned no direct sources of taxation existed
which could be expanded to yield the necessary increased
receipts. In fact the whole financial policy of the empire was
influenced by the absence of elastic direct taxes, and was
founded on the principle of providing by loan all costs of the
war, thus putting the burden of war expenditure upon the
future. Dr. Wirth says:
" T h e financial difficulties of the empire were not quite so
apparent during the first two years of the war. The national
household continued to live on the stores accumulated in
time of peace. Similarly, there may have been at that time
an even level between production and consumption at home,
and the material and physical resources of the nation had
not been as sharply strained as necessity required in the later
years of the war. Further, during the first few years of the
war it was possible to provide the money for carrying on the
war by the issue of funded loans and to convert the floating
debt into funded debt, at least to a large extent; therefore
the volume of floating debt only expanded slowly. Stocks of
commodities of all kinds which existed at the beginning of the
war could be liquidated and the proceeds converted into war
loans, thus preventing inflation, caused by increased floating
debt, for a considerable time. In addition, the government
fixed a maximum of prices for things in short supply and kept
the general level of prices within bounds, and the budget re


THE INTER-ALLY DEBTS

[ 64

quirements were consequently still bearable during that
period. Temporary advances on account of the high cost of
living granted during the first half of wartime were moderate
and the existence of these conditions had a wholesome influence on the prices of war material, and yet the internal condition of the empire's finances grew worse."
I t will be seen that Dr. Wirth admits that even during the
first two years of the war the financial position of the empire
had become difficult. The development of the finances of the
empire from the last year of peace onwards is shown in the
following recapitulation, stating revenue without the amounts
derived from loans and floating debt and outgoings of the
ordinary and extraordinary budgets combined. The figures
are " n e t , " that is less cost of collecting the revenues, and are
in currency except for the supplementary columns in " 1 9 1 3 "
dollars in the first table.
The figures for 1919-1920 were
given by Dr. Wirth subject to final audit.
TABLE I—GERMAN EMPIRE
TOTAL REVENUE AND EXPENDITURE 1914-1920

(IN dollars—00,000 omitted)

T O T A L R E V E N U E IN**
CLUDING P R O F I T & Loss
FROM THE S E R V I C E S OF
IMPERIAL W O R K S

Fiscal Year
Ended
March 31

"Currency"
Dollars
527,8

1 9 14
1915

191 6

.

.

.

.

.

.

559.4

412,9

191 7

482,8

191 8

1,863,5

191 9

1920
Total for War
years 1915-20 .




1,617,0
2,102,4
7,038,0

"1913"
Dollars
527,8

487.2
285.3
315,0

991,8
694,0

TOTAL

EXPENDITURE

"Currency"
Dollars

"1913"
Dollars

Per Cent.
Revenue
to
Expenditure

604,0

604,0

97-38

2,059,6
6,118,5
6,602,3

1,794,0
4.228.4

12,379,6

6,588,3

27.16
6-75
7-3i
15-05
15-43

285.4

10.479.3
17.708.4

3-058,7

5 5 >347,7

4,306,7

4.497.5
2404.3

11.87

23,819,2

12.72

ioo]

BANKERS TRUST COMPANY

Dr. Wirth lists the net revenue in five principal groups
as follows:
TABLE II—GERMAN EMPIRE
PRINCIPAL GROUPS OF REVENUE 1914-1920

(In "Currency" dollars—00,000 omitted)
Cost of Administration
Revenue
Profit or
from
Loss of the
Customs.
AdminisFiscal Year
Taxes
Ending March 31 trations of
and
Imperial
Fees
Works

X9M
191 5
191 6
191 7
191 8
IQIQ
'V?
1920

33,5
-12,7

—10,0
— 12,0
-33*2

-1419
-218,7

Total for War
Years 1915-20 -428,5

Deducted

NonRecurring
Revenue

Surplus
from
Previous
Years

Other
Revenue

Total per
Table I

402,9

0,2

64,8

26,3

527,8

381.0
265.1
342,6
545.2
838,9
1,533,9

15*,7
73,2
15,5
i,i55,o
573.6
279.7

12,8
5.0
52,3

26,6
79,6
84,4
196,5
346.4
507.5

559,4
412,9
482,8
1,863,5
1,617,0
2,102,4

3,906,7

2,248,7

70,1

1,241,0

7,038,0

Imperial Works Revenues: A s shown by Table III, after
1914, imperial works, which included the post and telegraph
services, imperial railways, and the imperial printing office
were operated at a loss for the six fiscal years 1915 to 1920 inclusive, equivalent to about $429,000,000. The principal loss
was in the postal and telegraph services. This amounted to
$408,000,000. The loss in operating the imperial railways
was about $23,000,000, while the imperial printing office
showed a profit of $2,500,000.
These losses did not really become serious until 1919 when
they reached nearly $142,000,000. In 1920 the loss was not
quite $219,000,000. T h e reasons given for these losses are
that it was impossible to adjust tariffs quickly enough to keep
pace with growing costs, especially of wages and salaries.




THE INTER-ALLY DEBTS
TABLE III—GERMAN

[ 64

EMPIRE

NET REVENUE FROM THE ADMINISTRATIONS OF IMPERIAL WORKS 1914-20

(In "Currency" dollars—00,000 omitted)

Fiscal Year
Ending March 31

1914
191 5

191 6

191 7
191 8
191 9
1 9 20

Total for War Years
1915-20

Post and
Telegraph Office
Including
Compensating
Amounts from
Bavaria and
WUrtcmbcrg

25.0
-10,3
-10,4
-IS,2
-27,1
-131,4
-213,8
—408,2

Imperial
Railways

7,3
-3,8

2,3

-7,o

-12,7

-0,3

-22,8

Imperial
Printing
Office

Total per
Col. 1
Table II

1,2

33,5

1,4
1,7

-12,7
— 10,0
—12,0
-33,2
-141,9
-218,7

0,9

o,9
2,2

-4,6

2,5

-428,5

Tax Revenues: Analysing the revenue from customs, taxes
and fees as per Table IV, attention is drawn by Doctor Wirth
to the great variations in the curve of each particular item.
He states that this is partly due to the fact that the yield of
the various sources of revenue had not been in accordance
with the estimates upon which rates were based, and partly
because the shrinkage of consuming ability had not affected
every group of taxable values in the same ratio. The table
gives the return from revenue collections for the fiscal years
1914 to 1920 inclusive.
Customs:—The customs provided the most remunerative
source of revenue before the war: about 40 per cent, of the
entire revenue receipts of the imperial government. After
the war began, this was the most vulnerable source of revenue.
Some important duties had to be suspended for the duration



ioo]

BANKERS TRUST COMPANY

of the war, others withered from year to year under the
influence of the constantly tightening blockade of Germany's
foreign trade. T h e total revenue from customs in 1919 was
less than one-fifth of their yield in 1914.
Excise Taxes: A f t e r a temporary large increase in the
alcohol and beer taxes in 1915, these imposts yielded a steadily diminishing revenue until 1919, when they picked up
slightly and then largely increased in 1920. This improvement
in 1919 and 1920 was due to a higher tax on alcohol, but the
higher tax also reduced consumption.
On the other hand, the tax on tobacco yielded a larger
revenue each year, the yield in 1920 being over 13 times the
yield of 1914. This is attributed partly to an increase in the
rate of tax, but especially to an extraordinary demand for
cigarettes. Another commodity, the tax on which assisted
in swelling the excise taxes, was coal. This tax which was
TABLE IV—GERMAN

EMPIRE

NET REVENUE FROM CUSTOMS, TAXES AND FEES 1 9 1 4 - 1 9 2 0

(In "Currency" dollars—00,000 omitted)
Fiscal Year
Ending
March 31

Customs

1914 . . . . 161,7

Excise

157,4

Total
Stamp Taxes on
per
Duties
Traffic Tax on Dircct Other
Including Including Turn- Taxa- Taxes Col. 1
Table 1!
Bill
over
tion
Statistic
Stamps
Fees

60,6

- 133-4 185.1 43.1
. 85,6 123,3 39.3
59.5
• 82,9 159,7
. 554 286.2 110,9
• 31,6 483.7 121,6
1 9 2 0 . . . . 255,1
730,1 185,1
Total for War
Years 1915-20 644,0 1,968,1 559,5
1915 • •
1916 . .
1917 • •
1918 . .
1919 • .

•
.
•
.
•




14,7

o,5
0,3
0,2
21,5
50,4
125,6 ' 353
161,2 163,4
359,2

8,0

11,0

8,1
4.9
3,4
1,3
0,8

11,8
15,6
41.0
39.8
38.1

199,2 157,3

402,9

381.0
265.1
342,6
545.2
838,9
0,9 1,533,9
19,4 3.906,7

THE INTER-ALLY DEBTS

[ 64

first introduced in 1917, yielded nearly half of the total excise
receipts in 1920.
Coal Tax: The coal tax, as imposed up to March 31,
1920, was assessed at the rate of 20 per cent, of the value of
coal at the mines. The only coal exempt from the tax was
that necessary for the consumption of the mines for maintenance of the works and under certain conditions for the
production of oil and similar products and the coal supply
for domestic use of the miners and other employees. The increased income from the coal tax is attributed by German
authorities, not to a larger output—it is stated that the output as compared with the time of peace had decreased—but
to the continual rise in the price of coal at the mines. The
tax is one that can be passed on to some one else and, therefore, affects practically all industries, the railways, shipping,
electric and gas works and the entire population requiring
coal for any use. Therefore, this tax burdens very sensibly
the entire economic life of the country and is felt in every
home.
Since 1920 this tax has continued to be the tax
bringing the largest return to the imperial treasury, and with
the exception of the income and turnover taxes the most
productive of all taxes levied. For the year ended March 31,
1923, it was expected to be more productive of income even
than the two taxes last mentioned.
Stamp Duties: The return from stamp taxes, which form
of taxes had been in use pre-war, fell off in the fiscal years
ending March 31,1915 and 1916 but increased again in 1917
and became of importance thereafter, being levied to
cover some additional lines of business, while the rates were
increased also. These taxes are levied on partnership agreements, on securities, on insurance documents, on real estate
purchases, on passenger and freight traffic of the railways



ioo]

BANKERS TRUST COMPANY

and on entertainments; even on the fees of directors in corporations. To the increase in new corporations and in the
general broadening of insurance, together with a revision in
rates, is attributed the increases in stamp duties.
The yield was progressive. In 1917 the net return was
£S9>57i>°oo;
was $110,955,000 in 1918 and $185,140,000
in 1920.
The yield of the other taxes was so small that they do not
call for detailed comment.

Non-Recurring Revenue
In addition to the usual sources of taxation, there were
several new methods of taxation tried out in Germany during
the war and immediately thereafter. These Dr. Wirth calls
non-recurring direct taxes.
As shown in Table II, column three, these taxes produced
$2,248,700,000 in the six war years. Of this amount, $232,000,000 was obtained from the tax on capital, or "defence
t a x " as it was also called. This we have already noted was
inaugurated in 1913 in connection with the non-recurring
expenses of increasing the military establishment.
The extraordinary war levy of 1916 was the outcome of a
recommendation made by Finance Minister Helferrich in
connection with the request for the December, 1915, vote of
credit. It was a war profits tax levied as part of a general
impost upon all gains from January, 1914, to January, 1917*
Persons whose profits had been augmented by the war were
instructed to hold 50 per cent of such profits in reserve for
the payment of the tax. The law imposing the tax was
enacted in June, 1916. Similar war profits taxes were levied
in 1918 and 1919. There was also levied in 1919 a war tax
on the increment of wealth.




THE INTER-ALLY DEBTS

[ 64

These taxes are referred to by Dr. Wirth as " T h e chief
success of tax legislation during the war."
The extraordinary war levy under the law of 1916, plus
surcharge, brought in $1,375,000,000; that under the law of
1918 brought in $639,000,000. Not much had been realized
on the special taxes of 1919 up to the close of the fiscal year,
March 31, 1920.

Concluding Remarks
The "other revenue," listed in the next to the last column
of Table II, was chiefly derived from banking, coming from
the Reichsbank and the Darlehnskassen.
It will be noted that the total net revenue receipts for the
six years of war financing amounted to only 12.72 per cent
of the total expenditure.
The figures used all through this discussion are for " n e t "
revenue, presumably revenue less cost of collection. We have
used the figures as given by Dr. Wirth, simply turning marks
into dollars at par of exchange.
In tables printed below may be found the statistics as
published in the statistical year books of the German Empire.
These figures are done into dollars at par of exchange; also,
adjusted to the 1913 purchasing power basis, that is in " 1913 "
dollars. The figures differ considerably from Dr. Wirth's
presumably because the revenues are given gross while the
expenses include the cost of collection of revenues. This is the
method of reporting financial statistics followed by other
nations; therefore these latter figures are the proper ones to
use in making comparison with the receipts and expenses of
other nations and for this reason they have been used in our
comparative tables. However, the year book figures lack



ioo] BANKERS TRUST COMPANY

details and therefore Dr. Wirth's statistics as given above are
especially valuable for the purposes of this chapter.
GERMANY
GOVERNMENT RECEIPTS

(In "Currency" dollars—000,000 omitted)
Years Ended March 31

1914

Revenue
Ordinary . . .
Extraordinary .

611

Total . . .
Government
Services—Net .

1915

588

1919

1920

1.760

2,607

89

681

434
27

505

1,906

22

545

461

527

2.451

1,849

— 11

19

—12

-34

-86

450

515

1.763

88

630

676
— /

23

Total Revenue 653
Borrowing. . . .
9
Total Receipts

1918

1917

1916

675
M*3

662

2,088

3,288

-7

5,680

6,098

2,417
9.971

8,725

9.342

6,130

6.613

12,388

10,488

12,623

3,281

GERMANY
GOVERNMENT RECEIPTS

(In "1913" dollars—000,000 omitted)
Years Ended March 31

19x4

Revenue
Ordinary . . . .
Extraordinary . .

611

Total . . ; .
Government Services

19

630

23

Total Revenue. 653
Borrowing
. . . .
9
Total Receipts.




662

1919

1920

755
38

354
92

793

446

1,230

756
336 1,286
3ii
3.925 3.978 5.307 3.745

1,269

1,818

4.236 4.314 6,593 4.50*

1,714

19*5
512
77
589
—7
588

1916
300

19

i'S

1917

329
15

1918
1,014
290

^

-37

—1

445

CHAPTER

VI

Borrowing in Home and Foreign Markets
1914-1920
5 shown by Statistical Table X , on the "1913" dollar
basis, 97 per cent of the receipts of the belligerent
governments for war came from borrowing. The German
group borrowed all of their requirements, while the Allied
group borrowed around 94. per cent. The difference is not as
great as is generally believed to have been the case. The fact
is that the war was financed by inflation of the currency, or
through bank credits, to a greater or less degree in every
country which was engaged in the struggle.
Home borrowing provided 83^3 per cent of the sinews
of war for all the nations involved; say 77.2 per cent in the
case of the Allies and 100 per cent in the case of their opponents. The internal borrowing, proceeding along the lines of
least resistance was aided first of all from the State banks by
utilizing their note issuing powers against discounted treasury
bills as already explained beginning at page 40; then it took
the form of borrowing from the business banks and the general public on short time paper and, finally, of the sale of
bonds payable in the future.
Borrowing in foreign markets which yielded only a little
over one per cent of the receipts for war while quite unimportant as to amount, was very important when the fact is
borne in mind that it was through the medium of such loans
that certain absolutely essential raw materials of warfare,
such as cotton, rubber, copper, steel, chemicals and other
munitions were obtained in the early years of the war.




[71

ioo]

BANKERS TRUST COMPANY

The inter-ally loans, what our French friends call the
"political loans," provided the remaining 11.7 per cent of the
receipts. These loans we will discuss in subsequent chapters.
In this chapter we will consider the home and foreign market
borrowings.

Public Debts vs. Currency
It is a difficult matter to present a statement of the public
debts of a nation when the purchasing power of its money is
constantly changing. If there is no stipulation to the contrary, a government debt is payable in the currency of the
country. If this currency depreciates in purchasing power at
the time a debt matures, as compared with its purchasing
power when the debt was contracted, the government is the
gainer. On the contrary, if the currency has a greater purchasing power when a debt falls due than it had when it
was contracted, the bond-holder has the advantage. Of
course, if it is stipulated in the bond that the debt is payable
in "gold coin" of a particular weight and fineness, then gains
or losses due to depreciation or appreciation in the purchasing
power of the currency are to a great extent eliminated. Such
a stipulation is usually made in the case of debts contracted
in foreign markets, but internal government debts are usually
payable simply in the currency of the country.
Thus the purchasing power of money obtained from borrowing is one thing, but the purchasing power of the money
required to pay a debt off may be quite different. For example, suppose a debt of $10,000,000 to have been contracted
when the currency was " a s good as gold," but that when it
matures the currency is worth in gold only 50 per cent of its
face value; obviously the government gains $5,000,000 when



THE INTER-ALLY DEBTS[64

paying the obligation and the lenders lose this amount. This
is what has been happening all over the world, notably in the
case of Germany and of German corporations where currency
debts contracted pre-war have been paid off at par in marks
which would hardly pay for a good dinner or perhaps even
a carfare.
On the other hand, this works out just the other way
around in the case of a solvent state such as France, Italy,
England or the United States. For example, take our Civil
War debt, some of which was contracted in currency dollars
with a buying power of only forty or fifty cents in gold, but
was paid off in a dollar worth one hundred cents in gold.

The Interest Burden
Every solvent nation is facing today the same situation,
which may in time involve a very serious loss. However,the
problem for a national treasury is not so much one of paying
off principal as it is one of the annual interest charge. It is in
this connection, doubtless, as time goes on, that adjustments
can be made which will appreciably lighten the burden of
the war debts and this possibility will encourage the adoption
of measures calculated to improve the credit of the nations.
As credit improves, debt can be refunded at lower rates of
interest and the day of final payment of the principal need
not concern the present generation or even later generations.

Growing Up to the Debt
Meanwhile, increasing wealth due to the adaptation to the
uses of trade and commerce of scientific discoveries may bring
national fortunes and national debts into much better rela


ioo]

BANKERS TRUST COMPANY

tion than is the case today. It was because of the utilization
of the work of scientists in developing steam, electricity and
mechanics that the world recovered quite quickly from the
ravages of the hundred years of almost continuous warfare
which ended with the battle of Waterloo in 1815 and that
nations "grew u p " to debts contracted in those years of
fighting.

The Debts Stated
For the reasons just given, it seems necessary in stating
national debts to deal primarily with par values, although
the burden of interest charge may properly be measured in
" 1913 " dollars. However, it is desirable to sec just what the
debts would amount to if they were repayable now or at
some other given date and it were possible to refund them
into currencies of, say " 1 9 1 3 " purchasing power; or into
dollars at rates of exchange current for the dates for which
statements are made. The following table compares the debts
of the opposing groups of belligerents as they stood just
before the war, with their status about the time the United
States came into the fray and at the close of the war, say at
the end of 1919 (or for the close of the fiscal year 1919-20).
The figures are given at face value; also on t h e " 1913"dollar
basis and at the rate of exchange on New York current at
the time.
The tables do not require extended comment. The disadvantage which solvent nations will face if compelled to pay
off their debts when money has appreciated in value is obvious. Tables setting forth the debts of each nation at the
same dates, classified as to their character, may be found
among the Statistical Tables.



THE INTER-ALLY DEBTS[64

NATIONAL DEBTS
(In "Currency" dollars—000,000 omitted)
ALLIED POWERS

Total
Pre-war
1913-14 . . 25.727
^ (I-CS9 India) 24.231
Mid-War
1916-17 . - 77.536
(Less India) 75.990
Post-war . .
1919-20 , . 166,425
(Less India) 1 6 4 , 1 5 9

CENTRAL POWERS

Per
Per
Cap- Cent. Total
ita Wealth

A L L BELLIGERENTS

Per
Per
Cap- Cent. Total
ita Wealth

Per
Per
Cap- Cent.
ita Wealth

33
45

5.08
3.08

6.258

43

5.07

31.9S5
30,489

35
45

5.07
3.08

99
142

is. 31
15-94

29,994

208

24.28

107,530
105.984

116
156

17.06
17.66

213

30.61
32.28

71,112

494

94-10

237.537
235.371

257
346

38.30
40.28

306

(In 11 1913" dollars—000,000 omitted)
Pre-war
1913-14 • .
(Less India)
Mid-war
1916-17 . .
(Less India)
Post-war
1919-20 . .
(Less India)

25,727
24,231

33
45

3.08
3.08

6,258

43

5.07

31.985
30,489

35
45

3.07
j.o3

35.I4I
33.933

45
63

6.94
7.12

19.459

135

1.37

54,600
53.392

59
78

8.66
8.90

53,084
5M67

68
96

9-77
10.44

14.974

104

19.83

68,058
66,441

74
98

TO. 99
11.37

(In dollars at Exchange Rate on New York—000,000 omitted)
Pre-war
33
1913-14 . . 25.737
45
(Less India) 34.231
Mid-war
1916-17 . . 65,631
84
(Less India) 64,100 119
Post-war . .
1919-20 . . 118,664 152
(Less India) x 16,389 217

3.08
3.08

6,258

43

3.07

31.985
30,489

35
45

3.07
3.08

12.03
13-4S

21,065

146

17.06

86,698
85.167

94
125

I3.f6
14.19

H.83
22.88

6.096

43

8.07

124,760
122,485

135
180

20.13
20.97

Per capita statistic* in whole figures.




ioo]

BANKERS TRUST COMPANY

Internal Funded Debts
A t the close of the period of war financing as shown by
Statistical Table X V I I I , the domestic debts were divided
between floating and funded debts in the proportions of
39.01 per cent floating and 60.99 P e r c e n t funded.
Very much the same methods were used in each country
to sell the permanent loans. Purchasing was made easy by
allowing payments to be made in several instalments and by
arranging to have the business and state banks make temporary loans secured by the new bonds so as to encourage the
public to buy to the limit of their resources. Permanent loans
were not offered oftener than twice a year and in several
cases at wider intervals. This gave time for the purchasers to
pay off their bank loans and fully to complete the payment
for one issue before another was bought out.
Great spectacular campaigns were carried on to stimulate
interest in the loans. Brass bands, picture posters pasted
everywhere, even on the walls of public buildings, mass meetings, appeals in churches, schools and places of amusement,
were all employed to secure a maximum subscription. "Lend
your money while your boys are giving their lives" was one
of many effective slogans. Speeches by wounded men and by
men temporarily brought in from the battle-front were especially useful in winning subscribers.
Partial payment plans by which employees in factory,
store and office could pay for bonds out of their weekly or
monthly pay envelope proved to be very helpful, while the
War Savings Stamps and Certificates made it possible for the
school children's pennies and the widows* mites to swell the
funds put at the disposal of the various governments.
Much of the money for the conduct of the war was lent



INTER-ALLY DEBTS

to the governments at a great sacrifice by those whose incomes were steadily shrinking in purchasing power, because
of the abnormal war demand for goods and the policies of
inflation everywhere in use.

Borrowing in Foreign Markets
Early in the war the necessity of creating credits abroad
against which could be obtained absolutely essential raw
materials and other munitions of war, as well as food for the
civilian population, led to arrangements being made to place
loans in the markets of allied and neutral governments.
Germany succeeded in placing a small loan, around #10,000,000, in the United States and she also established credits in
the Netherlands, in the Scandinavian countries, in Switzerland and probably early in the war in Italy. She was assisted
in arranging these credits by the fact that she had considerable foreign investments which could be utilized for the purpose. She probably was able to obtain certain much needed
supplies in the Balkan countries against trade credits. However, not much is known as to these financial operations.
The London market was open to the Allies and trade
credits wTere arranged with the British dominions, with the
neutral powers of Europe and South America and especially
in the United States. Thus in exchange for direct or indirect
credits the Allies obtained nitrates from Chile, wool from
Australia and New Zealand, hides and grain from Argentina,
coffee from Brazil, grain from Canada, cotton from India,
gold from South Africa and vast quantities of munitions of
all kinds from the United States.
England and France were greatly aided in establishing
these credits by their ability to utilize their investments in
foreign countries accumulated over a long period of years of



ioo]

BANKERS TRUST COMPANY

prosperity and saving. Russia had no important foreign investments and but little gold so she had to do her financing
vicariously through London and Paris, although she seems to
have been able to establish a few direct credits. Italy was in
much the same position and therefore to a great extent had
to look to her allies for the financing of her needs in neutral
markets.
Measured in "currency" dollars, the purchases by the
Allies in foreign markets financed by loans placed in such
markets aggregated about three billion dollars, practically
all of them prior to the entrance of the United States into
the arena. England borrowed $1,444,000,000; the English
dominions about $105,000,000; France, $1,084,000,000 and
Russia $338,000,000—in all $2,971,000,000. However, making allowances for repayments by some countries, the net
amount owing in 1920,3s shown by Statistical Table IX, was
$2,528,000,000.
In the next chapter we discuss in greater detail the borrowing methods and the income realized therefrom of each
of the larger belligerents.




CHAPTER

VII

Market Borrowing of Each Belligerent
1914-1920
A T this point the reader may profitably turn to the chapters on wealth and income. A perusal of these chapters
will give one a good idea of the relative economic strength of
the belligerent nations at the beginning of the war and today.
The sections of these chapters dealing with the question
of foreign investments and foreign indebtedness have a direct
bearing upon the reasons why certain of the powers at war
could freely obtain foreign goods. This was because they
could pay for them either in gold of which they had a limited
supply, or especially that they could pay foreign farmers,
manufacturers or merchants for their goods in the money
of their own country. This money was obtained either by
the direct sale on their stock exchanges of the national, state,
municipal or corporation stocks and bonds of the nations
from which the munitions were being bought, or by arranging
loans secured by such collateral through the bankers of these
nations. These stocks or bonds were borrowed or bought by
their governments from citizens of the buying nations who
had acquired them in former years by investment of their
savings. In cases where securities were bought, the seller was
paid in home currencies; where the securities were borrowed
the owners received interest-bearing receipts and usually a
bonus "for use" of the collateral.
Nations with small foreign investments, like Russia for
example, could arrange direct purchases only to a limited
degree and therefore could obtain any important amount of
foreign goods only by availing of the good offices of allies




179

ioo]

BANKERS TRUST COMPANY

who could command credit in the seller's market, or at any
rate in some market which was in a position to export to the
nation whose nationals were supplying munitions, goods
which could be marketed within its borders. The exchange
of credits between governments—the inter-ally borrowing—
which these three-cornered arrangements involved will be
discussed in the chapters on the inter-ally loans.
This chapter deals with the direct domestic and foreign
market borrowing on the part of the larger powers. For
general statistics of such borrowing by all belligerents, reference may be made to Statistical Tables I X to X I V inclusive.
The status of national debts at the close of the fiscal years
1916-17, 1919-20 and 1922-23 is given in Statistical Tables
X V to X X I I I .
G R E A T B R I T A I N ' S M A R K E T B O R R O W I N G FOR W A R

We have already seen that the heaviest burden of war
financing of the Allies fell on the national group composing the
British Empire. Great Britain was the banker for this group
and, until the United States came into the situation, to a
great extent for her other allies. It will be of interest, therefore, to learn what were some of the problems which her
leaders had to face and how they solved them. We have already discussed how the people were taxed and what the
national treasury realized from revenue collections. But, after
all, while revenue provided the very creditable sum of about
nine and a half thousand million pre-war dollars, this was less
than a third of the total receipts for the six years of war financing—the rest of the receipts of the exchequer had to come
from borrowing.
Of the money borrowed, about eighty per cent was obtained right in the United Kingdom; about five per cent



THE INTER-ALLY DEBTS

[ 64

came from foreign markets, chiefly from the United States
and about fifteen per cent came from allied and associated
governments, again chiefly from the United States.

Britain's Borrowing At Home
The Currency Notes: In Great Britain, at the very beginning of the war, rather than authorize fiduciary note issues
by the Bank of England, the government provided for a direct
government currency, technically known as "currency
notes," but popularly called "Bradbury's," because the
earlier issues were signed by an official of this name.
The act of parliament under which the currency notes are
issued was passed on August 6, 1914. It provides for the
issuance of notes of the denomination of one pound and of ten
shillings which "shall be current in the United Kingdom in
the same manner and to the same extent and as fully as sovereigns and half-sovereigns are current and shall be legal tender in the United Kingdom for the payment of any amount."
An important provision of the act which does not appear
to be generally known is that the holder of a currency note
is "entitled to obtain on demand, during office hours at the
Bank of England, payment for the note at its face value in
gold coin which is for the time being legal tender in the
United Kingdom."
The government has the right to call in any currency
notes "on paying for those notes at their face value in gold."
Under the terms of this same act, known as The Currency
and Bank Notes Act, 1914, postal orders were temporarily
made legal tender and redeemable in coin at the Bank of
England. The Bank of England and the Scotch and Irish
banks, so far as temporarily authorized by the treasury, were
permitted to "issue notes in excess of any limit fixed by l a w "



ioo]

BANKERS TRUST COMPANY

and Scotch and Irish bank notes were made a legal tender in
Scotland or Ireland, respectively, and redeemable in currency
notes.
A very important further provision applying to the Scotch
and Irish banks was that currency notes or certificates might
be used as cover for their notes instead of gold or silver.
On December 15, 1919, the chancellor of the exchequer
announced in the House of Commons that he proposed to
give immediate effect to certain recommendations contained
in a report made to parliament by the Committee on Currency and Foreign Exchanges. In pursuance of these recommendations the legal tender character of the Scotch and Irish
bank notes was withdrawn, also the loan of currency notes
to the banks and, of greatest importance in its effect upon the
currency conditions, it was provided that " t h e actual maximum fiduciary circulation of currency notes in any one calendar year should be fixed as the legal maximum for the next.
In accordance with this last regulation, the maximum uncovered issue for 1920 was placed at $1,560,039,000; for 1921,
$1,545,223,000; for 1922,$1,508,406,000and for 1923, $1,314,715,000. The maximum for 1924 will be $1,207,697,000.
The table on page 83 shows the amount of currency notes
outstanding at the close of each year, from 1914, and the
cover for same held in the redemption account.
The currency notes are always covered by securities or
cash in one or more of the following ways, viz.:—by gold
coin and bullion; silver coin; Bank of England notes; government securities; advances to bankers—or by balance at the
Bank of England.
A word of explanation in regard to the Investments
Reserve Account may be of interest. In this account is shown
the income from the advances to bankers and from the gov


T H E I N T E R - A L L Y DEBTS
GREAT

[

64

BRITAIN

CURRENCY NOTES ACCOUNT

(In dollars—000 omitted)

££

2

£

0
5

5 & 0

>S4<

IS
Si*
c

c

.si

•OQ
*OTJ

Aug.
Dcc.
Dec.
Dec.
Dcc.
Dec.
Dec.

26,
30,
29,
27,
26,
31,
31,

1914
104,789
1914
187.234
1915
SOI,£06
1916
730,601
1 9 1 " 1,035.397
1918 1.572,891
1919 1,742.768

3.546
16,690
41,624

75.564
83,608

18.539
2,920
774 1,212
311
195
1 9 0 3,285
2,774
1,216
1.192

30,665
822

1,788,868 82,537 Silver Coin
14.598
1.584.292 71.326

Dec. 29, 1920
Dec. 28, 1 9 2 1
Dcc. 2 7 , 1 9 2 2 1 , 4 6 6 , 3 0 6 6 2 , 6 3 5
Dec. 26, 1923 1.455.275 61,170

34.062
34.062

J-sl
I' IP
O g

£

0

|

< 0

Ail vance 9
to Savings
Banka

Date

m

REDEMPTION ACCOUNT

ffl M
a rt=5
U J

t

A

K C
5

90.021
138,681
138,681
138,681
138,681
138,681

48,190
365.786
lO.O 574.684
IJ.4 908,176
8.0 1,484.777
19,464 O.i 1,642,455

138,681
94.644
I3S.68I
94.644
1 3 1 . 3 8 2 102,916
IO9.242
131.382

48.I
27.6

I3>0 1,637.428
14.7 1,406,911
IJ.Q 1,258,914
16.S 1.340,986

a

55.584
45.186
99.938
33.320
26,695

23,318
13.634
652
783
667

774

ernment securities held as collateral, presumably less the
expenses of issue, although this is not specifically stated to
be the case. Under a Treasury Minute dated M a y 3, 1915,
the net income accruing to the account is payable to the
exchequer, but an amount equivalent to not less than five
per cent of the total securities held must be reserved b y the
Bank of England to cover losses.
It will be observed that the gold and Bank of England
notes reserved against the outstanding currency notes
amounted on December 26,1923, to 16.5 per cent of the fiduciary circulation. This is the largest reserve held since the
close of 1918 when it stood at the low point of 8.9 per cent,
having fallen each year before then from a maximum of 48.1
per cent at the close of 1914.
The Floating Debt:—Ways and Means Advances: Prior to
the war it had been customary for the Bank of England to




ioo]

BANKERS TRUST COMPANY

provide the government with credit for temporary use while
awaiting the receipts from taxation. Such loans were known
as Ways and Means Advances. During the war the government frequently called upon the Bank of England for very
large advances of this character to tide over periods when tax
collections and returns from market borrowings fell short of
expenditures. For a time these advances seemed to have crystallized into a permanent loan from the bank. This caused
the directors of the bank several times to represent to the
government that loans of a continuous character should be
obtained from the public and "advances from the bank once
more confined to the temporary requirements of the treasury." It is anticipating our story a little, but it may be noted
that advances of this character since the close of the period
of war financing have partaken more and more of the temporary pre-war character. However, indirectly, the government
continues to borrow quite heavily from the bank by causing
government departments having credit balances at the bank
to loan such balances to the treasury.
The Floating Debt:—Treasury Bills: The most potent
source of temporary borrowing during the war was found in
the treasury bills, a form of borrowing dating back to 1696
in the reign of William III. As originally issued they were
a form of government currency. Their subsequent use has
been to bridge over the period between expenditure and the
receipt of income from taxation and from long time loans.
Before 1877 they were called exchequer bills. They have
served as the shuttle which wove into the fabric of government resources the floating capital of the realm. They were
issued during the war to mature at various short dates ranging from two months to twelve months. Sometimes they were
issued below par, to be repaid at par; that is as discounted



THE INTER-ALLY DEBTS

[ 64

paper. Again they were issued at par bearing fixed rates of
interest. Sometimes the treasury offered them on definite
terms, but again the treasury asked for tenders from the public. A t times the denominations were made low so as to
attract floating capital in small as well as in large sums; again
they were offered only in bills of large denominations, say of
the equivalent of $25,000 or $50,000. Of course these latter
offerings were attractive only to the banks and others commanding money in large sums.
In short, they were used by the treasury to direct the
flow of capital from the public into channels which best
suited the requirements of the government. If a large permanent loan was about to be issued, offerings of treasury bills
could be discontinued and those outstanding allowed to run
off, thus creating a vacuum to be filled by the new permanent
issue. In the interval, if necessary, the treasury financed its
requirements through increased advances from the Bank of
England.
The floating debt was a very potent source of inflation
during the war and after.
The amount of this character of debt outstanding at the
close of each fiscal year, that is on March 31, is shown by
the table on page 86.
Technically the amounts listed in the column headed
"other bonds maturing within a y e a r " are not part of the
floating debt as set up in English treasury publications, but
actually they do come into this category, because provision
must be made within a year to refund them or they must be
paid off in cash.
If the supposition is correct that the "government securities" held as collateral to the currency notes are in fact
treasury bills, then the amount of the floating debt as stated



ioo]

BANKERS TRUST COMPANY

FLOATING DEBT OF GREAT BRITAIN
(In "Currency" dollars—ooo.ooo omitted)
W A Y S AND M E . S X S A D V A N C E S

cTreasury
5By Bank 6By Public
Bills
Departof
England
ments

March 31

1914

•

•

•

-

•

•

•

•

460

1916 . . . .

Total
Floating
Debt
63

63

1915

Total

Other
Debt
Maturing
Within
a Year

7

460
2,862

•

2,256

97
1,059

477

3,792

1918 . . . .

4,737

1,048

670

6,455

1919

•

4,307

2,214

1,187

1920 . . . .
1921 . . . .
1922 . . . .

5,152

997

997

752

752

1,467
2,058

7,708
7,616
8,108

4,244

717

717

1923

2,997

944

944

2,269

6,210

1917

•
•

.

•
•

.

•
.

.

.

2.758

5.298

8,077

oNet, i.e.. Less bills held as collateral to foreign debt.
bSo division of Ways and Means Advances into those made by the Bank of England and those made by Public Departments was published prior to 1020. Although no
advances are shown from the Bank the column is included in the table to draw attention to the fact that during each year such advances have from time to time been made.
Ways and Means advances by Public Departments presumably represent sums past
due or due to the spending departments from the Treasury. Part of such advances may
also represent loans by Public Departments out of actual balances standing to their
credit at the Bank of England.

above can be reduced by the amount of these government
securities as given in the currency notes tables printed on
page 83, but if this is done the corresponding amount of
currency notes must be added to the debt statement.
The Short Term Funded Debt: In British practice the
funded debt, technically, consists only of the perpetual debt,
such as the permanent debts due to the Bank of England and
the Bank of Ireland and the old consols. T h e unfunded debt
is debt of a temporary nature and debt repayable at the end
of fixed terms.
A s some of the obligations listed under this latter head
are not repayable for many years the division based on established usage has become somewhat illogical. In this book all




THE INTER-ALLY DEBTS

[ 64

forms of debt maturing within a year are classified as unfunded debt, while forms maturing in from one to ten years
are classified as short term funded debt; the perpetual debt
and all other forms of debt maturing after ten years are classified as long term funded debt.
During the war the British government issued various
forms of debt obligations maturing in from one year to ten
years, the aggregate amount of which outstanding on March
31, 1920, was $8,900,000,000, nearly a quarter of the total
debt at that date.
The most important issues coming under this category
were the Exchequer Bonds as they were first called, a title
which in 1917 was changed to National War Bonds, as more
likely to attract loans from the people. These bonds were
issued in small denominations as well as for large amounts.
It would be tiresome to discuss the details of these various
issues. Interest rates and other terms were varied from time
to time to suit the exigencies of the moment, both in regard
to the needs of the treasury and the whims of the lenders.
One very interesting feature of the offering of exchequer
bonds was the fact that from December 16, 1915, these bonds
were put on sale "over the counter" from day to day, instead
of waiting for spectacular periodical offerings. The object was
to have a steady flow of money into the treasury. Just as in
the case of the treasury bills, offerings were occasionally discontinued, especially when it was desired to divert the flow
of money into the permanent war loans which were issued
periodically.
The Permanent War Loans: There were four of these
loans. The first was for $1,703,000,000 at 3 T h i s issue
was offered in November, 1914, at 95 and was quickly oversubscribed by nearly 100,000 applicants.



ioo]

BANKERS TRUST COMPANY

The second offering, made June 21, 1915, was at
per cent. The issue price was par. Subscriptions aggregated
$2,774,000,000.
T h e third war loan was not issued until January, 1917.
The loan was an unqualified success, $4,811,000,000 being
sold for cash; $5,511,000,000 being issued in exchange for
4 p e r cent war loan and exchequer bonds—a grand total
of $10,322,000,000.
The fourth war loan or victory loan was issued June 13,
1919. It was mainly designed to liquidate a large amount of
floating debt. It was issued in two forms, both bearing 4
per cent interest, but one issue was offered at 80 per cent
not redeemable before i960, while the other was offered at
85 per cent, redeemable by annual drawings at par. The subscriptions aggregated $3,735,000,000 of which $540,000,000
came from the banks.

Great Britam as a Borrower Abroad
From the very beginning of the war Great Britain found
it necessary to finance both her dominions and her allies.
In the latter task she was ably seconded by France although,
as early as the latter part of 1914, it was found desirable to
permit France to offer her treasury bills in the London
market, and thereafter, until the United States became a
partner of the Allies, France frequently borrowed either in
t h e L o n d o n market or of the British government.
T h e b u l k of England's market borrowing was arranged
in the United States. This was because we were in a position
ID supply munitions of every kind required by the allied governments, whether they were foodstuffs, metals, lumber and
Other Taw materials, especially cotton; or clothing, boots and
shoes, ammunition, motor cars or locomotives. England also




THE INTER-ALLY DEBTS

[ 64

borrowed to some extent in Canada against shipments of
grain and other supplies; in Japan, against purchases of
clothing and other munitions; in South America against purchases of meats, coffee, grain and nitrates. She also exchanged
credits with Australia and New Zealand against purchases
of wool from them in return for. sundry supplies furnished to
their troops. She also borrowed gold from the Bank of France,
from the Italian banks, and from the Imperial Russian Bank
chiefly, however, to finance purchases made for the account
of their governments in America and in 1916 she arranged
credits with Spanish banks in order to provide the means of
paying for purchases which she was making in their country.
Bonds and treasury bills sold in foreign markets, as distinguished from loans arranged with foreign governments,
provided Great Britain during the six years of war financing
with #1,444,000,000 currency dollars. These dollars had a
purchasing power on the basis of pre-war values of $1,067,000,000. The greater part of these credits was arranged for
during the first three years of the war. After the United
States opened her national resources to Great Britain and
her associates in exchange for their promises to pay, they had
little occasion to borrow abroad except to obtain certain supplies such, for example, as nitrates and certain metals which
the United States did not have or wool, clothing and foodstuffs needed to supplement supplies obtainable from us.
It should be kept firmly in mind that in no case were the
actual loans in money. They were made simply in terms of
money. What Great Britain and the other borrowers sought
and what they obtained were munitions of war—using the
phrase in its broadest sense. The important loans were arranged in the money markets, their proceeds were placed to
the credit of the borrowing government with their bankers in



ioo] BANKERS TRUST COMPANY

G R E A T BRITAIN'S BORROWINGS FOR WAR
FOREIGN

IN

MARKETS

STATUS AT CLOSE OF EACH FISCAL YEAR

(In "Currency" dollars—000,000 omitted)
March 31

Due Each Total Due
Lender

From

Annual
Increase 1
or
j
Decrease

250

350

350

1917

Japan
United States

97
1.047

X.X44

894

1918

Japan
Sweden
United States

146
33
939

X.toS

-J*

19x9

Argentina
Canada
Fi ji. Straits Settlements and Mauritius
Holland

ts
3X3
45
9
J4I
61
13
33
16
866

1.401

293

19x6

Norway
Spain
Sweden
Switzerland
United States
ipso

Argentina
Canada
Fiji,Straits SetUmentsand Mauritius
Holland
Japan
Spain
Sweden
United States

12
4
818

MS4

-34?

1921

Argentina
Canada
Straits Settlements
Japan
Sweden
United States

IS
137
40
39
4
493

708

-446

19 22

Argentina
Canada
Straits SetUcmcnts
Japan
United States

*5
xo
40
14
313

393

-j/tf

1923

Argentina
. . . . . . . . . . . .
Straits Settlements
United States

15
37
313

37 0

—132




. . . . . . .

IS
* 76
43

A

THE INTER-ALLY DEBTS

[ 64

New York or elsewhere and against these credits drafts were
drawn to pay producers and manufacturers for the munitions
which nearly every ship leaving our ports was carrying to the
seat of war.
The nations in whose markets loans were arranged by
Great Britain and the amount of such loans outstanding at
the close of each year is shown by the table printed on the
opposite page.

Market Loans Arranged in the United States
The table on page 92 lists the market loans arranged in
the United States, giving the dates of redemption and the
amount outstanding at the close of 1923.
In addition to the bond issues shown in the table, there
was one other form of borrowing which provided a substantial addition to Britain's resources in the United States.
This was a weekly offering, beginning August 24, 1917, of
$15,000,000 treasury bills. These were quite well received
by financial institutions. The maximum amount of such bills
outstanding at any one time was $98,000,000 on September
30, 1919. These have all been retired, offerings having been
discontinued in November, 1921. From an examination of
the table it will be observed that the only issues outstanding
at the end of 1923 were $75,000,000 or thereabouts of the $}4
per cent notes of 1929; $143,600,000 of the 5 per cent bonds
of 1937 and the obligation to the Central Argentine Railway
Company in lieu of the $15,000,000 6s of 1927 borrowed of
that company in February, 1917.
The Stabilization of the New York Exchanges: In July,
1915, the British treasury took the first step toward stabilizing New York exchange by instructing the Bank of England
to purchase American dollar securities in London and to



vO

OFOREIGN

w

Calendar Year

BORROWINGS
Anglo-French 53, 'ao.
3-yr. Secured 5s, *t8
3-yr. Secured 5 3,'IQ
"
S*yr. Secured 5 s.'ai
1-yr. Secured 5 s,'i8
2-yr. Secured sis."
ao-yr. Bonds sis. '37
3*yr. Notes sjs, '23
Jo-yr. Notes s|s. 9
Central AreentmeRy.

MARKET

IQI4

DEBTS

1015
Dated
10-15

OF G R E A T

1916
Dated

350,0

9-1
i-i
11-1
1

1917

IN T H E

1918

Dated

UNITED

1930

1919

Dated

STATES

1931

1933

Totals

Dated

350.0
150,0
150,0
3-1

3-1

100,0
150.0

3-1

'17

55.0 3-1 '17
11-1

11—1

6%, ra7

Total Borrowed

BRITAIN

88,6
101,6
148.4

iS.o

350.0

550.0

365.0

55.0

33S.6

1.458.6

REDEMPTIONS

AngUv French 59 . .
3-yr. Secured 59. 'lS
3-yr. Secured 5I3/10
S-yr. Secured sts.'ai
l-yr. Secured 5 is,'18
3-yr. Secured J J3,"to
30-yr. Bonds sis,'J7
3-yr. Notes 5 la, *33
10-yr. Notes sjs, '39
Total Redeemed

350,0

350.0

15.0

135.0
15.5

3

63.5

4*7,5

33.0

Ill.S

6.5
33,5

100,0

9.6

87.5
9S.I

41.6

33S.0

303,0

131,1

136.7 1.335.3

703.1

401.1

370,0

333.3 6333.3

Outstanding close

800.0
r.065.0
350.0
aThis table does not include Dollar Treasury Bills—None now outstanding.
tMade up as follows: sis. '29
74.7
143.6
Also status of Dec. sfs, '37
3ist, 1933
Cent!. A. Ry, 6s, '27 .
is.o
333.3




THE INTER-ALLY DEBTS

[ 64

transmit them to New York for sale. Exchange on New York
was then $4.77 Tor sterling and 1 7 ^ cents for the franc, comparing with $7.00 to the pound and 2 3 ^ cents to the franc
in August, 1914, to which rates it was forced by the necessities of tourists and others just after the declaration of war;
and with quotations at exchange parities in January, 1915.
The American current indebtedness abroad had been
largely liquidated and thousands of American securities from
both English, French and other overseas markets had been
repatriated.
Notwithstanding the efforts to meet the heavy payments
due to America for munitions of war by the sales of securities
just referred to, also by sales in New York of certain issues
of the French government as well as by considerable remittances of gold, the value of the pound and of the franc in that
market continued to fall, reaching on September 1 the low
levels of $4.50 and \6}4 cents, respectively.
It was then that the English government arranged with
their American bankers, Messrs. J. P. Morgan & Co., to
" p e g " or stabilize the New York-London exchanges by
standing ready at all times to furnish, at practically a fixed
rate, bills required to settle for purchases made in the American markets. Automatically this arrangement had the effect
of stabilizing Canadian-London exchanges, and, as a result
of the close working arrangements existing between the Bank
of France and the Bank of England, the Paris-New York
exchanges and the Paris-London exchanges were likewise
brought into line.
Because of the falling off in foreign exports to America
there were not sufficient commercial credits available to pay
for the great quantities of goods being purchased in our country and as the gold available for remittance had about been



ioo] BANKERS TRUST COMPANY

exhausted, it became necessary to create credits by borrowing
in the New York market.
The Anglo-French Loan: It was to create the credits just
mentioned that in October, 1915, France and England joined
hands to place in America an issue of $500,000,000 5 per cent
bonds, the Anglo-French 5s which have since matured and
been paid.
Secured Note Issues: In September, 1916, Great Britain
placed in New York $250,000,000 two-year 5 per cent secured notes. In November she placed $300,000,000 secured
notes maturing one-half in three years and one-half in five
years and in February, 1917, she placed $250,000,000
per
cent secured notes maturing $100,000,000 in one year and
$150,000,000 in two years. In addition she sold in New York
$15,000,000 Central Argentine Railway 6 per cent bonds.
Thus, up to the time when the United States nation became
a belligerent, Great Britain had borrowed directly $815,000,000 secured by collateral while her share of the Anglo-French
loan, $250,000,000, brought up her total direct borrowings to
that date to $1,065,000,000.
Subsequent bond issues by Great Britain in America were
unimportant. They were for $55,000,000 in 1918 and $338,600,000 in 1919 and were used to refund the earlier issues.
The funds to meet other maturing issues came from the
United States government or were remitted from London.
It will be noted that all issues of bonds placed in the
United States subsequent to the joint issue with France were
secured by collateral. This collateral was obtained by Great
Britain by borrowing or buying dollar bonds from her citizens. A t first the treasury undertook to purchase any suitable
dollar securities at prices based on current New York Stock
Exchange quotations or to borrow the securities for two



THE INTER-ALLY DEBTS

[ 64

years on the understanding that the interest received on such
securities would be paid to the depositor together with an
additional payment at the rate of one-half per cent per annum; afterward the terms were somewhat changed. We do
not need to go into all of the details. The important fact is
that the savings of past years invested in foreign securities
were now mobilized to make foreign payments, the owners
being compensated in sterling or government securities which
would not be taken abroad for outright purchases or by an
annual bonus in the case of loans. It is these same savings
invested in foreign securities and properties which are now
enabling Great Britain to meet her obligations to the United
States government and it is largely because of the present lack
of such investments that it is quite impossible for France and
Italy to pay us or for Germany to make reparation payments
except through a surplus of exports. In other words, they can
only pay as they can save while Great Britain is paying from
the income of past investments, as well as from current
savings.
MARKET

BORROWING

OF

FRANCE

Borrowing at Home
The Currency: Since the revolution and the unfortunate
experiences of that period with government issued fiduciary
currency, the French government has made no direct issues
of paper money. It is also true that at no time up to 1914
had the government interfered with the management of the
Bank of France, the sole bank of issue, in regard to its affairs,
in connection with the currency or otherwise. However, a
convention existed between the government and the Bank of
France whereby in case of a military emergency the bank was



ioo]

BANKERS TRUST COMPANY

obligated to lend to the nation up to 2,900,000,000 francs,
while the Bank of Algeria, the bank of issue in Africa, was
obligated to advance 100,000,000 francs. Thus, altogether,
3,000,000,000 francs, say in round figures the equivalent of
$600,000,000 was immediately at the disposal of the government in case of an emergency. T o facilitate such advances,
the banks were authorized correspondingly to increase their
note issues. From time to time since 1914 parliament has authorized the Bank of France to increase its note issues in order
that, in turn, the bank might increase its loans to the nation.
T h e total advances for the war by the end of 1919 had reached
29,255,000,000 francs or at par of exchange, $5,646,215,000.
These advances involved a corresponding increase in the
circulating notes of the bank, so that at the close of 1919
they had reached 37,274,000,000 francs or $7,193,882,000 an
increase from a circulation of 5,713,000,000 francs or $1,102,609,000 at the close of 1913.
The advances to the state were both direct and indirect;
that is to say, the bank received treasury bills against which
it made direct advances, thus directly increasing its note
issues. It also discounted for foreign governments, chiefly
Russia, treasury bills lent to them by the French government
— t h u s indirectly lending to France herself. These issues led
also to increases in the bank's issues of circulating notes.
The Bank of France also greatly aided the flotation of
government loans and the daily sales of treasury bills by
agreeing to lend to holders of government paper 80 per cent,
of the par value thereof. The reports of the bank do not
segregate these loans secured by government bonds and notes
from other loans made to the public but at times they must
have been for a substantial amount. However, as commercial loans at the close of each of the war years were less than




THE INTER-ALLY DEBTS

[ 64

at the close of 1913, large loans on government securities must
have been for short periods only.
The advances which the bank made to the nation during
the war were at the low rate of one per cent a year, but in
September, 1914, it was stipulated that one year after the
cessation of hostilities this rate should be raised to three per
cent. The additional two per cent was not to be counted in
the profits of the bank, but to be used to amortize the debt
of the nation to the bank.
The Bills of National Defence:—One of the most efficient
instruments for keeping the war chest filled was found to be
the treasury bills, very felicitously re-named by M. Ribot,
the Minister of Finance during the early part of the war,
"National Defense Bills." The change of name was determined upon in September, 1914. The new bills were at first
issued in denominations equivalent to $20, #100 and $200.
A t a later date these bills were issued in as small denominations as five francs and twenty francs (one and four dollars)
to fit the requirements of the smallest investor, and in various
larger denominations to meet the needs of banks and other
wholesale investors. A t first they were issued at a discount
which, when the note was repaid at par, gave the bearer a
return from the earlier issues at the rate of about 5)4 P e r
cent a year. The rate was readjusted from time to time as
conditions seemed to require.
These bills were at first issued to mature in three or six
months or a year. Later, bills of one month's maturity also
were issued. Three hundred and twelve million dollars worth
were absorbed in 1914. In the next year and the year following there were respectively net additions to the amount outstanding of some £839,000,000 in 1915 and $ 1,089,000,000 in
1916, while in 1917 the net increase was $1,345,000,000. In



ioo]

BANKERS TRUST COMPANY

1918, on November 30, the outstanding issue had increased
the equivalent of $2,590,000,000 to $6,357,000,000. This
amount was reduced nearly two billion in December from the
proceeds of a new permanent loan. The issues steadily increased during the following year reaching about nine and a
half billion dollars worth by the close of 1919; an important
part of them hidden away in the homes of the people. They
provided for nearly 29 per cent of the war expenditures.
The popularity of these bills was greatly increased by the
fact that the Bank of France agreed to accept them as security for loans at 80 per cent of their nominal value. Thus
they were a particularly liquid asset for people in business,
either large or small, and for institutions of credit.
The Funded Debt: In February, 1915, a new form of short
term bonds was placed on sale. These bonds, known as
"Bonds of National Defense," had a currency of ten years
and were well received, but they never achieved the popularity accorded to the bills of similar name. The first issue,
bearing 5 per cent interest, was placed at 9 6 ^ , reimbursable
at par upon maturity, in 1925 or in 1920, if the right of redemtion at that time were exercised. The bonds were issued free
of taxation. This first issue brought into the treasury the
equivalent of over $539,000,000. However, quite a large part
of this amount, around $150,000,000 was received in old bond
issues taken in payment. Subsequent issues were placed in
1917 and 1919.
It was not until November, 1915, that the first great war
loan was offered to the public.
Everything possible was done to popularize the loan and
to make it easy to subscribe. The books opened on November
25, 1915, and closed on December 15. The subscriptions at



THE INTER-ALLY DEBTS

[ 64

par totalled $2,934,000,000. The money value in cash and
securities totalled $2,568,000,000.
There were three other great loans placed during the war
period aggregating at par $11,136,000,000. They brought
into the treasury the equivalent of $8,193,000,000 either in
cash or in other national securities.

Borrowing in Foreign Markets
The external borrowings of France due to the Great War
fell into two classes, viz.: market borrowings and loans from
other governments.
The purposes for which the loans were incurred were:
for military supplies of all kinds; for civilian needs—especially
for food; for refunding of market debts incurred in the United
States for war purposes prior to April, 1917; for interest to the
United States upon the money it furnished; to reimburse
other nations, especially England, for advances received from
them; for needs of other nations, France acting as intermediary.
Apart from certain relatively unimportant export credits
from neutral countries and loans of about $200,000,000 from
Japan, the external indebtedness of France on account of the
war is due to or in the United States and the United Kingdom.
Market Borrowings in the United States: It was in September of 1914 that the first war loan was placed by France in
the United States. The amount was not large, only the sum
of $10,000,000 was involved, but the fact is worth recording
for this was the first opportunity which had been offered for
America to reciprocate, even in a slight degree, the great assistance(which France so generously gave her during the Revolutionary War. This loan was arranged by Mr. Maurice Leon,
a French attorney resident in New York, through the



ioo]

BANKERS TRUST COMPANY

National City Bank. It was for one year and secured solely
by the good faith of the French nation. It was in this month
that the submarine warfare began which, two and a half
years later, was to force American intervention on the side of
the Allies. This loan was promptly paid at maturity.
About six months later, in March, 1915, a syndicate
headed by Messrs. J. P. Morgan & Co., placed in New York
a loan of $50,000,000 for the French government.
In June, 1915, the French government distributed widely
to French banks and bankers a circular authorizing them to
buy for account of the national treasury United States railway securities held in France. These securities apparently
were resold in New York, thus forming the basis for credits
there.
In October, 1915, the French and English governments
united in placing in New Y o r k , through a powerful banking
syndicate headed by Messrs. J. P. Morgan & Co., a loan for
$500,000,000 at 5 per cent, repayable in five years. Although
this loan was unsecured it was readily placed and the bonds
always were well regarded in the American financial markets.
This is the largest foreign government loan ever placed in the
United States. It was paid at maturity, October, 1920, without aid from the United States government.
In 1916 M . Ribot, the French minister of finance, in a
note issued on M a y 4 appealed to the public to loan to the
treasury securities of neutral countries. In July, securities
obtained in response to this appeal were used as the basis for
a loan of $100,000,000 obtained in New York from the American Foreign Securities Company. This company, having a
paid in capital of $10,000,000, obtained the bulk of the money
needed to effect the loan through the sale of $94,500,000
5 per cent bonds.




THE INTER-ALLY DEBTS[64

The French government continued to appeal for negotiable
foreign securities and in April, 1917, arranged through Messrs,
J. P. Morgan & Co. another secured loan for $100,000,000.
In addition to these bond issues placed with the public
there were a number of industrial, or export, credits placed
with banks and bankers. Two of these aggregating $45,000,000 were arranged by Messrs. Brown Brothers & Co. and
five, aggregating $110,000,000, by Messrs. Bonbright & Co,
independently and in connection with the Guaranty Trust
Company and the Bankers Trust Company.
There were also some smaller credits placed through other
bankers or arranged directly with exporting houses and manufacturers and purveyors of munitions.
The French government sponsored these credits. They
were also in some cases protected by a deposit of securities
and in particular by bankers' acceptances of drafts drawn upon
French manufacturers and other importers purchasing supplies in the United States.
The commercial export credit for $20,000,000 arranged by
Messrs. Brown Brothers & Co. in August, 1915, is notable
because it was the first dollar commercial export credit in
syndicate form ever issued in the United States. Besides being secured by drafts accepted by responsible French importing houses, it was backed by the credit of the French
government in the form of treasury bills.
In October, 1916, the city of Paris borrowed $50,000,000
in New York and in November of that year the cities of
Marseilles, Lyons and Bordeaux each borrowed $12,000,000.
These loans, while ostensibly for account of the cities,
were actually for the benefit of the French national treasury.
They bore 6 per cent interest and were negotiated by Messrs.
Kuhn, Loeb & Company.



ioo] BANKERS TRUST COMPANY

As in April, 1917, the United States government became
banker to the Allied Nations, there were no other market
loans placed by France in the United States during the period
of the war, after the offering of April, 1917, except in November, 1919, when the loans to Bordeaux, Lyons and Marseilles were refunded.
However, in August, 1919, the French government began
to offer 90 day treasury bills in America through their accredited bankers, Messrs. J. P. Morgan & Co. These bills
were chiefly bought by the banks. They were constantly running off and being renewed. The maximum issue outstanding
at any one time is understood to have been around $50,000,000. Sales of these bills were discontinued in August, 1921.
Market Borrowings in the United Kingdom: Similar data
to the foregoing in regard to the borrowing of France in
Great Britain do not appear to have been published.
We know that in or about October, 1914, an issue of
French treasury bills was placed through the Bank of England for the equivalent of $49,000,000 and that on October
15, 1914, Messrs. N. M. Rothschild & Son floated in London
similar bills for the equivalent of, say $10,000,000.
This was the first borrowing abroad by France in connection with the financing of the Great War and these appear to
have been the first loans payable in a foreign currency ever
placed by the French government up to that time, although
at different times considerable amounts of French rentes had
been owned abroad. In particular was this true in connection
with the payment of the indemnity to Germany in 1871-1873
when around, $386,000,000 of rentes were sold to foreigners. However, these bonds were not made payable in
foreign currencies and they were quickly reabsorbed by the
French people.



INTER-ALLY DEBTS

Large amounts of treasury bills were placed in London
during the war years rising from around $57,000,000 at the
close of 1914 to $163,000,000 at the close of 1915, to $340,000,000 at the close of 1916 and finally reaching a maximum
of nearly $400,000,000 in 1917 at about which amount they
stood at the close of 1919.
In December, 1915, a "substantial amount" of the first
Loan of National Defense was reported to have been taken
in England. The proceeds, by arrangement with the English
government, were to be devoted to the liquidation of the
large debts which had been contracted in England by the
French government.
In April, 1918, France sold about $23,000,000 of her internal bonds in Argentina and at various times during the
war arranged export credits in Argentina, Uruguay, Spain
and the Netherlands. She also borrowed from the Bank of
Japan, and floated one or more loans in that country.
On December 31, 1919, the French government owed to
foreign markets exclusive of amounts due to other nations—
the political loans as they are sometimes called—the equivalent of $1,084,000,000 currency dollars. Of this large sum
$372,000,000 was due in the United States, $414,000,000 in
Great Britain, $298,000,000 in Japan, Spain, the Netherlands,
Argentina, Uruguay and elsewhere.
The status of the debt of France pre-war, at the close of
the first three years of war and on December 31,1919, may be
seen by reference to Statistical Tables III and X V through X X .
THE

NATIONAL

DEBT

OF

ITALY

The debt of the Italian government on June 30, 1914
was $3,034,000,000, all held at home. On June 30, 1920, the
debt was $17,849,000,000 of which amount $13,938,000,000,



ioo] BANKERS TRUST COMPANY

78.09 per cent, was internal debt and $3,911,000,000, or
21.91 per cent, was external debt. Of the internal debt the
sum of $10,145,000,000 was funded debt, $3,235,000,000 was
floating debt and $558,000,000 was government currency.

Borrowing at Home and Abroad
The Currency: In Italy the government issues a fiduciary
currency for a relatively unimportant amount of small notes,
but the greater part of the circulating notes is issued by the
banks. There are three banks of issue. In July, 1914, these
banks had in circulation notes amounting to $437,145,000,
while the state notes outstanding totalled $96,307,000, a
grand total of $533,452,000.
Issues of bank notes were made during the war on account of the state. These issues at the end of June, 1920,
had reached the large total of $1,994,269,000. The direct
state issue at that time was $438,110,000, while bank notes
issued by the banks on their own account had reached
$1,444,412,000. A substantial portion of this latter issue
probably was made to assist the marketing of the bonds of
the government. Thus on June 30, 1920, there were in circulation $3,876,791,000 bank notes and state notes as against
$533>452>ooo a t the beginning of the war.
We are not advised as to what form of security was given
by the government to the banks in exchange for their circulating notes. The method of exchanging treasury bills for
notes followed in several other countries does not seem to have
been used.
Treasury Bills: There were five forms of treasury bills
issued by Italy. These were ordinary bills, so called three,
five, and seven-year bills or bonds, and special bills for foreign use. On June 30, 1920, there were outstanding $1,778,


INTER-ALLY DEBTS

495,000 ordinary bills, $819,285,000 three and five-year bills,
and $3,911,338,000 bills for external use, chiefly in connection
with loans from the governments of Great Britain and the
United States, although there were small amounts, aggregating not quite $17,000,000, due to private lenders in Brazil
and the United States. *
The Permanent Loans: There were six of these loans for a
total of $6,939,508,000 issued during the war.

THE

PUBLIC

DEBT

OF

RUSSIA

The Debt Prior to the Great War
The financial history of Russia is characterized by at least
two noticeable features; the enormous accumulation of public debt, and the extraordinary growth of the state budget.
One of the favorable characteristics of Russia's credit,
to quote M. Bark, the Russian Minister of Finance, during the
early part of the World War, from January, 1914, until the
abdication of the Czar in March, 1917, was that, "in the
whole financial history of Russia there has never been a
moment's delay in paying creditors."
Russia's credit had always depended on two things: first,
the importance of her role in foreign politics, and second, the
popularity of her wars in the financial markets of the world.
If either one of those factors was absent, it was always difficult for her to obtain credit, and she was usually forced t o
accept terms somewhat humiliating for a great nation. This
was the case in the Turkish Wars of the 70's when Russia,
actuated by the most altruistic motives, wanted to free some
of the Balkan states from the Turkish yoke. T o do this it
was necessary to sacrifice her credit,sinceher jealous neighbors



ioo]

BANKERS TRUST COMPANY

in western Europe saw in Russia's actions the terrible menace
of Pan-Slavism.
The total direct debt of Russia at the beginning of January, 1914 was $4,541,000,000 of which debt $2,947,000,000
was contracted for the general needs of the state and
$1,594,000,000 for railroad construction.
Financing the Railroads: Although the Russian public
debt was contracted largely for state purposes and to defray
the expenses incurred by wars, still it had another characteristic which was peculiarly striking, and that was the role
played in its composition by the debts contracted for railroad
construction. Previous to the Great War, the debt issue for
this purpose as just stated had reached the sum of $1,594,000,000, or 35 per cent of the total. In addition to this debt
directly incurred for railway development, the Russian government had guaranteed issues made by the railway companies themselves for $965,816,000.
The Guaranteed Debt: In addition to her obligation as
guarantor, for $965,816,000 of railroad bonds and stocks, Russia on January 1, 1913, was obligated as guarantor for $423,912,000 bonds of the Nobles Land Bank and for $636,838,000
bonds of the Peasants Land Bank, a grand total of $2,026,566,000.
Summary of Pre-War Debt Status: Therefore the total
national debt of Russia direct and guaranteed on January 1,
1914, approximated $6,568,000,000. It is not possible to tell
exactly the proportions of the Russian debt which were held
at home and held abroad before the Great War, but judging
by the manner in which interest payments were made, somewhat more than 50 per cent was held at home and somewhat
less than 50 per cent abroad. Doctor Eliacheff is inclined to
place the foreign holdings at 44 per cent of the total.



THE INTER-ALLY DEBTS[64

Before the war Russian government securities were quoted
in Paris, London, Geneva, Brussels, Vienna, Rome, Berlin
and Amsterdam. What amounts were held in each market
are not definitely known.
The total interest charge on the foreign debt approximated $199,150,000. Of this amount $125,050,000, say 62.79
per cent, were remitted to France; $15,440,000, 7.75 per cent,
were remitted to Great Britain; $500,000, c.25 per cent, were
remitted to the United States; $23,160,000, 11.63 P e r c e n t >
went to Holland, and $35,000,000, 17.58 per cent, to Germany, Austria-Hungary and elsewhere. These figures confirm other estimates which make France to have been by far
the largest external creditor of Russia.

The War Debt of Russia
Russia's sinews of war consisted mainly of internal loans.
These took the forms with which we have now become familiar because of the fact that they were adopted by substantially all of the belligerents; namely, of paper money, treasury
bills (otherwise called in Russia "series"), short term loans,
and long term loans.
Paper Money: A t the outbreak of the war, the Russian
fiduciary circulation was almost entirely covered by the specie
of the State Bank; $825,418,400 in gold in Russia and $72,044,000 in gold belonging to the State Bank abroad, against
$840,341,800 of bank notes in circulation.
On October 1, 1917, there were in circulation $8,897,434,000 bank notes.
Prior to the war, the Russian law did not allow the issue
of more than $154,380,000 in paper not covered by gold.
The convertibility of paper money into gold was suppressed
by law of July 27 (August 9), 1914, and thereafter there were



ioo] BANKERS TRUST COMPANY

tea decrees permitting increased issues of bank notes. The
n«w issues aggregated $8,057,092,200.
A t the beginning of the war, specie formed more than 30
percent of the money in circulation in Russia; in September,
1917, not more than 4 per cent. Knowing the evil consequences of repeated and large issues of paper money, Russian
economists and the authorities were none too anxious to inflate the currency, but they had to deal with a population
little used to bonds and other securities and which preferred
to receive wages and keep savings in paper which they could
understand. This, in a way, explains the great increase in
bank notes during the war.
The bank notes were issued to the government in exchange
for treasury bonds.
Treasury Bonds: Treasury bonds originally issued—law
of July 27 or August 9, 1914—were to be discounted by the
State Bank and serve as cover for bank notes advanced by
the State Bank to the treasury. They served this purpose, in
the main, until the end of the war, but in time they also
reached the public. They were for a term not exceeding one
year, and were issued at par less the 5 per cent interest deducted in advance by the purchaser.
Six weeks before its fall, the provisional government
authorized the minister of finance to increase the issue of
treasury bonds up to an amount of $12,865,000,000, including obligations discounted by the State Bank. Of this sum,
only about $9,634,000,000 had been issued before the fall of
Kerensky, of which $6,948,000,000 were discounted by the
State Bank, $73,000,000 were issued in Finnish money for
expenditures incurred in Finland, and $2,613,000,000 remained in circulation. Some of these treasury bonds were



THE INTER-ALLY DEBTS[64

not presented for redemption at maturity, but remained in
circulation practically as currency.
Treasury Notes: Another type of short term loan, used
in Russia since 1830 and familiar to the public, was the treasury note, popularly known as "series," which was intermediate between a bond and currency. As a bond, it bore
interest, coupons being attached to the "series."
It was not legal tender for payment of debts between individuals, but was accepted by the treasury, by the State Bank
in payment for supplies to the government, and in short in all
transactions with the fiscal departments.
The " s e r i e s " issued during the war brought in a total of
$437,000,000. There were three issues: August 22, 1914,
$154,000,000; March 22, 1915, $154,000,000; and August 14,
1915, $129,000,000. This type of obligation was discontinued
after the third issue, as the public preferred the new " treasury
bonds," already described, which bore higher interest and
were sometimes issued for less than one year, the term of the
old "treasury notes" or "series."
Long-term Internal Loans: The nominal amount of internal long term war loans was more than $6,489,000,000.
The Imperial government issued six of these loans:
5%
5%
5&5

under ukase of October 30, 1914 for $257,000,000
February 6, 1915
257,000,000
" April
24, 1915
515,000,000
" October 28, 1915;
515,000,000
SX%
"
" February 26,1916
1,029,000,000
SH%
'
'
" October 10, 1916
1,544,000,000
The net proceeds of these loans amounted to $3,879,000,000.
The Provisional (Kerensky) government issued at 5 per
cent a single " L i b e r t y Loan," by decree of March 27, 1917.
T h e amount was not fixed but by September 27, 1917, it had




ioo]

BANKERS TRUST COMPANY

produced subscriptions of $2,080,528,000. Its greater success
than that of the imperial loans, both as to amounts subscribed
and to the number of subscribers, more than 900,000, was
due to the general satisfaction at the fall of the old regime.
On all these loans subscriptions were received at the State
Bank as well as at the private banks and savings banks, and
at other financial houses. A syndicate of private banks guaranteed the placement of a considerable fixed amount. Subscribers enjoyed certain fiscal privileges, such as exemption
from the tax on securities and the acceptance of the bonds in
payment of certain taxes and in payment of customs duties.
From 1916, the bonds could be borrowed upon from the
State Bank at 88 per cent less 4 per cent to 5 per cent commission.
The price at which the first two loans were issued was 94
per cent to the public and 92 per cent to the banking syndicate. The syndicate took $154,380,000 of each of these loans.
The real interest therefore was 5.3 per cent.
When the income tax was introduced, income from war
loan securities became subject to taxation as part of the general income of the individual.
The third Czarist loan was issued at 99 to the public and
9 t o the syndicate, which took $308,760,000. The real
interest was 5.6 per cent. The fourth, fifth and sixth loans
were issued at 95 to the public and 93 to the syndicate, which
took $308,760,000 of the fourth, $617,520,000 of the fifth, and
$823,360,000 of the sixth. The real interest on these loans
works out at 5.8 per cent.
The Kerensky "Liberty L o a n " was issued at a uniform
rate of 85, with real interest at 6 per cent. The syndicate of
banks guaranteed a minimum sale of $1,543,800,000 of this
loan.



[ 64

THE INTER-ALLY DEBTS

T h e interest on these loans was low, as compared with
Russia's previous war loans. The Russo-Turkish war loan
of 1877 cost 7.5 per cent real interest and the Russo-Japanese
loan 7 percent real interest. The real amount received by
the treasury from the seven internal loans in the Great War
was, up to September 1, 1917, $5,447,000,000.
On all seven loans, the large and medium subscriptions
predominated. Even on the " L i b e r t y L o a n " the "democ r a t i c " subscription was negligible.
PUBLIC DEBT OF RUSSIA
SEPTEMBER I, 1917

(In "Currency" dollars—000,000 omitted)
WAR DEBT
Internal

Funded Debt: Seven War Loans . . . . .
Floating Debt
Treasury Bills (Series)
437
Treasury Bonds
Discounted by State Bank against
its notes
6,948
Sold to other banks and to the public 2,249

TOTAL INTERNAL DEBT
External

To
To
To
To
To

France
England
Japan
Italy
United States

TOTAL WAR DEBT
PRE-WAR DEBT

Internal
External

762
2,766
152
10
279

3,969
20,092

2,504
1,968

4,472
24,564

Guaranteed Debt




9»634
16,123

TOTAL DIRECT DEBT
TOTAL DIRECT AND GUARANTEED DEBT

6,489

2,027

. . . .

26,591

ioo] BANKERS TRUST COMPANY

The Foreign War Debt: The external debt incurred for
the conduct of the war amounted to $3,969,000,000, about
one-sixth of the total amount borrowed from the beginning
of the war to the fall of the Kerensky government. These
credits were obtained in Great Britain, France, Italy, Japan,
and the United States. As the market transactions and the
loans from allied goverments were largely inter-dependent,
it will be more satisfactory to consider them together in the
next chapter, which deals with the inter-ally loans.

The Total IVar Borrowing of Russia
The total amount borrowed for the conduct of the war by
the Czarist and Kerensky governments up to September 1,
1917 at par values was $20,092,000,000. The status of the
debt on that date is shown by the table on page i l l .
H o w

THE U N I T E D

STATES

BORROWED

When the United States on April 7, 1917, declared war
against Germany, our debt was $1,282,000,000. On June 30,
1920, the debt was $24,298,000,000, almost twenty fold what
it was three years before. This debt was owed entirely at
home. The only foreign debt, if it can be so termed, which
the United States had at any time during t(ie war or thereafter, was for unadjusted accounts with associated powers
for supplies furnished to our army or navy.

Financing the American Expeditionary Forces
General Dawes, the General Purchasing Agent, and Chairman of the General Purchasing Board, American Expeditionary Force, in his final report dated February 28, 1919,
states that "the advisability of purchases in the United States



THE INTER-ALLY DEBTS[64

as distinguished from purchases in Europe was controlled
by the continuous tonnage emergency."
The thing of supreme importance was to transport soldiers from America to France. Therefore, even if supplies
obtained in Europe cost substantially more than they might
have been obtained for in the United States plus transportation, it was necessary to assume the greater cost in order that
the ships might be available to transport the troops.
The Annual Report of the Secretary of the Treasury for
1920 states that the currencies needed by the United States
in France, Great Britain and Italy for our war expenditures
in those countries were provided by the respective foreign
governments under an arrangement whereby the dollar equivalent of the amounts so provided was made available to the
respective foreign governments for use to meet their war expenditures in the United States, and thus the needs of these
governments for advances from the United States were reduced by a corresponding amount.
The total amount of foreign currencies placed at the disposal of the United States under this arrangement, from
April 6, 1917, to November 1, 1920, was $1,490,557,000;
$449,496,000 by Great Britain, $1,025,438,000 by France,
$14,425,000 by Italy, and $1,198,000 by Belgium. For these
advances the respective nations received credit on the books
of the United States treasury and against these credits they
were enabled to buy in the United States goods which they
needed for the prosecution of the war. A t the end of the war
some remaining unsettled debit balances were paid by us in
cash.
The government of the United States has been severely
criticised in some quarters for handling the accounts in the
manner indicated instead of treating debits of our European



ioo]

BANKERS TRUST COMPANY

allies against us as offsets to our credits to them. However,
the criticism hardly holds water because our allies had to have
the supplies furnished from the United States so that the
method of accounting was unimportant. In the end our net
advances must have been the same.

The War Debt of the United States
The Floating Debt: The methods of borrowing used by
the United States government were much the same as those
followed by the other belligerents except that w*e did not
directly or indirectly issue any fiduciary currency. That is,
we did not make any indirect issues by tendering treasury
bills to a state bank which the bank must perforce discount,
and in order to do so was authorized, really compelled, to
issue its notes. However, the same result was accomplished,
due to the fact that the federal reserve banks were authorized to rediscount for the commercial banks and to effect
such rediscounts increased their note issues. Thus we see
that during the three years above mentioned, the floating
debt of the United States increased $2,739,000,000, while the
amount of federal reserve notes outstanding increased
$2,739,000,000, an exact parallel, although other causes besides the increase in the funded debt account to a considerable degree for the increase in the note issues. The actual
amount of government securities of all kinds owned or loaned
upon by the federal reserve banks on June 30, 1920, was
$1,610,000,000.
It is evident that the right to issue treasury bills, or in
American parlance, certificates of indebtedness, had been
used with reserve, for at the close of the period of war financing the floating debt was only 11.57 per cent of the total
debt.



THE INTER-ALLY DEBTS[64

The War Loans: There were four loans issued by the
United States for an aggregate amount of $16,978,356,250.
A comparative summary statement of the debt pre-war,
at the close of the war, and at the close of 1923 may be found
among the Statistical Tables.
GERMANY'S

BORROWINGS

FOR

WAR

Barring a small loan raised in the United States and possibly some quite unimportant financing in other neutral countries, all of Germany's war financing was with her own citizens.

Financing the First Part of the War
The Floating Debt: Early in the war she adopted the
policy of borrowing in the first instance from the banks and
from the public against issues of interest bearing or discounted treasury bills, which bills were semi-annually funded
into permanent loans. These latter loans were issued in
March and September.
Loans of the Imperial Bank to the imperial government
which in the early part of 1914 had fluctuated between a
minimum of $178,500,000 and a maximum of $323,918,000,
suddenly jumped to $495,278,000 at the end of July, 1914,
reaching a maximum of $1,131,690,000 at the close of September. Evidently, as a result of the successful flotation by
the government of the first war loan, advances from the Imperial Bank fell off during October about $500,000,000, but
they soon increased and, at the end of the year, amounted
to just under a billion dollars. Meanwhile the circulating
notes of the bank which before the war had fluctuated between
$500,000,000 and $600,000,000, had by the end of the year
reached an issue of over $1,200,000,000.



J. J J J
U

liANK.tRS TRUST COMPANY

During 1915 loans to the government gradually increased,
reaching a maximum of $1,432,000,000 in the latter part of
March and of $1,788,000,000 at the end of September, and
then dropping off again as the proceeds of the semi-annual
bond issues materialized. A t the end of the year the bank
was lending the government $1,381,000,000 while the circulating notes outstanding had reached $1,646,000,000.
In 1916 the story of the bank is a similar one, loans to the
government increasing in volume, with the usual peak load
in March and September and closing the year at $2,287,000,000. Note issues did not markedly increase during 1916,
the amount of notes in circulation at the end of the year
being $1,917,000,000.
On April 7, 1917, the eventful day when the United States
declared war, the outstanding note issue of the Imperial
Bank was $2,037,000,000 and the loans to the empire were
$2,366,000,000. A t that date the total floating debt of the
empire was $4,450,000,000 so that the Imperial Bank was
carrying a little more than one-half of this class of debt.
On July 31, 1914, the bank had a gold reserve of $298,000,000 while on April 7, 1917, the reserve was $603,000,000
or more than double the pre-war reserve. Therefore, while it
is evident that during these years the government had used
the facilities of the bank, it can not be said to have abused
them, even though the relation of the gold reserve to net
note issues had declined from a ratio of 1 to 2 to a ratio of
1 to 3 ^ .
The Permanent War Loans: The permanent war loans
were well received by the people, and in every case subscriptions were liberal. The loans all bore 5 per cent interest and
were offered at a slight discount. Treasury bonds repayable
by drawings were simultaneously issued. The first two issues



THE INTER-ALLY DEBTS

[ 161

of these bore 5 per cent interest, subsequent issues 4 y i per
cent.
The permanent loans and treasury bonds during the first
three years of the war aggregated at par $10,805>000,000,
while the floating debt increased $4,356,000,000, an aggregate increase in debt of $15,161,000,000, bringing the total
debt on March 31, 1917, up to $16,446,000,000 as against
$1,285,000,000 on July 31, 1914. The interest charge increased from $43,485,000 on March 31, 1914 to $800,639,000
on March 31, 1917.
The Loan Banks: Subscriptions to the government issues
were facilitated by the organization of loan banks. These
banks, which were organized by the government or under
government auspices, almost as soon as war was declared, had
for their object making available for the use of the government investments in fixed forms, also investments in personal
securities difficult of negotiation, as well as investments in
securities ordinarily readily convertible. These banks were
allowed to issue notes to bearer which circulated as money
and which were accepted by the government in payment
for its issues of bonds or notes. The loan banks accepted as
security not only government bonds and other negotiable
bonds and stocks but also loaned to some extent against
goods, sugar, grain, silk and tobacco pledged by interior
trading organizations.

Financing the Last Two Years of Warfare
During the remaining two years of active warfare, the
same methods of borrowing were followed by Germany as
those which we have just described, but the relation between
floating debt and funded debt was altered for the worse with
the result that whereas on March 31, 1917, the floating debt



GERMANY'S PUBLIC DEBT STATUS
(In " C u r r e n c y " dollars—000,000 omitted)
R E C E I P T S FROM BORROWING

For Fiscal
Year
Floating
Ended
Debt
March 31 Discounted
Treasury
Bills
67
1.650
333

2.398
3.484
7.225

6,611

3I,I0S
33.067
1,903,107

Funded
Debt
Bonds of
the Empire and
Treasury
Bills
Bearing
Interest
26
1.055
4.851
4.679
5,677

5.413
30S

Total

93
3.705

5.184

7.077
9.161
12.637

6,919

21,198
33.067
I.903.107

C A P I T A L OP D E O T A T
E N D OK F I S C A L Y E A R

Floating
Debt

67
1,718
2,051
4.450
7.934
15.160
21.770

42.969

66.036
1.969,142

Funded
Debt

1,170

2.260
7.196
11.977

17.116
21,990

21.667
19,554
19.082
15.333

Total

CIRCULATING N O T E S

Interest
Charge
as Debt
Stood
at End
of Year

Imperial
Bank
Notes

43
6573
1.237
I80
3.078
CI,201
444
9.247
rf I.646
Boo
16,427
«.9I7
25.050
1,229
/2.729
6.067
37.1 So 1,829
10,750
043.437
3,104
16,521
62.523 3.056
31.337
85.U8 4.137
1.984.475 53.340 1.313,264

Treas- Loan
Bant
ury
Notes Notes

56

78
84
83

S

72

106
231

684
M9I
2.624
3.26S
3.430
2.047
2.999

oNot Including "other floating debt" which according to another official document amounted to about $3,449 million.
frjune 30, 1914^December 31, 1914.
dDecember 31. I9I5.
^December 31. 1916.
'December 31, 1917.




THE INTER-ALLY DEBTS[161

was only 27.06 per cent of the total debt, on March 31, 1920,
the floating debt and the funded debt practically balanced
each other. The former amounted to $24,990,000,000, or
53-3 per cent of the total debt, the latter to $21,896,000,000
and the total debt to $46,886,000,000. A t this time the notes
of the Imperial Bank outstanding aggregated about $11,000,000,000 and those of the loan banks amounted to about
$3,400,000,000.

Summary Statement of War Borrowing
A table expressly furnished for this book by the German
ministry of finance is printed on page 118. This table gives
for the year ended March 21, 1914, and for each year thereafter the revenue from borrowing, the total public debt at the
end of the year and the interest charge on the debt as it stood
at the end of the year. We have converted marks into dollars
at the exchange parity and have added the amount of circulating notes outstanding on or about the same dates.
It will be observed by reference to Statistical Table X V I I I
that while the debt was large on March 31, 1920, amounting
in currency dollars to $46,886,000,000 its status did not
compare unfavorably with that of the debts of France and
of England, the former of which owed $41,250,000,000 in
currency and the latter $38,311,000,000.




CHAPTER

VIII

The Inter-Ally Loans
1914-1917
^ alliance in a great war, to be effective, means that each
country must bring all its resources, whatever they
are, into the common stock. An alliance of war can not be
conducted on limited liability principles. If one country in
the alliance has more trained and armed men ready with guns,
rifles and munitions than another allied country can command, she must bring them all up against the common enemy
without regard to the fact that the others can not for the moment make a similar contribution. It is equally true that the
same principle applies to a country with a larger navy, or the
country with greater resources of capital and credit—they
must be made available to the utmost for the purposes of
the alliance whether the other countries are in the position
to make a similar contribution or not."
With these words, Mr. Lloyd George, Chancellor of the
Exchequer, concluded an address in the House of Commons
in February, 1915, asking the approval of the House for the
most important financial arrangements with foreign nations
which up to that time Great Britain had ever undertaken.
It was in pursuance of these arrangements with her allies and
of similar arrangements with her dominions made in the previous November, that Great Britain during a period of a little
over two years made net advances to dominions and allies of
$3,824,496,000.
It is evident that to England belongs the honor of being
known as the banker of the entente group for the first three
years of the war. T h e principal borrowers on balance were
120]




T H E I N T E R - A L L Y D E B T S[161

Russia for $2,091,067,coo; Italy for $676,678,000; the British
Dominions for $544,510,000; and Belgium for $291,063,000.
During the same period, France borrowed on balance $40,524,000. The other borrowers for relatively small amounts
were Serbia, Roumania, Montenegro, Greece and Portugal.
The facts are clearly shown in the table.
INTER-NATION

INDEBTEDNESS

DUE

S T A T U S ON A P R I L
( I n dollars—000

LENDERS

I,

TO THE

GREAT

WAR

1917

omitted)

Great
Canada France
Britain
to Allied to Allied to Allied
Gvta.
Gvts.
Gvta.

Italy
to
Allied
Gvts.

Russia
to Allied
Gvts.

Total

BORROWERS

British Empire
Great Britain
. . . .
Australia
Canada
New Zealand
. . . .
South Africa
. . . .
British So. Africa Co.
Crown Colonies . . .

169.558
289,584
88,561
86,138
3 T76
7.299

Total British Empire

714,068

Belgium
. . . . .
Belgian Congo
. . . .
France
. . . . . . . .
Greece
. . . .
Italy
Portugal
Montenegro
. . . . .
Roumania
,
Russia
Serbia
. . . .

930,865
7.H3
764.156
9.732
456

Total

&375.90O

338.920

3.576

7.299
169.558

375,900

80.674

1,265.160 2.605,360

48,250

242,813
4,510

391*063
4,510

930,86s

3,860

168

10,973
764,334
9,733
553

96

60,825
36
58,562

5.715.788

£80,674 til, 265,160 1,891,293
238,920
389,584
88,561
86,128

426,530

60,825
3,356,327
94,267

6,972

35,705

169,763

890,341

87,646

1,265,160

8,128,697

^Includes J973 million for interchange of credits with Russia.
Gold Abroad."
cGold.
rfGoId $391,960; Interchange of credit* with Great Britain $973,000.

T H E BRITISH, F R E N C H AND R U S S I A N A C C O R D
OF I 9 I 5

The great event in connection with early inter-ally financing was the tripartite conference held in Paris in February,



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BANKERS TRUST COMPANY

1915, when the military entente which already existed between France, Russia and England was supplemented and
really made effective by a financial alliance which was the
outcome of this conference. These arrangements were made
by the finance ministers of the three nations, Mr. Lloyd
George representing England, M. Ribot representing France,
and M. Bark representing Russia. Mr. Lloyd George was
supported by a very important group of financiers which included Lord Cunliffe, Governor of the Bank of England, and
Mr. Montague of the English treasury department. Presumably the Russian and French finance ministers had financial advisers of similar importance.
The outcome of this conference was officially recorded in
the following statement which was given out at the close of
the conference:
" T h e Finance Ministers of France, Great Britain and
Russia have met together at Paris to examine into the financial questions arising out of the war. They are agreed in declaring that the three powers are resolved to unite their financial resources, equally with their military resources, for the
purpose of carrying the war to a successful conclusion. With
this aim in view, they have decided to recommend to their
respective governments to take over in equal shares the advances made, or to be made to the countries which are now
fighting with them, or which may find themselves in the near
future in a position to take up arms for the common cause.
The amount of these advances will be covered by the individual resources of the three powders, as well as by the issue
at a suitable opportunity of a loan in the name of the three
powers.
" T h e question of the relations to be established between
the banks of issue of the three powers was the subject of a



THE INTER-ALLY DEBTS

[ 161

special understanding. The ministers have decided to proceed
jointly with all purchases which their governments have occasion to make from neutral countries.
" T h e y have adopted the financial measures necessary to
facilitate Russian exports and to re-establish, so far as possible, the parity of exchange between Russia and the other
Allies.
" T h e y have determined to meet again according as circumstances may require. The next conference will be held
in London."
English financial circles were much disturbed at the intimations in the above statement that there was in contemplation " t h e issue at a suitable opportunity of a loan in the name
of the three powers."
Immediately after this agreement was entered into the
Bank of England, on February 13, offered in London $48,660,000 treasury bills for the Russian government. These
were twelve months' discount bills. They were offered at 95
and were over-subscribed, large subscribers being allotted
only 82 per cent of the amount applied for.

An Historic Address
On February 15, Mr. Lloyd George addressed the House
of Commons, explaining the terms of the agreement made at
Paris for which he was asking parliamentary approval.
In the course of this speech Mr. Lloyd George outlined the
relative positions of the three great countries which had led
the finance ministers to make the arrangement which he was
commending to parliament. He called attention to the fact
that Great Britain and France were two of the richest countries in the world and the great bankers of the world. He
stated that Great Britain could pay for the huge expenditure



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of the war for five years, allowing a substantial sum for depreciation, out of the proceeds of her foreign investments,
and that France could carry on the war for two or three years
at least, out of the proceeds of her investments abroad, and
that the respective countries at the end of these periods would
have something to spare to advance to their allies. He claimed
that the Allies were fighting the whole of the mobilized
strength of the German army with perhaps less than onethird of their own strength, and he said that the problem was
how to bring the remaining two-thirds of their resources and
strength into the fighting line at the earliest possible moment.
Russia's Difficulties: Mr. Lloyd George called attention
to the fact that Russia was prodigiously rich in natural resources, in fact perhaps the richest country in the world in
food products and raw materials. He referred to her great
and growing population and commented on the fact that she
therefore had labor in abundance with which to develop her
resources. The great difficulty with Russia, he said, was that
although she had great natural resources she had not been
able to command the capital within her own dominions to develop those resources, even during times of peace. A t that
time, under war conditions, she could not sell her commodities; this for several reasons. One was the difficulty of obtaining working capital; another was the fact that absorption of
labor into the armies had reduced the amount available for
use in the mines, factories and on the fields. For these
reasons and others Russia was experiencing special difficulties
in the matter of financing outside purchases for war use.
Difficulties of France: Mr. Lloyd George stated that
France also had special difficulties and that he was not sure
that in England they quite realized the strain that had been
put upon that gallant country up to that time.



THE INTER-ALLY DEBTS

[ 161

He referred to the fact that the enemy were in occupation
of part of her richest territory; that they were within fifty
miles of her capital, exactly as if a huge German army were
at Oxford. But, he said, notwithstanding these facts, France
had raised great sums of money to carry on the war and to
help finance the allied states. He referred to the wonderful
confidence prevailing throughout France, the "calm and
serene confidence which is supposed to be incompatible with
the temperament of the Celt by those who do not know him."
The Needs of Other States; Reference was made to Belgium, devastated, desolate, and almost entirely in the hands
of the enemy, with an army and a civil government to maintain but with no revenue; and to Serbia, "with a population
equal to that of Ireland, a people of peasants maintaining an
army of 300,000 and having her third great war within two
years." It was stated that other states were preparing for
war and that it was obviously to the interest of England that
they should be well equipped for their task and that they
could only borrow in the French and English markets.
England's Difficulties: Mr. Lloyd George went on to speak
of the special difficulties which England was experiencing.
Two-thirds of her food supplies were purchased from abroad.
Enormous quantities of raw materials for her manufactures
and her industries were largely absorbed in war equipment
and her ships were engaged in war transportation. Therefore,
he said, "we can not pay as usual in exports and freights and
services and our savings for the moment are not what they
would be in the case of peace. We can not therefore pay for
our imports in that w a y . " He explained that for these reasons
it was necessary to finance purchases abroad by creating
enormous credits and by enabling her allies to do the same
thing.



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BANKERS TRUST COMPANY

Cooperation in Making Purchases: Passing over for the
time Mr. Lloyd George's statement to parliament in regard
to the special arrangements which had been made with Russia,
it is of interest to nbte the very important announcement
then made that the three countries had agreed to coordinate
their methods of purchasing supplies. He said that the
methods which had been in use had led to a good deal of
confusion; that the three nations were buying in the same
countries and buying against each other, therefore putting up
prices upon one another. " I t ended," he said, "not merely in
confusion but I am afraid in a good deal of extravagance."
T o correct this condition he explained that a coordinating
arrangement had been made which would eliminate this competition and enable the nations to combine their orders. He
hoped this would lead to less delay and more efficiency and to
the avoidance of extravagance due to the former methods of
working.

The House of Commons Approves
In the course of the debate in the House of Commons on
the motion to approve the action of the government, it w*as
generally conceded that as the Allies were in a joint undertaking, they must regard all of their resources, men, armies,
equipment, food, credit, as a whole and use them when, how
and where they could be disposed of to the greatest advantage.
Special commendation was given to the arrangement for the
joint purchases of supplies. The extension of aid to the smaller
countries, especially to Serbia, was also approved but it was
not thought desirable, even for this purpose, that there should
be any joint financing. The accord with France and Russia
was approved on February 23.
It will now be of interest to consider in some detail the



THE INTER-ALLY DEBTS[161

outcome of these understandings. But first of all let us see
how England arranged to uphold the hands of France in
order that together they might support, and encourage Russia
and thus insure her continuing cooperation with them in the
struggle.
FINANCIAL

ARRANGEMENTS
BRITAIN AND

BETWEEN

GREAT

FRANCE

In October, 1914, France placed her first loan on account
of the war in the English market.
This was an issue of
£2,000,000 ($9,733,000) one-year sterling treasury bonds sold
through Messrs. N. M. Rothschild & Sons of London.

The London Conference of May, 1915
In May, 1915 a very important arrangement was created
between the French and British governments at a conference
held in London between M. Ribot, the French Minister of
Finance and Mr. Lloyd George, Chancellor of the Exchequer.
Perhaps we can not do better than to let M. Ribot tell us
exactly what happened. We shall quote from an eloquent
speech which he delivered from the rostrum of the Chamber
of Deputies early in the month of May. He spoke in part as
follows:
" I have been to London recently. I found the entire
government, especially the Chancellor of the Exchequer, Mr.
Lloyd George, most amicably disposed. It is a pleasure to
negotiate with such a quick and open mind as that of the
chancellor. Business does not drag with him, and this is a
quality that we know how to appreciate. In a few hours we
had everything settled.
" I told Mr. Lloyd George that we had heavy payments to
make to America, to Canada, and to London, and that he



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BANKERS TRUST COMPANY

could help us by opening credits to us in England. We
reckoned up together the amounts that France would have
to pay out in the following six months. Six months is a long
period in war time for a minister of finance, I do not wish to
look any further ahead for the time being. We drew up estimates; perhaps a little underneath the exact amount for I
can not answer for my friend, M. Millerand, not being led
into going beyond his own specifications. I will try to manage
so that expenses will be kept down to the indispensable minimum. However, we arrived at a total of a little more than
a billion and a half francs ($289,500,000) to be paid in six
months either to the United States, to Canada or to England.
" W e asked ourselves under what form we might obtain
credits in England. We might have launched treasury bills
with the help of the Bank of England as we did in January
last; we have at present sold £10,000,000 worth ($48,660,000)
or in round numbers 250,000,000 francs. Our credit is pretty
well quoted in London as you may see by the papers, which
show our bills, issued at 5 per cent, discounted on the stock
exchange at
per cent.
"French credit is therefore solid on the London market.
If the government or the bank were willing to facilitate a
fresh issue, we could make it under good conditions, but the
chancellor of the exchequer is not anxious at present that
loans should be made on the London market. He does not
make any himself and does not want anyone else to do so.
He, himself, offered to open credits to us, to put at our disposal
the sum of 1,500,000,000 francs ($289,500,000) on condition
that we would send over shipments of gold representing a
third of the total credits, which seemed to us perfectly just.
In other words, if we send to London at periods chosen by us
500,000,000 francs ($96,000,000) in gold (this is the maximum)



THE INTER-ALLY DEBTS

[ 161

we shall receive as a counterpart not 500,000,000 francs, but
1,500,000,000, that is to say three times as much* It is perfectly just that we should be asked for a shipment of gold,
because England could not maintain her exchange with the
United States, in view of the new burden laid on her by
France, unless she were able herself to make gold shipments
to America.
" T h e plan is equitable and on broad lines. I accepted it
in your behalf, gentlemen, and I hope you will not disavow
it. We can accept it, not merely as a helping hand from our
allies, but as a business transaction where each contributes
an asset. We contribute the gold required; we have it and can
offer it; and in exchange we are tendered credit. I can not call
this exactly a trade but it is one of those transactions which are
their own excuse; where the dignity of peoples is safeguarded
because they bring reciprocal gifts."
A t the conclusion of this address the deputies rose and
applauded at length. The minister returned to his bench and
was congratulated by his colleagues.
In the course of his address, M. Ribot stated that the
United States was actually the great source of supply for
Europe of industrial materials and of armament and munitions. He also said that the United States was the creditor
of Europe for from 700,000,000 to 800,000,000 francs monthly
($135,100,000 to $154,400,000) and that while the elements of
compensation were temporarily lacking they would not remain wanting and they would consist largely of American
securities held by European investors. He estimated that in
the coming six months French government purchases in the
United States, England and Canada would aggregate one and
a half billion francs ($289,500,000). Referring to the loan of
gold to England, M . Ribot said, " T h e bargain is advanta


IZO]BANKERS TRUST COMPANY

geous; it matters little that the gold reserve of the bank is reduced some 500,000,000 francs ($96,500,000); a decline in the
gold holdings of the bank from
billion francs to 3 billion
francs ($675,500,000 to $579,000,000). This great sum was
not accumulated never to be used. France, moreover,
abounds in gold, although it is not seen and it is not to our
interest that it should be seen. After the peace, if political
and financial conditions are favorable, the bank's gold reserve
will gradually be reconstituted."
It was not in this address but in connection with an earlier
address before the Chamber of Deputies in which he was setting forth the methods of finance which the government had
adopted, that M. Ribot closed by saying " W h a t we are doing
assuredly is not a work of genius, but it is a French piece of
work because it is the product of sincerity, anxiety and
clarity." These remarks may well be applied to this very
sensible arrangement for mutual co-operation just described.

Borrowing American Securities
On June 3, M . Ribot presented a financial statement in
which he said that the government had distributed widely
to credit houses circulars stating that they were authorized
to buy United States railway securities for government account. These securities were to be used as collateral to loans
to be placed in America.

Loans from Great Britain
In November, 1915, France placed through the Bank of
England a goodly amount of her first great loan of national
defence, approximately $117,000,000 par value. It is understood that these bonds were distributed among some twentytwo thousand subscribers. The proceeds of the sale were



THE INTER-ALLY DEBTS[161

used to liquidate some part of the large indebtedness which
the French government had incurred in England since the
beginning of the war.
In January, 1916, the Bank of England received subscriptions for French sterling treasury bills which were issued at
the fixed rate of discount of 5 ^ per cent. This issue of bills
was for a maximum amount equivalent to $350,352,000 and
was not to mature until two years after the close of the war.
In consideration of this credit, the Bank of France sent gold
to England worth $116,784,000. This was done in pursuance
of the arrangements already described.
In September, 1916, the British treasury agreed to discount a further amount of French treasury bills maturing
three years after the war. The proceeds of these bills were
to be used only to meet payments to be made within the
United Kingdom. In connection with this credit apparently
no deposit of gold was required.
On the 1st of April, 1917, France was borrowing from the
British government the equivalent of $930,865,000, but up
to that time she had not borrowed from any other ally.

France as a Lender
On the date last referred to above, France was lending
$890,341,000 divided, $375,900,000 to Great Britain (the
loan of gold already discussed), $48,250,000 to Belgium,
$3,860,000 to Greece, a small amount to Montenegro, $426,530,000 to Russia, and about $35,705,000 to Serbia, and she
had agreed to make additional loans aggregating $173,000,000 to Serbia and Belgium, making her total loans or commitments $1,063,341,000. Thus her loans and commitments
more than offset the amount which she was borrowing from
Great Britain.



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BANKERS TRUST COMPANY

RUSSIA'S

FOREIGN

FINANCING

We are now in a position intelligently to consider how
France and England financed their great Muscovite ally.
For convenience we shall bring into the record the story
of the financial relations which existed during the war between
Russia and her other allies.

Russia's Total Borrowing Abroad
Russia effected during the war, from August, 1914* to
September, 1917, inclusive, foreign credit operations in the
markets and with allied governments to a total amount of
about four billion dollars. T h e loans were made payable in
foreign money or in gold and according to reliable Russian
authorities were obtained from the various lending nations in
the following amounts:
$2,766,000,000 in England
762,000,000 in France
152,000,000 in Japan
10,000,000 in Italy
279,000,000 in United States
$3,969,000,000
In addition, in October, 1915, there was a credit operation of
a special character effected in England for $973,000,000 in
favor of the Russian State Bank. This is described in a later
paragraph.
T h e external loans of Russia during the war had a rather
well defined limit, as was indeed the case with the foreign
credits of the other belligerents. This limit was set, generally
speaking, b y the quantity of orders for w a r material which
foreign manufacturers received from each belligerent. So far
as Russia is concerned, the amount of credits opened abroad




THE INTER-ALLY DEBTS[161

was somewhat greater than the value of military orders sent
abroad. The difference was caused by credits opened in Paris
and in London for the payment of interest on the Russian
debt, as well as by relatively small sums placed at the disposal
of the Russian government to stabilize the exchange rate of
the ruble and obtain exchange for the industrial and commercial circles of Russia.
On the other hand, the distribution of military orders to
the different countries did not coincide with the respective
amounts of the loans which were effected in such countries.
Thus Japan and the United States received from Russia more
military orders than the credits allowed her by them, while
on the other hand England opened a far greater amount of
credit than the amount of the military orders which she received. In fact, England served as intermediary in the financial settlements of Russia with the United States and Japan
and other countries, just as she did in connection with the
foreign purchases made through her by France and some of
the smaller allies. T o liquidate the balance of accounts unfavorable to Russia in other countries, England borrowed on
her own account in those countries and opened corresponding
credits in favor of Russia in London.

Credit Operations of Russia in Great Britain
As we have seen, the credit operations between the Russian government, the English government and the Bank of
England, for the period in which Russia was a factor in the
war, aggregated $2,766,000,000.
Russia's Gold Shipment of 1914.-1$: Some important
financing had already taken place before the accord of February, 1915. In October, 1914, Russia sold £39,000,000 in
gold to England, the proceeds to be used in financing pur


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chases by the English government for Russian account, and
in consideration of this strengthening of the gold reserves of
the Bank of England, it was arranged that the Russian government should receive advances of $58,000,000. In order to
observe absolute secrecy about this shipment of gold, extraordinary precautionary measures were taken. The English
cruiser Drake and the military transport Mantois, on arriving
at Archangel, cast anchor on the high seas at a distance of
thirty miles from the coast and the gold was carried out to
them by night on lighters. Despite these precautions the
Germans were apprised of this shipment and on their return
to England the Drake and Mantois encountered mines which
German submarines had placed in their route.
The gold was finally delivered at Liverpool but the danger
of such an enterprise and the fact that war vessels convoying
the shipment of gold were damaged during the voyage, forced
the British government to discontinue this means of transportation, and all subsequent shipments of gold were made by
rail to Vladivostock and thence on Japanese cruisers to Vancouver, Canada, and presumably then overland to Ottawa
where, it will be remembered, the Bank of England maintained for several months a depository for part of its gold
reserve.
Early Credits from England: This relatively unimportant
sum could not smooth out the difficulties created for Russia
by the prolongation of the war. Russia needed further credits
of far greater importance. Prior to the meeting of the three
ministers in Paris in February, Mr. Lloyd George had agreed
to advances of some$97,000,000 in addition to the$58,ooo,ooo
above referred to. In his address to parliament which we have
just paraphrased, he stated that these credits had been
availed of by Russia for making purchases in England and



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[ 161

elsewhere outside of the British Empire. He explained to
parliament that England and France had given a guarantee
to Russia that she need not hesitate a moment in giving her
orders for any purchases which were necessary for the war on
account of fear of experiencing any difficulty in the matter
of raising money for payments.
Debts of Russian Merchants in England Financed: The
chancellor further stated that arrangements had been initiated which it was hoped would help to restore the exchequer
in respect of bills held in the United Kingdom against Russian
merchants who, although perfectly solvent, could not discharge their obligations in England owing to difficulties of
exchange. The plan adopted was to accept Russian treasury
bills against these bills of exchange due from Russian merchants, the Russian government to collect the debts in
rubles in their own country and to give Britain the treasury
bills in exchange.
The Paris Accord and English Credits: As a result of the
Paris accord, additional credits were opened for Russia in
London for $243,000,000. A contract was entered into with
Barings for the immediate issue of Russian treasury bills to
run from February 23, 1915, to February 22, 1916, with a
guarantee of taking what the public might not subscribe. A
commission of ^ per cent, plus stamp taxes and the expense
of making the securities, was agreed upon, of which commission the Bank of England was to receive one-half. By virtue
of these initial arrangements, the Bank of England discounted
under the guarantee of the British government during
November, 1914, $58,000,000 at 4 per cent.; during February,
I 9 I S> $195,000,000 at 5 per cent; and during July and August, 1915, $243,000,000 at 6 per cent, or $496,000,000 in all.
The Boulogne Gold Agreement: In September, 1915, there



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was another meeting of the ministers of finance of the three
countries, this time in London. This meeting was for the
purpose of arranging for still larger credits to Russia. In the
meantime there had taken place an Anglo-French agreement
at Boulogne by which the Bank of France and the Bank of
England contracted each to send to New York $195,000,000
with a view to facilitating the issue of the Anglo-French 5 per
cent loan for $500,000,000.
It was decided at Boulogne to request Russia to take part
in this procedure by sending an equivalent amount along with
this shipment of gold. A t the London meeting, M . Bark
dwelt upon the difficulty under which he labored in permitting
the further reduction of the gold holdings in the State Bank,
in view of the sentiment of the Duma and of public opinion
generally. On the other hand, Mr. Reginald McKenna, who
in M a y had succeeded Mr. Lloyd George as chancellor of
the exchequer when the latter became minister of munitions, pointed out the difficulties with which the Bank of
England had to contend, as this institution alone of all the
banks of issue of the powers at war, had not discontinued the
exchange of its notes against gold. He made it very plain that
England would be willing to open further credits in favor of
Russia solely on condition that Russia placed at her disposal
by way of an advance, a substantial quantity of gold.
Lengthy discussions dragged out without giving any result.
Russia finally yielded only when France, which nation also
had requested the opening of credits in England, declared her
readiness to export thither a portion of her gold. The Russian
minister of finance, who was thus placed in a situation from
which there was no escape, nevertheless succeeded in obtaining special conditions and particularly it was understood that
the gold would be returned to Russia after the war, while



THE INTER-ALLY DEBTS

[ 161

the Russian government reserved the right to keep the arrangement secret in order not to bring to light at home the
unfavorable influence of the decrease of gold on the balance
sheet of the Bank of the State.
The Great Credit of igi5; It was finally agreed that the
British government would open in favor of Russia a credit
for #1,460,000,000 for one year, this credit to be effected
through the Bank of England, which agreed to discount every
month $122,000,000 of Russian treasury bills at a rate one
per cent higher than its own rate of discount. These advances were to be utilized for the payment of coupons, for
purchases in England, and in connection with the exchange
operations in the United States. In consideration of such advances, M . Bark promised to have Russia furnish the $195,000,000 in gold, of which one-half only would be exported
during the first six months. In exchange for this gold Russia
was to receive British exchequer bonds payable in gold after
the close of the war, within a period to be decided later.
"Gold Abroad" vs. "Intangible CreditsA
further consideration received by Russia was an arrangement by which
the British government agreed to open in favor of Russia a
non-negotiable credit for $973,000,000, which appeared on
the balance sheet of the Bank of the State as "gold abroad"
and afforded a basis for the issuance of bank notes in Russia.
This plan was made effective in the following manner: Great
Britain made an exchange of obligations with the Russian
government, the Russian government depositing with the
British treasury non-interest bearing Russian treasury bonds,
while the British Government gave in exchange intangible
credits. This arrangement was to expire not later than one
year after the conclusion of peace, when these obligations of
equal value of both parties were to be redeemed. Thanks to



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this arrangement, which was pure camouflage, in banking
parlance "kiting," the decrease in the gold stock resulting
from the exportation of the gold, was not perceived by the
public at large. Indeed, the decrease of specie under the heading of "gold coin, ingots and vouchers of mines," was more
than compensated by the increase in the quantity of specie
under the heading of "gold abroad." This was one of the
financial secrets of the war, which only came to light after the
fall of the Czarist government.
The Conference of igi6: In July, 1916, another conference
of the three finance ministers took place in London. The
Russian minister of finance was accompanied by General
BelyaefF, Chief of Staff. M. Bark stressed the fact that during
the first year of the war Russia had covered its internal expenses by appealing to the national market for about $3,602,000,000 and had covered its foreign expenditures by exhausting the funds accumulated with the correspondents of the
treasury and finally by utilizing credits to the amount of
$618,000,000 opened by the Allies. He set forth that the
Russian needs were constantly increasing. He asked for
$1,460,000,000 with the power to make payments for limited
amounts in Italy, Japan and Scandinavia, with a view
to paying the coupons of the state debt, the guaranteed
debt, and the municipal debt, and furnishing exchange for
commerce.
England Demands More Gold: The discussion was keen.
It dealt principally with the question of gold as the English
statesmen were apparently terrified with the weight of their
engagements and responsibilities. M. Bark endeavored to
maintain the point of view to which he held that credits
should be separated from the question of gold, and he insisted that up to that date France had not sent the gold as



THE INTER-ALLY DEBTS

[ 161

agreed at Boulogne. The tenacity of Mr. Reginald McKenna,
then chancellor of the exchequer, prevailed, and the Russian
minister had to agree to ship the balance of $58,000,000 out
of the $195,000,000 promised in the autumn of 1915 to
cover the former arrangements, and also to ship $97,000,000
in addition by June, 1917, against $730,000,000 of new
credits.
The shipments of gold contemplated in these several
agreements were made in the following manner: For $195,000,000 to be delivered under the first arrangement, $49,000,000 were shipped in December, 1915, $49,000,000 in June,
1916, and $97,000,000 in November, 1916. The gold was sent
partly to Japan and partly to Canada. In accordance with
the arrangement made between the British admiralty and the
Japanese minister of marines, the gold was sent on Japanese
war ships and under Japanese escort. In like manner there
were shipped from Moscow on the eve of the revolution, in
February, 1917, in accordance with the second agreement,
$97,000,000 in gold. In consequence of these shipments, the
Russian gold stock decreased $331,000,000. It will be remembered that the first delivery in October, 1914, of $39,000,000
in gold was an outright purchase of gold by the British government against credits for $58,000,000. T o offset the loan of
the remaining $292,000,000, England delivered to Russia gold
exchequer bonds payable in from three to five years in equal
portions without interest.
Great Britain's Total Advances to Russia: The total advances made by the British government to Russia amounted
to $2,733,000,000, of which $496,000,000 were advanced during 1914-15, $1,460,000,000 in accordance with the agreement
of September, 1915, and $777,000,000 in accordance with the
agreement of October, 1916.



IZO]BANKERS TRUST COMPANY

Both of our Russian authorities, Dr. EliachefF and M .
Raffalovich, agree that the total advances of Great Britain
to Russia amounted to $2,733,000,000.
Dr. EliachefF states that the last $47,000,000 was advanced after the Bolshevist coup d'etat to the Russian
National Committee in London. EliachefF also states that in
addition to these direct advances, there was a debt resulting
from operations in exchange amounting to nearly $32,000,000,
making a grand total of $2,765,000,000. He adds that this
figure " m u s t be increased by the accrued interest on the debt
which on January 1, 1919, had already reached the sum of
$234,000,000." He says, also, that there were $68,000,000 due
on military orders.
M . RafFalovich does not mention the debt due for exchange operations or the accrued interest, but he refers to
payments made by the British government on coupons
which he places at $19,556,000. He says that after the overthrow of the provisional government and the repudiation of
the debt by the Bolshevists, the British government ceased
its advances and paid no more coupons. He tells us, though,
that the British government agreed to exchange against 3
per cent treasury bonds for twelve years, which were worth in
the market 82 per cent, treasury paper issued in 1915 and
commercial paper on Russia issued pursuant to the agreement
of 1915. He estimates that in this w a y a sum of $40,777,000
was converted and added to the debt. If we assume that the
^i9>5S6,OOO paid on coupons was provided out of Russian
money in the British treasury, but that the $40,777,000 was
an addition to debt, we arrive at a total debt on RafFalovich's
basis of $2,773,777,000, which agrees remarkably well with
an official statement of the British government which shows
that on March 31, 1918, Russia owed Great Britain $2,779,-




THE INTER-ALLY DEBTS[161

000,000. The British statement for the next year, however,
shows an indebtedness of $2,764,000,000, which would agree
with EliachefTs figure. In all three cases it is quite evident
that no allowance is made for accrued interest.

Credit Operations of Russia tn France
The character of the transactions of the Russian minister
of finance in France differed in two essential respects from the
credit operations effected in England. First, there was no
agreement with private banking institutions, and second, the
French government did not raise the question of a specie
pledge by the offering of Russian gold. This question did not
arise because the credits opened in favor of Russia in France
were destined exclusively for the payment of military orders
and for the payment of interest on Russian bonds held in
France.
In the course of the war the Russian government made
three financial agreements with the French government; one
in February, 1915, one in November of that year, and another
in 1916. The general terms of these three agreements were
identical, the differences relating only to the amount of the
credits opened and to some secondary conditions.
A t the time of the second meeting in June, 1916, M. Ribot
said, " w e shall go, if necessary, to the very limit of our resources to back our ally, but our situation is becoming more
and more difficult. We are forced to have recourse to the
Bank of France to a large extent to meet our war expenses;
it is the Bank of France alone which supplies the advances
which we make to our allies. The bank has no means of increasing its resources other than the increased issue of its
paper money." The issue of paper money had reached $3,088,000,000, a figure which gave considerable concern to M. Ribot.



IZO

]

BANKERS TRUST COMPANY

The French government placed at the disposal of the
Russian treasury its three months' treasury notes renewable
within one year after the signing of peace. These French
treasury notes were discounted by the Bank of France at an
interest rate of 5 per cent and for the average amount of
$24,000,000 a month. By reason of this moderate discount
rate and the absence of commission to the Bank of France,
Russia found in France the most advantageous conditions for
her war loans contracted abroad, with the exception of the
credits opened in her favor by the United States after the
entry of the latter into the war.
The French agreement of the month of February, 1915,
opened credits in favor of Russia for $121,000,000, and that
of the month of November for $290,000,000. The 1916 agreement was created for the duration of the war. It stipulated
no limit as to the amount and merely fixed the monthly
credit at $24,000,000, of which amount one million a month
was placed at the disposal of the Russian exchequer for
the stabilization of the exchange rate of the ruble and to
meet the demands for exchange by Russian commerce and
individuals.
In addition to the agreement between the two governments, there was a special agreement, made in the early
part of 1915, between the Bank of France and the Russian
State Bank. This agreement opened in favor of the Russian
State Bank a credit of $97,000,000 for the purpose of liquidating obligations of Russian commercial houses and industrial enterprises contracted in France before the war.
A t the time of the Bolshevist coup d'etat, the total amount
of credits utilized in France was $665,000,000, to which must
be added the debt of $97,000,000 due by the Bank of the
State to the Bank of France.



THE INTER-ALLY DEBTS

[ 161

Russian Credit Operations in Japan
From the very first year of the war, in view of the isolation
of Russia from Western Europe, Japan became an important
supplier of war material to Russia. Heavy artillery, armored
cars and even small pharmaceutical products were comprised
in the wide range of articles which warring Russia imported
from Japan.
The restricted capacity of transportation of the TransSiberian Railway limited imports from Japan; nevertheless
it is probable that Russia was the country which contributed
most to the great economic development of Japan during the
war. Payments for the numerous orders placed in Japan were
made either by direct remittances or through England or by
means of credits opened by Japan in favor of the Russian
government.
In February, 1916, an agreement was made between the
Russian government and a group of Japanese banks headed
by the Yokohama Specie Bank, which made it possible to
dispose of $25,000,000 in Russian treasury notes on the Japanese market. These treasury notes issued for one year were
renewed in February, 1917, for the further period of one year.
In April, 1916, the Japanese State Bank discounted Russian treasury notes to the value of $8,000,000. The sum realized was remitted to the Japanese government in payment for
the Japanese war ships purchased by Russia. These treasury
notes issued for six months were renewed in October, 1916,
and again in October, 1917, for a period of one year. They
bore interest at 7 per cent.
In September, 1916, the same group of banks represented
by the Yokohama Specie Bank agreed to a loan of $3 5,000,000; the Russian government issued treasury notes payable



IZO]BANKERS TRUST COMPANY

within one year at the same rate. In September of the following year, in order to be able to pay for the matured treasury
notes, the Russian Government discounted at the Japanese
State Bank, new treasury notes payable within two years at
the rate of 6 per cent and il/Z per cent commission to the
amount of $52,000,000. Of the sum realized, $35,000,000
served for the reimbursement of the matured treasury notes
and $17,000,000 remained at the disposal of the Russian
ministry of finance.
In October, 1917, under similar conditions (the commission
of the Japanese State Bank had been reduced from
per
cent to 1 per cent) the Japanese State Bank discounted another lot of Russian treasury notes for the amount of $25,000,000. All sums derived from these transactions were devoted exclusively to payments made in Japan itself.
Aside from the above-mentioned loans, the Russian government contracted in Japan debts amounting to the sum
.of $37,000,000 to various Japanese houses which supplied it
with war material.
The total amount of the Russian debt to Japan thus
amounted to $147,000,000, of which $110,000,000 was derived from the discounting of Russian treasury bonds and
$37,000,000 represented the debt to industrial and commercial enterprises which supplied war material to Russia. There
appear to have been other credit operations in Japan involving a further sum of $5,000,000 in regard to which exact
information is missing. On December 2, 1918, the Russian
ambassador at Tokio, M. Kroupensky, advised the Russian
representatives abroad that the Japanese government had
decided to consolidate the Russian debt to Japan and to keep
intact the sum of $29,000,000 remaining in the Yokohama
Specie Bank for the account of the Russian ministry of



THE INTER-ALLY DEBTS

[ 161

finance until such time as a new and lawful Russian government should be formed.

Russian Credit Operations in the United States
Until the entry of the United States into the war, Russia
had had difficulty in securing credits in our country even for
the payment of orders from the ministry of war placed in
America. The credit terms charged for comparatively small
loans were rather burdensome. For this reason a large part
of Russian military orders placed in the United States was
financed through England.
The first transaction made in America was a credit of
$5,000,000 opened in favor of the Russian ministry of finance
in October, 1914, by the National City Bank. The Russian
government paid 6 per cent interest and a commission of
H per cent to the bank. The credit was opened for three
months but it was renewable after an agreement to that effect
between the Russian ministry of finance and the National
City Bank.
In April, 1915, the ministry of finance made a contract
with the National City Bank by which the bank acquired
Russian treasury notes to the value of $10,000,000. The bank
took the treasury notes at the rate of 98 per cent, with 5 per
cent interest and a commission of JlS per cent. The treasury notes ran for one year. In April, 1916, the matured
treasury notes were paid by the delivery of new treasury
notes to the amount of $11,000,000. The same operation was
repeated in April, 1917. The terms remained the same except
for the fact that the price paid for the notes was 97, but the
bank's commission was eliminated.
On June 28, 1916, an agreement was made between the
Russian ministry of finance and a syndicate of American



IZO ]

BANKERS TRUST COMPANY

banks headed by the National City Bank, for the opening of
a credit of #50,000,000 on the following terms: Within three
years sums paid out under this credit were to be reimbursed
to the syndicate in dollars. The sums paid out could be utilized at the will of the Russian ministry of finance, but exclusively for payments to be made in America. The credit
opened to the Russian government was guaranteed by a corresponding credit in rubles (for the sum of #77,000,000)
opened in favor of the syndicate of American banks by the
Russian State Bank in Petrograd. Interest at the rate of 6}4
per cent plus 1 per cent commission was payable by the
Russian government on the amount of the credits in rubles
not utilized by the American syndicate. Interest was paid in
dollars at the exchange rate of 33}/$ cents per ruble. Onethird of the sums drawn by the syndicate on their account in
rubles could be used toward the payment by the Russian government of the amount due in dollars.
Finally in November, 1916,, the Russian government
issued on the American market, through the same syndicate
of banks, treasury notes for the sum of $25,000,000. These
treasury notes at
per cent interest were payable on
December 1, 1921, in gold, either in dollars in New York or in
rubles in Petrograd at the exchange rate of the day, as the
holder might elect.
After the entry of the United States into the war, the
American government opened in behalf of Russia a credit of
$325,000,000. The interest was not stipulated at the time of
the opening of credit. In November, 1917, the rate of interest was fixed at
per cent and at
per cent for credits
subsequent to September 25, 1917. The first draft on this
credit, amounting to $35,000,000, was made on July 6, 1917*
On November 15, 1917, the sums paid out amounted to



THE INTER-ALLY DEBTS

[ 161

$188,000,000. After the Bolshevist coup d'etat the American
government stopped the credit.
B R I T A I N ' S L O A N S TO A N D FROM H E R

DOMINIONS

The first step toward co-ordinating the financial resources
of the British Empire was taken in November, 1914, when
Great Britain, with a view to avoiding the disadvantages incident to the separate flotations of loans by each of the dominions, made arrangements with Canada, Australia, New Zealand, and South Africa to supply them with such munitions
as they might require and probably with at least part of the
funds with which to pay their soldiers. The advances were
reckoned in terms of money and charged up to the different
dominions upon the books of the British government. It
was understood that the rate of interest to be charged the
dominions should not in any case exceed the rate of interest
at which Great Britain herself had borrowed. These advances
amounted in the British fiscal year ending March 31, 1915,
to $193,000,000. In the following year similar advances were
made for $251,000,000 and in the year ending March 31,
1917* the advances totaled $270,000,000, so that for the three
years prior to the entrance of the United States into the war
Great Britain had advanced to her dominions and colonial
possessions upwards of $714,000,000.
On the other hand, she had received loans from Canada
amounting to $169,558,000, while the Canadian banks had
lent Great Britain $100,000,000. These loans from Canada
were made to facilitate payment for munitions of war, including grain purchased in Canada by Great Britain.
Apparently there were no similar counter loans made by
the other dominions although arrangements were made by
the British treasury with Australia for purchases of wool and



IZO ]

BANKERS TRUST COMPANY

grain, with N e w Zealand for the purchase of wool and possibly
some other materials, and apparently some supplies were also
obtained on credit in South Africa.
ITALY'S

INTER-ALLY

FINANCING

Italy did not become a belligerent until M a y 23, 1915.
This decision was arrived at following a secret treaty with
Great Britain, Russia and France, signed on M a y 9 of the
same year. In this treaty Great Britain undertook to facilitate the placing on the English market of a loan of £50,000,000 ($243,300,000) in favor of Italy.
In the following June, Mr. Reginald M c K e n n a , Chancellor
of the Exchequer, had an interview at Nice with the Italian
minister of finance, at which time, recognizing the impossibility of effecting a loan in the London market, he offered instead to open to Italy a credit of £60,000,000 ($291,960,000)
at the Bank of England, to be covered by Italian treasury
bonds in sterling having twelve months maturity.
In this connection an arrangement was made for the transfer of Italian gold to Great Britain. There is not very much
known about the details but it appears to have followed along
the same lines as the similar agreements entered into with
Russia and with France. A s Italy has no state bank, the Italian government apparently caused the three Italian banks of
issue, namely the Bank of Italy, Bank of Naples, and Bank
of Sicily, to transfer to England the equivalent of $80,674,000,
in gold lire, distributed approximately $73,000,000 from the
Bank of Italy, $6,000,000 from the Bank of Naples, and
$2,000,000 from the Bank of Sicily. I t is understood that
around $58,000,000 of this amount belonged to the Italian
treasury.
In addition to this loan of gold to England, Italy
advanced Russia about $7,000,000.




THE INTER-ALLY DEBTS

[ 161

B y a subsequent agreement made in London, December
21, 1915, the British government placed at the disposal of
the Italian government a credit of £122,000,000 ($593,652,000) with the promise to make additional advances from time
to time. The total advances so made aggregated the equivalent of $764,000,000 up to March 31, 1917.
Italy also appears to have borrowed a small amount from
Canada, but with this exception her entire borrowings prior
to the entry of the United States into the war were from
Great Britain.
I N T E R - N A T I O N L O A N S OF T H E C E N T R A L P O W E R S

The inter-nation financing of the Central Powers was
much simpler than that of the Allied Powers due to the fact
that there were only four nations involved, and that one
probably did all the lending while the others were borrowers.
Austria-Hungary, Bulgaria and Turkey all borrowed substantial amounts from Germany. During the month of January, 1915, German banks advanced $15,000,000 to Bulgaria.
It was explained that this loan had been promised before
the war began, and therefore was just a market proposition.
Nevertheless, the receipt of the loan from German sources
probably had its value in influencing Bulgaria, the following
October, to become the active ally of Austria-Hungary and
Germany.
The total advances of Germany to her allies during the
first three years of the war is estimated to have been
$1,347,000,000.




CHAPTER

IX

The United States Becomes Financier for
the Allies
1917-1920
N April 6, 1917, the United States ceased being a merchant in munitions and began to manufacture and provide them in great quantities for the Entente Allies free of
charge, while her markets were completely closed to the Central Powers. Up to that time we had exported to the belligerents a heavy tonnage of munitions of war, such as food,
cotton, metals and manufactured articles.
While our markets were nominally open to any nation
which could pay for the goods furnished, by force of circumstances the exports were chiefly to the Allies. This state of
facts is shown by the statistics of our foreign trade. In the
twelve months ended June 30, I9i5,we exported to England,
France, Italy and Russia goods valued at $675,000,000 in excess of our shipments in the previous twelve months, while our
exports to Germany, Austria-Hungary and Turkey decreased
$339,000,000. If we assume that our increased exports of
$189,000,000 to neutral states lying contiguous to Germany,
say the Netherlands and the Scandinavian states, found their
way entirely into Germany, even then the value of supplies
reaching the Central Powers from the United States was
$150,000,000 less than in the last year before the war.
In the next fiscal year the same statistics compare as follows: Increased exports to Entente Allies, 1916 over 1914*
$1,882,000,000; decreased exports to Central Powers, 1916
under 1914, $346,000,000; increased exports to Netherlands
and Scandinavian nations, $107,000,000.
150]

O




THE INTER-ALLY DEBTS[161

In the next year, namely from July i, 1916, to June 30,
1917, the statistics, compiled on the same basis, show that
the exports to the Allied group amounted to $3,125,000,000
more than in 1914; the exports to the Central group decreased
$345,000,000, while the exports to the Dutch and Scandinavian group increased $141,000,000.
We were paid for these exports partly in gold, partly by a
return of our evidences of indebtedness to European lenders,
and, in part, we extended credits. As to the latter, we had
been careful to know that they were amply secured. We took
no chances. It is true that we asked no security against the
largest of our loans—the $500,000,000 Anglo-French loan of
October, 1915—but in this case we had the joint and several
obligation of two great nations whose solvency, even under
great stress, no one doubted for a minute at the time the loan
was made, however much some of us may have come to
realize the terrible stress they were under as the months
passed by.
Translating the total exports into terms of merchandise,
we find that food products accounted for 18.49 P e r c e n t
1914; 35.40 per cent in 1915; 23.93 per cent in 1916, and
20.39 P e r c e n t , n I 9 I 7> crude materials for use in manufacturing amounted to 34.03 per cent in 1914, 18.79 P e r c e n t
1915, 12.55 per cent in 1916 and 8.54 per cent in 1917; while
goods manufactured or partly manufactured accounted for
47-17 per cent in 1914, 42.83 per cent in 1915, 62.17 per cent
in 1916 and to 66.38 per cent in 1917. The tremendous and
growing demand for manufactured goods and the important
demand for food stuffs is apparent. It is also evident what
an important source of supply the United States was to the
combatants and that the Allied group was the one principally
benefited. However, we have shown above and in previous



IZO]BANKERS TRUST COMPANY

chapters that the American manufacturer and exporter took
no chances and that theAmerican investor in European bonds
loaned only on what he regarded as excellent security.

The Break with Germany
The long controversy with Germany in regard to her
methods of submarine warfare by which she strove very naturally to keep American munitions from reaching her enemies, finally culminated in the spring of 1917 and led to our
government taking a definite position on the side of the Allied
Powers on April 6 of that year.

The Grave Condition of Allied Finances
in the Spring of IQIJ
By their own admission the foreign finances of the Allied
Powers in the Spring of 1917 were in a bad way. Consequently they were greatly concerned as to how they would be
able to continue to obtain from America and elsewhere the
munitions of war vital to their success. One British authority
of very high standing has gone on record as follows: " A t the
very moment that the United States came into the war, the
British government, with commitments in the United States
running into hundreds of millions of pounds, was at the end
of its tether. It had no means whatever of meeting them."
Another British authority of unquestioned reliability,
stated that, "though it was not at the time generally realized,
the entry of the United States into the war cut Great Britain
free from a network of financial difficulties, continued entanglement in which might have spelled defeat and would certainly have impaired the war strength of all the Allies. The
Allies, and especially Great Britain, had been buying supplies
in great and increasing quantities from the United States.



THE INTER-ALLY DEBTS[161

Despite the artificial stabilization of exchange, the difficulty
of financing these purchases was steadily growing. It was
becoming more difficult and more expensive to raise credit
loans in the United States. Supplies of securities which could
be used as collateral were becoming exhausted."
The Federal Reserve Board had evinced anxiety as to
whether the financial community had not already been overoptimistic in financing foreign governments. We have seen
on the other hand, that the financiers had demanded security
for their advances. While England and France still had in
reserve substantial amounts of foreign securities, they were
rapidly getting down "to the bottom of the box." They
could not for very long have provided the American lenders
with acceptable collateral. When that time had arrived,
possibly within a very short period, they would in fact "have
been at the end of their tether."

The United States Joins the Allies
The 65th Congress met at noon on April 2, 1917, and the
same evening the President delivered to the two houses in
joint session an address in which he recommended congress
to declare "the recent course of the Imperial German Government to be nothing less than war against the government and
people of the United States," and that congress "formally
accept the status of belligerent which has thus been thrust
upon it." In the course of his address the President said,
" W e have no selfish ends to serve, we desire no conquest,
no dominion, we seek no indemnities for ourselves, no material compensation for the sacrifices we shall freelv make."
The House adopted the war resolution early in the morning of April 6 by 373 votes against 50. The resolution having
already been passed by the Senate on April 4 by a vote of



IZO]BANKERS TRUST COMPANY

82 against 6, the President signed the joint resolution on
April 6 and by this act the United States and Germany were
officially at war.
The first act on the part of the United States government
was the seizure of all German ships in American ports. They
had an aggregate tonnage of 600,000. Wireless stations were
also seized or ordered to be dismantled. Recruiting for the
army and navy was promptly begun.
America's financial relations with the Allies underwent an
immediate change. For the last two years the Allies had been
supplied with billions of dollars worth of munitions which were
paid for by means of credits arranged by American bankers.
It was now decided that theUnited States government should
loan the necessary money to the Allies and thus undertake
the risk heretofore borne by the financial community.
Little did anyone realize, whether in or out of official life,
what this decision was to cost. It meant that within the next
three years the United States government would supply the
Allied Powers with which it had now become associated, in
exchange for their unsecured promises of payment at indefinite
dates in the future, with munitions of war valued at over
$9*500,000,000.
Thus " t h e mantle of Elijah fell upon Elisha." T h a t is to
say, Mother England ceased to be the foreign banker for the
Allies and her lusty descendant, the United States of America,
took her place.
It is true that during the second part of the war up to the
close of March 31, 1920, Great Britain lent $4,176,000,000,
but she borrowed abroad $4,498,000,000. During the same
period France lent $2,540,000,000 but borrowed $4,674,000,000. All the other nations, excepting Australia, Canada and
New Zealand, were heavy net' borrowers.




THE INTER-ALLY DEBTS[161

Borrowing to Lend Again
Let us now retrace our steps to the eventful days of the
spring of 1917. Some one had the pre-vision to realize that the
first task which the United States, as a belligerent, would have
to face, would be to furnish her associates in the war with an
unlimited amount of food, clothing, guns and ammunition,
motors, locomotives, railway cars, cotton, copper, iron, steel,
other metals, and other raw materials.
We had all these things in abundance. A t least we had the
labor, the raw materials, and large factories and could greatly
and promptly expand our manufacturing facilities.
The seized German ships supplementing British and neutral shipping would provide over-seas transportation. All that
was needed to set the machinery in motion was action on the
part of the national legislature. This was quickly taken in the
form of large discretionary appropriations, making the national resources available to the executive, by authorizing the
executive to give credits to the Allied Powers and to raise the
necessary money by increased taxation, and especially by
phenomenal internal borrowing.
Now we are prepared to go to the capitol and see what is
taking place in the committee rooms and in the senate and
house of representatives.
T h a t ever since the breaking off of diplomatic relations
with Germany on February 3 the administration, informally
at least, had been considering what must be done in case of
a final break, seems to be a foregone conclusion. We know
that in February the National Defense Council met in Washington and took preliminary measures, in case of hostilities,
to mobilize American industries and all other resources, and
that the House then passed a naval appropriation bill, the



IZO]BANKERS TRUST COMPANY

largest in the history of the government. The bill appropriated $368,553,000.
In the latter part of March, in a letter to his brother,
Ambassador Page writing from London said, " T h e impression
becomes stronger here every day that we shall go into the
war 'with both feet'—that the people have pushed the President over in spite of his vision of the Great Peacemaker, and
that, being pushed over, his idea now would be to show how
he led them into a glorious war in defense of democracy. . . .
I have my staff of twenty-five good men getting all sorts of
war-like information. . . .
"A gift of a billion dollars to France will fix FrancoAmerican history all right for several centuries. Push it
through. Such a gift could come to this Kingdom also but for
the British stupidity about the Irish for three hundred years.
A big loan to Great Britain at a low rate of interest will do
the work here. . . .
" M y staff and I are asking everybody what the Americans
can best do to help the cause along. The views are not startling but they are interesting. Jellicoe: More ships, merchant ships, any kind of ships, and take over the patrol of the
American side of the Atlantic and release the British cruisers
there. Balfour: Credits in the United States big enough to
keep up the rate of exchange. Bonar Law: Same thing.
The military men: An expeditionary force, no matter how
small, for the effect of the American Flag in Europe. If one
regiment marched through London and Paris and took the
Flag to the front, that would be worth the winning of a
battle."
On April 1, Franklin K . Lane, Secretary of the Interior in
President Wilson's Cabinet, wrote to his brother:
" I took your letter and your proposed wire as to our going



THE INTER-ALLY DEBTS

[ 161

into the war and sent them to the President as suggestions
for his proposed message which in a couple of days will come
out—what it is to be I don't know, excepting in spirit. He is
to be for recognizing war and taking hold of the situation in
such a fashion as will eventually lead to an Allies' victory
over Germany. But he goes unwillingly. The cabinet is at
last a unit. We can stand Germany's insolence and murderous policy no longer. . . . The meetings of the c abinet lately
have been nothing less than councils of war. T h e die is cast
—and yet no one has seen the message. The President hasn't
shown us a line. . . . The Council of National Defense is
getting ready. I yesterday proposed a resolution, which was
adopted, that our contracts for ships, ammunition and supplies be made upon the basis of a three years' program. We
may win in two years. If we had the nerve to raise live million men at once we could end it in six months.
" T h e first thing is to let Russia and France have money.
The second thing, to see that Russia has munitions, of which
they are short—depending largely, too largely, upon Japan.
I shouldn't be surprised if we would operate the Russian
railroads. And ships, ships! How we do need ships, and there
are none in the world. All sides need aeroplanes—for the war
that is perhaps the greatest of all needs; and there Germany
is strongest. . . . This is the program as far as we have gone:
N a v y , to make a line across the sea and hunt submarines;
Army, 1,000,000 at once, and as many more as necessary as
soon as they can be got ready; Financed, by income taxes
largely. Men and capital both drafted."
In subsequent letters Mr. Lane wrote, " T h e great need of
France at this moment is to get ships to carry the supplies
across the water. It is a secret but a fact, that France has



IZO]BANKERS TRUST COMPANY

600,000 tons of freight in New York and other harbors waiting
for ships/'
" O n all sides they are frank in telling of their distress.
We did not come in a minute too soon. England and France,
I believe, were gone if we had not come in."

Congress Authorizes Credits for
of $3,000,000,000

Allies

On Wednesday, April 11, 19x7, Representative Kitchin of
North Carolina introduced in the House of Representatives
a bill authorizing a bond issue of $5,000,000,000 from the
proceeds of which issue the secretary of the treasury with
the approval of the President was authorized to extend credits not to exceed $3,000,000,000 to foreign governments. The
bill was referred to the committee of ways and means, was
immediately reported, and was then referred to the committee of the whole house on the state of the Union. It
came up for debate in committee of the whole house on
April 13 and passed the house on the 14th. The bill passed
the senate on April 17, it was sent to conference on the
18th. The conference report was accepted by both houses
on the 23rd and was approved by the President and became
a law on the 24th.
Thus within less than two weeks time the United States
congress shattered all precedents in regard to "alliances with
foreign nations" and agreed to back up a military alliance
with practically unlimited supplies of munitions of war.

The Debate in Congress
It will be of interest to note the course of the debate in
congress and the arguments which brought almost unanimous



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[ 161

support for the appropriation of such a great amount for the
benefit of nations across the seas.
Action of the Committee of Ways and Means: The report
of the committee of ways and means contained the following
statement:
" T h e bill authorizes the secretary of the treasury with
the approval of the President to extend credits not to exceed
$3,000,000,000 to foreign governments. It authorizes the purchase with the proceeds from the sale of these bonds, by the
secretary of the treasury with the approval of the President,
of the obligations of foreign governments bearing the same
rate of interest and containing essentially the same terms and
conditions as the bonds issued under authority of this act.
It provides, however, that should any of the bonds of the
United States issued and used for the purchase of such foreign obligations, be converted into United States bonds bearing a rate of interest higher than 3 ^ per cent, that in such
an event the obligations of the foreign governments held by
the United States shall be converted into obligations bearing
the same rate of interest as the like bonds of the United States.
It will, therefore, be observed that the $3,000,000,000 credit
proposed to be extended to foreign governments will take care
of itself and will not constitute an indebtedness that will have
to be met by taxation in the future."
In introducing the bill, Mr. Kitchin, the chairman of the
ways and means committee, said "This bill contains the
largest authorization of bond issues ever contained in any bill
presented to any legislative body in the history of the world.
I am happy to report that this bill has the unanimous approval and indorsement, and has the unanimous vote of the
entire membership—Republican, Democratic and Progressive
— o f the ways and means committee."



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BANKERS TRUST COMPANY

The Debate in the House
One of the first objections which Mr. Kitchin had to meet
was that we were buying bonds at par of nations whose obligations were selling in the market at a discount; in the case
of Russia at a heavy discount.
Mr. Kitchin's reply was: " I would oppose any purchases
of bonds of the allied governments if it were not going to help
us more effectively to prosecute this war. That is the very
object of it, and we leave it to the Executive, and to the war
fighting power of our government to use the $3,000,000,000
for the best interests of this country in order to quicken the
termination of the war in which we are engaged, and if the
Executive thinks that a loan to a foreign government is the
best way to do it, I for one am willing to give him such authority."
Mr. Kitchin said further: " W e are in this war. We ought
to do everything possible to help not only the United States,
but to help those who are co-operating with us in this war.
W e ought to help the Allies, and if their bonds have gone
down to 80 or 75 or 50 per cent, all the more necessity exists
for us to loan them this money at the lowest possible rate of
interest, because they are helping to fight our cause." (Applause.)
Loans Limited to Allied Powers and to the Duration of the
War: Representative Fitzgerald urged that the bill should
he amended to limit the advances to be made by the United
States to governments at war with Germany, and that the
power to make such loans ought to be restricted to the duration of the war. These suggestions were recognized as good
and the bill amended accordingly, but they were evaded after
the armistice, for the last loans were made late in 1920, and



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[ 161

in order to extend aid to the starving people of Austria and
to those of other former enemy powers our government made
loans to Great Britain, France and Italy, which nations passed
along the money or its equivalent in food and other necessities
to our recent enemies.
Retiring Market Issues with United States Money: The
fear was expressed in the course of the debate that money borrowed from the United States might be used to retire bond
issues theretofore placed in the money markets. Mr. Kitchin
conceded that there was nothing specifically to prevent this,
but said that he could hardly conceive that it would be done,
but he added, " I f we are going to lend this money to the governments that we are co-operating with to more effectively
prosecute this war, why not leave it to them to expend the
proceeds in any wray which their judgment tells them is the
best way to achieve success in the prosecution of this war and
not limit or qualify the use of that money?" (Applause.)
As a matter of fact several loans placed in the money
markets prior to our entrance into the war were paid with
money borrowed from Uncle Sam.
The Borrowing Governments Should Be Required to Spend the
Money Borrowed in the United States: Mr. Sabath of Illinois
stated that he understood that Great Britain, in making
loans to her allies, had in certain instances specified that the
proceeds should be expended in Great Britain. He said, " I
do not see why our government can not make the same arrangements and agreements."
Mr. Kitchin replied that while he would not be in favor of
qualifying or limiting the right of the borrowers to expend
the money in any way they saw fit, yet the committee (ways
and means) had considered.what the gentleman had suggested



IZO]BANKERS TRUST COMPANY

and were of the opinion that most of the money "will of
necessity have to be expended in the United States."
Guarantees: Mr. Wood of Indiana asked whether or not,
in considering this measure, the committee contemplated the
advisability of providing that the redemption of these bonds
purchased from any one of the foreign powers at war with
Germany should be guaranteed by the other foreign powers
at war with Germany.
Mr. Kitchin replied that this was not discussed, while
another member added, " T h e fact is that if we ever get this
money back at all when the war is won we shall get off cheap."
As this question has several times since been stressed, it
may be well at this point to note the unqualified statement of
Mr. R. C. Leffingwell, former Assistant Secretary of the
Treasury, that no such guarantee was asked or given. The
question is discussed in detail in the section of this chapter
dealing with our debt transactions with Great Britain.
"The Mies are Fighting Our Battles;" The sentiment was
freely expressed in the course of the debate in the House that
as we were not prepared to fight our own battles, it was only
right that we should finance our allies who were "fighting
our battle along the battle fronts of Europe." Whether or
not the loans were ever repaid was a minor consideration.
Said Representative Mann of Illinois: " T h e administration has proposed that it shall have the authority to lend three
billion dollars to those nations now engaged in the war with the
country upon which we have declared war. When we take the
responsibility of engaging in war, we ought not to expect that
it will be a mere paper war or a mere discussion. We are not
prepared to place men in the field. We are not prepared to
fight with our army. We are not prepared to do very much
with our n a v y . . . . But there is one way in which we are pre


THE INTER-ALLY DEBTS[161

pared to engage in the war. There is only one way in which
today we can do more than make our war an academic discussion and the only way left to us is to help finance those
nations who are fighting our enemy." (Applause.)
" T h i s bill will authorize the loan to them of three billion
dollars. I doubt not that before a year has passed that sum
will be more than doubled; but let us hope that by financing
our credit and by loaning our money we may be able thus to
end the war. I think it is our highest duty in the making of
war to give it to those who are fighting the enemy against
whom we have declared war; and I only hope and pray that
the aid thus given may be effectual enough to end the war
before we send our boys to the trenches."
Mr. Moore of Pennsylvania countered: " I do not like the
suggestion made by the gentleman from Illinois (Mr. Rainey)
that those folks over there are fighting our battles. That expression has been used quite commonly during the last two
or three weeks and it leads up to the inference that we are
practically at the mercy of the belligerent nations and that
the reason we propose to lend them the proceeds of our bonds
is to reward them for 'fighting our battles.' M y view is that
the foreign governments are fighting their own battles and
that we are aiding t h e m . . . . I am not yet convinced that any
one of these countries is fighting our battles in the sense now
commonly expressed, or that we will not be able to fight our
own. When we lend these foreign countries money, we are
rendering them an assistance and they are not rendering
assistance to us. . . . I would like them to understand that
it is expected in due course that the obligations they may
make to us will be redeemed.
Mr. Madden's reply was applauded. He said, in part,
" I am sorry to disagree with my friend from Pennsylvania



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BANKERS TRUST COMPANY

(Mr. Moore). When he states that we are loaning this money
to the European nations to defend their interests in the war
in which we are engaged, I think he stretches the case beyond
the facts. We have already declared war and we are not prepared to begin to fight the war we have declared. If we can
find somebody else to fight the war for us with our money,
we ought not to hesitate to grant them the credit which they
want and must have. We ought to begin the war upon which
we have entered today, not tomorrow. We ought not to wait
until we haVe enlisted an army that we can send over there.
It will be a year before we can do that, but if we send our
money to operate the armies that are already in the field, then
we shall have done the thing that the American people are
looking forward to us to do as their representatives."
Our Attitude Toward France; We have already seen that
Ambassador Page advocated a large gift to France, even as
much as $1,000,000,000. The same thought ran through the
debate in congress both in the house and in the senate.
It was perhaps most eloquently voiced by Representative
Montague of Virginia. Speaking on Saturday, April 14th,
he said:
" T h e world today beholds the agony and glory of France;
civilization itself is moved by her heroic resistance to the
colossal forces now battling to extinguish her republican institutions and to tear asunder the very fabric of her liberties.
So I have hoped that today our great nation might, through
their representatives in this hall, at least write into this bill
a forebearance and remittance upon any French bonds purchased by the American government. T o do more would be
becoming; to do less is ignoble.
" M r . Chairman, has our republic forgotten its weakness
and its dire extremities in the days of its infancy? Let the



THE INTER-ALLY DEBTS[161

words of Washington recall it. Writing to his beloved friend,
George Mason, on October 22, 1780, just a year before the
surrender of Cornwallis, he said: ' W e are without money
and have been so for a great length of time; without provision
of forage except what is taken by impress; without clothing;
and shortly shall be (in a manner) without men. In a word,
we have lived upon expedients until we can live no longer/
Again, to John Lawrence, who had just been sent to beg a
loan from France, Washington wrote on September 9, 1781:
'If France delays a timely and powerful aid in the critical
posture of our affairs, it will avail us nothing should she attempt it hereafter. We are at this hour suspended in the balance. . . . We can not transport the provisions from the
states in which they are assessed to the army because we can
not pay the teamsters who will no longer work for certificates.
Our troops are approaching fast to nakedness and we have
nothing to clothe them w i t h . . . . In a word, we are at the end
of our tether and now or never our deliverance must come.'
"These words were ringing in the ears of Benjamin Franklin, of Silas Deane and of John Lawrence when endeavoring
to reach the hearts and the treasury of the French nation.
How did that nation respond? The historic record answers
to her glory and to our deliverance. . . .
" T h e gentleman from New York, Mr. Fitzgerald, has just
intimated that there should be no discrimination as respects
the allied nations. I myself would subscribe as a general
principle to that statement; but I can never subscribe to a
view that would prevent this nation from making discrimination in behalf of the nation that made the existence of this
republic possible. (Applause.)
" M r . Chairman, in conclusion I beg again to suggest that
it is not my purpose or wish to embarrass any program. I am



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BANKERS TRUST COMPANY

willing, if reluctant, to sacrifice any personal opinion I may
have as to the expediency of omitting a more direct expression
of gratitude to France, hoping that at some future day, when
the war is well over and the accounting of things is had, that
the administrative department of our government, having in
charge our foreign affairs, may write into some convention or
treaty as was done by France in 1782, an ample and definite
expression of the abiding gratitude of the American people of
the transcendent generosity of France." (Prolonged applause.)
Mr. Graham of Pennsylvania, continuing the debate,
said, "Before concluding what I have to say, I would like to
call attention to what the gentleman from Virginia, Mr.
Montague, advocated in such eloquent terms—our relations
to France. I cordially agree with the thought and wish it
were practicable to put an amendment in this bill so that we
might at this time, when the situation is so exactly analagous
to what it was in the Revolutionary period, say to France,
' W e will make you a loan,.the interest upon that loan shall
be remitted, and that loan itself shall be payable at your
pleasure/ True, France was fighting England in those days;
but we are fighting Germany. True, she loaned us money
without interest. She gave us men, she gave us the immortal
Lafayette to help Washington in the dark hours of the American revolution, and it would be but a small thing for us now
to show that the old remark is without truth, that 'republics
are ungrateful'; to show to the world that America with her
higher ideals is prepared to set a new standard of action
among the nations of the earth."
Mr. Switzer of Ohio added, " I have no patience with those
who think that we may, by making these loans, lose some
money. I agree with what was said by the representative from



THE INTER-ALLY DEBTS[161

Virginia, Mr. Saunders, yesterday. We must take a chance
if we raise and equip a large army and meet the Germans on
the field of conquest. We must also take a chance if we now
loan our money. We must expect reverses if we equip an
army to go across the water to Europe—and we would certainly expect reverses as well as victory, though we trust in
ultimate victory in the end—and so it is with our money. It
may be that some of these countries to which we send our
credit may make no effective use of it and that money may
be lost, but we must take that chance and abide by the decree
of war." (Applause.)
The bill passed the house unanimously with 389 affirmative votes. There were no negative votes, but there were 41
members absent who their colleagues stated would have
voted for the bill if present. One member abstained from
voting.

The Debate in the Senate
The debate in the senate followed very much on the same
lines as did the debate in the house. " T h e Allies were fighting our battles and would have to do so for some months on
account of our utter unpreparedness for war." "There was
little else that we could do to help our allies than to lend
them money."
Said Senator Simmons of North Carolina: " W e have not
the men to send over there at present to help fight our battles; our navy possibly can be of but very little use in its present condition. It will be long weary months of waiting before
we shall be able to render much assistance to our allies in the
field. The help this bill offers is an earnest and a guarantee,
and offers assurance of greater assistance in the future. . . . "
Senator McCumber of North Dakota endorsed this point



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BANKERS TRUST COMPANY

of view, saying, "While we are recognizing that we are putting $7,000,000,000 into this battle, we must not fail to recognize that we are not as yet putting in a single one of our
American soldiers, while blood is being poured out by our
allies in unstinted measure. Even during the winter months
of February and March the reports from the British side in
France showed an average loss of between 135,000 and 145,000
soldiers every month. That was on the British side alone.
The French losses were probably nearly as great. It is probably true that more than a quarter of a million men are going
down to death or are being wounded or captured every month
during this conflict. Therefore, while they are suffering to
that extent, we ought to be mighty liberal in the expenditure of money when we can take no part in the real battle
which today is the battle of the American people."
Senator Kenyon of Iowa said, " M r . President, I shall vote
for this bill without any a p o l o g y . . . . I have heard some things
said here today concerning these loans and whether or not
they will ever be paid. I want to say this for myself, Mr.
President, that I hope one of these loans, if we make it, will
never be paid and that wTe will never ask that it be paid. We
owe more to the Republic of France for what it has done for
us than we can ever repay. France came to us with money,
with a part of her army and navy in the hour of our sore distress. And without the aid of France it is doubtful if we
would have had this nation of ours. . . . I never want to see
this government ask France to return the loan which we may
make to t h e m . . . . T o the boys in the trenches fighting what
is now our battle, this is a message of cheer, but the greatest
message it carries is to bleeding,wounded and stricken France,
with its cities burned, its fields destroyed and fertile lands
made a wilderness; rows upon rows of new made graves; over



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[ 161

a million men gone, another million injured and wounded,
her treasure nearly spent. It carries to France this message:
'When we were a young republic in a family of nations struggling along, hardly able to walk, you reached out and took
our hand and helped us. Now we are the powerful one in that
same family of nations and the big brother of democracy
says to you that it is willing to give of its treasure and of its
men enough to save you from the onslaught of the mad dog
of Autocracy.' That thought cheers me for voting for this
measure, regardless of the stupendous amount involved.
We show to the world that republics are not ungrateful and
to France that the great American republic does not forget."
It is not necessary to make other quotations. The sentiment which actuated the vote of 84 yeas to nays o has been
sufficiently made evident. On behalf of 12 members absent
because of illness or pressing duties elsewhere, statements
were made by their colleagues that, if present, they would
have voted " a y e . "

Subsequent Foreign Credit Legislation
In September, 1917, congress increased the appropriation for loans to foreign governments "then engaged in war
with the enemies of the United States" by $4,000,000,000,
bringing the total authorization for such loans up to $7,000,000,000. The act provided that the authority given to the
secretary of the treasury should cease upon " t h e termination
of the war between the United States and the Imperial German government."
In April, 1918, the authorization for loans to foreign governments was again raised, this time to $8,500,000,000. In
July, 1918, the appropriation was raised to $10,000,000,000,



I 7°]

BANKERS TRUST COMPANY

the maximum amount of loans to foreign governments
authorized under the Liberty Loan acts
By the terms of the Victory Liberty Loan act which became a law on March, 3, 1918, the secretary of the treasury
was authorized until the expiration of eighteen months after
the termination of the war between the United States and the
German government, as fixed by proclamation of the President, to make advances in addition to those authorized in the
several Liberty Loan acts " f o r the purpose only of providing
for purchases of any property owned directly or indirectly
by the United States, not needed by the United States, or of
any wheat the price of which has been or may be guaranteed
by the United States."
No advances were made under this authority, but in the
appropriation acts of 1918, for the support of the army and
of the navy for the fiscal year ending June 30,1919, authorization was granted for the sale, under such terms as were
deemed expedient, of property acquired during the war.
In the previous February the American Relief Administration was authorized to furnish supplies on a credit basis
to the stricken nations of Europe.
Finally on March 20, 1920, the United States Grain Corporation was authorized to dispose of its surplus stocks to
foreign governments on a credit basis. These various arrangements and the loans made in pursuance thereof will be discussed in the course of our narrative.

Making the Loans
England and France were overjoyed that we had come to
their aid. They immediately raised the Stars and Stripes over
their legislative halls and appointed commissions composed
of certain of their leading statesmen to go to America and



THE INTER-ALLY DEBTS[161

make plans for effective co-operation. The Italians also sent
to Washington a commission composed of men of high
standing.
The British and French commissions arrived first, on
April 22 and 24 respectively. The Italians came about a
month later. A commission from Russia reached Washington
on June 19 and one from Japan in August.
The English mission was headed by Arthur J. Balfour,
Foreign Minister and former Premier. Among his associates
and advisors was Lord Cunliffc, Governor of the Bank of England. The leader of the French mission was M. Viviani,
Minister of Justice and former President of the Council of
Ministers, who had as associate and adviser on financial questions M. Simon, Inspector of Finance.
The method of handling the financial co-operation between the United States and her associates worked out by
Secretary of the Treasury McAdoo in consultation with the
financial members of the commissions was as follows:
Credits were to be established from time to time at the
United States treasury against which the authorized representatives of the borrowing nations would be permitted to
draw from time to time as money was required to meet payments. The uses for which the moneys were advanced by the
United States were to be approved by the secretary of the
treasury and the borrowers were obligated to furnish statements showing for what purposes disbursements were made.

The First Loans
The first advance was made to Great Britain on April
25, three days after the British commissioner arrived at
Washington. It was for $200,000,000. This was followed on
M a y 3 by an advance of $25,000,000 to Italy, on the 5th



IZO

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BANKERS TRUST COMPANY

and 7th of M a y by two additional advances of $25,000,000
each to Great Britain, and on the 8th of M a y by an advance
of $50,000,000 to France.
Altogether, up to December 31, 1917, credits had been
established for different countries aggregating $4,236,400,000,
and advances had been made for the net amount of $3,656,129,000. T h e advances were made chiefly to Great Britain
and to France, $1,860,000,000 to the former and $1,130,000.000 to the latter. Italy received $400,000,000, Russia
$187,729,000, Belgium $75,400,000, and Serbia $3,000,000.
In 1918, prior to the armistice, further advances were made
aggregating $3,640,000,000, or just about the same amount
as had been advanced during the nine months of 1917. From
the 1st of December, 1918, until the signing of the peace
treaty, on June 28, 1919, $1,798,675,000 additional was advanced. After that date there were some further small advances aggregating $371,568,000.
It will be noted that in 1917 the advances were at the rate
of $457,000,000 a month, whereas in 1918 up to December
1, they averaged only $364,000,000 a month. The advances
during 1918 were therefore more than $90,000,000 a month
less than they were in 1917. This was not because our
allies required less in the way of supplies, but it was due to
the fact that as time went on a larger part of the productive
capacity of our factories had to be given over to the manufacturing of munitions of war for our own army. Therefore we
were not able to do as much in this way for our associates.
One result of the United States government becoming
banker for our associates was that it was no longer necessary
for the latter to obtain loans in the open market and in fact
some loans which had previously been obtained were paid off
out of proceeds of moneys borrowed from the government.




THE INTER-ALLY DEBTS[161

The Loan Policy Officially Defejided
In an official bulletin issued in the latter part of 1917 by
the United States treasury department, reasons were given
to the public for the making of these great loans to our associates. It was stated that the loans wTere essential to our protection, not alone in a military way, but for our economic
protection and welfare. It was also stated that we were producing more goods than were needed for our own uses and
that our own economic protection and welfare demanded that
we should sell much of our production to our allies. The
attention of the public was called to the fact that the commercial salvation of our allies was an essential part of their
effectiveness in the war and that their commercial welfare
demanded that their export trade be maintained in a suitable
measure; therefore that it was sound economic policy on our
part to assist them in maintaining their industrial life and
commercial welfare.
It was stated that very little of the money loaned went
out of the United States; that most of it was spent in our
own country for war materials and food stuffs. The fact was
stressed that the money wThich we were advancing wTas not
a contribution but a loan, upon which the borrowers would
pay interest and which ultimately would be repaid in full.
The fact was also emphasized that our allies were looked
upon by us as solvent people without ready money but with
perfectly good credit. The public was further advised that
the expenditures of our allies in this country were supervised
by us, purchases being made with the advice and assistance
of our War Industries Board; that thus the Allies obtained
the same prices and same terms as our government demanded
in making its own purchases.



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BANKERS TRUST COMPANY

In conclusion, it was stated that the loans made to our
allies enabled them to do the fighting which otherwise the
American army would have had to do at much expense not
only of men but of money—money which would not be returned to us and lives that never could be restored. It was
therefore claimed, that we were not only performing a duty
to our associates in lending them a part of our great wealth
but that we were also performing a duty to our soldiers and
sailors and our own nation in making our allies powerful and
effective, "thus lessening the work and danger and suffering
for our own men in bringing the war to an earlier close."

Supervision of Purchases
Referring to the paragraph in the foregoing statement
which called attention to the fact that purchases were being
made under the supervision of the War Industries Board, one
of the important results of the visit of the English and French
commissions to the United States in April and May of 1917
was the understanding arrived at in regard to matters of trade
and the purchasing of supplies.
It was decided that the United States should give the
Allies preferential treatment in commerce. With a view to
defeating the German submarine campaign, it was agreed
that all shipping, so far as possible, should be devoted to
merchandise transportation. A detailed program was adopted
in regard to shipping so that the commodities which were most
needed would have priority in shipments. A definite understanding was reached to cover both American and Canadian
wheat for sale to the Allied Wheat Executive Committee, and
arrangements were made for full Canadian co-operation
through a proposed food administration bureau.
Munitions control and purchase were similarly centralized



THE INTER-ALLY DEBTS[161

through an allied buying committee, although without price
control. The Council of National Defence charged itself with
some increasing manufacture so as to provide for the American
war army without cutting off exports vitally needed abroad.
In the Report of the Secretary of the Treasury to Congress
in December, 1917, the statement is made that in arranging
the loans for the associated governments the judgment of the
secretary wras determined largely by what was represented
to him as actual necessities for the purchase of supplies and
materials and other requirements for carrying on the war.
It is stated that in conducting these financial relations with
allied governments, every possible effort was made to obtain
the maximum results from the credits established. To this
end, in August, 1917, formal arrangements were entered into
by the secretary of the treasury with the approval of the
President on behalf of the United States and by representatives of the allied governments for the creation of a commission with headquarters at Washington, through which all
purchases made by those governments in the United States
should proceed. This commission was composed of Bernard
M . Baruch, Robert S. Lovett, and Robert S. Brookings.
These men were also members of the War Industries Board
of the Council of National Defence and by reason of this
relation were able to co-ordinate the purchases of the United
States government with the purchases of the Allied Powers.
In the report for the following year it is stated that valuable information as to the needs of the governments of the
Allies for war purposes, their urgency, and the necessity of
meeting them from advances by the United States had been
furnished from Europe by the Inter-Ally Council on W a r
Purchases and Finance, and by its president, Mr. Oscar T .
Crosby, formerly an assistant secretary of the treasury and



BANKERS TRUST COMPANY

IZO ]

then Special Finance Commissioner of the United States in
Europe.
The great responsibility which devolved upon the W a r
Industries Board and their European associates may be realized when the fact is appreciated that the expenditures made
on behalf of foreign governments totaled $10,296,000,000.
According to statements furnished by the allied governments
to the United States treasury department, the total expenditures were made for the following purposes:
E X P E N D I T U R E S OF T H E A L L I E D NATIONS
IN T H E UNITED S T A T E S
(In " C u r r e n c y " dollars)
. . .

$2,493,610,324.76

Munitions for other governments . .
Exchange and cotton purchases . . .
Cereals
Other foods
Tobacco
Other supplies
Transportation

Munitions, including remounts

205,495,801.10
2,644,783,870.07
1,422,476,706.14
1,629,726,802.57
145,100,821.27
613,107,428.61
136,083,774.95

Shipping

173,397,083.77

Interest
Maturities

730,504,176.91
648,246,316.94

ReIief

538,188,329.89

Silver

267,943,388.81

Food for Northern Russia
Purchases from Neutrals
Special credit against credits to be established for United States Government war purchases in Italy . . .
Miscellaneous




7,029,965.94
18,718,579.42

25,000,000.00
168,530,575.56
$11,867,943,946.71

THE INTER-ALLY DEBTS[161

These expenditures exceeded the net advances of $9,466,283,000 made by the United States up to November 1, 1920,
by $2,401,661,000. This difference apparently was provided
by other resources of the purchasing governments. The statements published by the United States treasury department
do not make the facts entirely clear and on the other hand the
foreign governments have not made any statements for public
use other than those made to the United States treasury
department.

Interest Arrangements
In the Annual Report of the Secretary of the Treasury of
the United States for 1917, it is stated that the obligations
of foreign governments which had been purchased under
the terms of the Liberty Loan acts were in the form of shortterm or demand certificates of indebtedness signed by the
duly authorized representatives of the respective governments receiving advances of funds and that these obligations
under their terms shortly would be converted, at par, with an
adjustment of accrued interest, into an equal par amount of
gold bonds of the governments concerned. Interest, on these
demand obligations was first placed at 3 per cent per annum,
and shortly thereafter increased to 3 ^ per cent per annum,
these rates being established to conform to the rates paid by
the government of the United States on its short-term certificates of indebtedness issued under authority of the act of
April 24, 1917, in anticipation of receipts from the sale of the
bonds of the first Liberty Loan. Subsequently, and coincident
with the sale of these bonds, the rate was raised to 3 ^ percent,
per annum, thus conforming with the rate carried by the bonds.
For obligations purchased after the approval of the act
of September 24, 19179 the rate was placed at 4 % per cent



IZO ]

BANKERS TRUST COMPANY

per annum. By the terms of this act the normal rate of interest to be borne by the obligations of the United States issued
thereunder could not exceed 4 per cent per annum. A t the
same time it rendered the bonds thus issuable exempt from
certain classifications of taxes, thereby substantially increasing the cost to the government of the money received from
the sale of its obligations by diminishing the amount which it
might in turn take from its citizens in taxes. The rate of
interest to be charged on the loans to foreign governments
under the terms of the act was not definitely fixed, but was
left in the discretion of the secretary of the treasury, though a
minimum was fixed. In the exercise of that discretion it was
determined to fix the rate at 4 ^ per cent per annum, the
additional one-quarter per cent being charged to compensate
in part at least the loss to the government due to the taxexemption features on its own obligations above referred to
and the cost incurred by the United States of issuing its own
bonds. It wTas stated that this rate in turn would be further
increased in case there should be higher rates of interest paid
by the United States during the continuance of the war for
the moneys that it might invest in the purchase of foreign
obligations. Thereafter interest was charged at the rate of
4 % per cent per annum.
In his report for 1919, the secretary of the treasury said,
" A l l interest which has become due on the obligations of
foreign governments held by the United States has been paid
in cash with a relatively unimportant exception pending adjustment. T o the extent that such interest has not been paid
from other resources of the foreign governments concerned
it has been paid from the proceeds of loans made by the
United States government. With the termination of the war
and the rapidly approaching exhaustion of the appropriation,



THE INTER-ALLY DEBTS

[ 161

it was considered necessary and appropriate for the secretary of the treasury, as contemplated by the Liberty Bond
acts, to take up with the foreign governments the funding
of the demand obligations now held by the United States into
long-time obligations and the funding during the reconstruction period, say for two or three years, of interest on the obligations. In view of the present derangement of the foreign
exchanges it would add to the difficulties of the situation and
would not be to the advantage of the United States to require
cash payment of interest."
The total amount of interest received on account of cash
advances under the Liberty Loan acts up to M a y 15, 1919,
was $429,658,000. From that date until November 15, 1922,
payments of interest were deferred in pursuance of an arrangement made by Secretary Glass in the early autumn of 1919.
A t this time the treasury informed the treasuries of the
European governments to which it had made advances that
it was prepared, in case they so desired, to discuss with them
the exchange of their demand notes held by the United States
for their long-term obligations, and in that connection the
deferring of interest collections during the reconstruction
period of two or three years from the spring of 1919. Public
announcement of the position of the treasury was made on
September 26, 1919, while under date of December 18, 1919,
Secretary Glass addressed a letter to Mr. Fordney, Chairman
of the Committee on Ways and Means, calling attention to
the fact that on account of the derangement in the foreign
exchanges following the discontinuance of the "pegging"
operations in effect during the war, " a n impenetrable barrier
exists which makes it impracticable for these governments to
pay in dollars the amount of interest due from them to the
United States."



IZO ]

BANKERS TRUST COMPANY

After stating why this was so, he concluded, " M y advisers
are firmly of the opinion that in connection with and as a
part of a general funding of the demand obligations into time
obligations I am duly authorized under the Liberty Loan acts
to spread over subsequent years the interest which would
accrue during the reconstruction period of, say, two or three
years, and to include such amounts in the time obligations.
If, however, the ways and means committee of the house,
which shared with the secretary of the treasury the initial
responsibility for the Liberty Loan acts, should question my
power so to act, I shall be pleased to have you so inform me
at once, in order that I may lay before your committee a proposal for further enabling legislation."
The Committee on Ways and Means replied that there
was in its opinion no legislative bar to the procedure proposed.
In the finance report for 1920, Secretary Houston made
the following statement:
"Negotiations looking to the exchange and, in that connection, the deferring of interest collection were undertaken
in Washington. They were continued in Europe in the fall
of 1919 and the spring of 1920 by Albert Rathbone, then
Assistant Secretary of the Treasury, and will be concluded in
Washington. I trust that they will be completed in the near
future. Such an arrangement will involve no present burden
to the debtor nations and would do much in fact to clear the
atmosphere and to improve European credits. The foreign
exchanges are now at a greater discount than they were at the
time of the treasury's original statement. It would add to
the difficulties of the situation and would not be to the advantage of the United States at this time to require cash payment of interest from the debtor European governments."
Nothing came of these funding negotiations but interest



THE INTER-ALLY DEBTS

[ 161

payments have not been resumed even yet, at the close of
I923* °n the loans made under the terms of the Liberty Loan
acts, except by Great Britain which nation promptly resumed
payments at the close of the three years moratorium established by Secretary Glass.
Exceptions to this statement should be made in the case
of Cuba, which made regular cash payments, until paying off
her loan in full, and in the case of Greece which paid in cash
up to November 15, 1921. Certain sums credited to Russia
were received from funds realized by the Russian representatives of this country in connection with the liquidation of
their fiscal operations.
On November 15, 1923, the interest account for advances
made under the Liberty Loan acts stood as follows:
INTEREST ACCOUNT TO NOVEMBER 15, 1923, ON OBLIGATIONS OF FOREIGN GOVERNMENTS RECEIVED BY THE
UNITED STATES UNDER THE TERMS OF LIBERTY
LOAN ACTS
(In " C u r r e n c y " dollars—000 omitted)

Belgium
Cuba
Czechoslovakia
France
Great Britain
Greece
Italy
Liberia
Rumania
Russia
Yugoslavia




Interest
Paid

Interest
Accrued

Country

$88,34*

2,287
13,539
779,622

883,078
2,659

.

424,681
6
5,349

56,086
6,554

2,262,2 02

Interest
Due

$10,907

$77,434

2,287
304
129,571

883,078
1,159
57,599

z

263
7,526

,636
1*093,331

13,235

650,051
1,500
367,082
5

5,o86
48,560
5,918

1,168,871

IZO

]

BANKERS TRUST COMPANY

T h e interest accrued, paid and still due up to November
15, 1923, upon advances made to foreign governments on
account of obligations received from them in connection with
other loan operations, were as follows:
INTEREST ACCOUNT MISCELLANEOUS LOANS BY
UNITED STATES TO FOREIGN GOVERNMENTS
TO NOVEMBER 15, 1923
(In "Currency" dollars—000 omitted)
Obligations

Interest
Accrued

Interest
Paid

Interest
Due

Account Sales of Surplus War Materials .
Account Relief Supplies Furnished . . .
Account Grain Corporation (Sales of
Flour

95,7

68,8

26,9

16,2

0,5

121,9

15.7

10,0

10,0
69,3

52.6

Post Armistice Loans
It will be remembered that under the terms of the Liberty
Loan acts the secretary of the treasury was permitted to
make loans only to foreign governments "engaged in war with
the enemies of the United States," and that the authority to
purchase bonds from such foreign governments was to "cease
upon the termination of the war between the United States
and the Imperial German Government."
Section 13 of the Second Liberty Bond A c t states " t h a t
for the purpose of this act the date of the termination of the
war between the United States and the Imperial German
Government shall be fixed by proclamation of the President
of the United States." President Harding set this date by
proclamation issued November 14, 1921, as July 2, 1921.
In his annual report for 1918 laid before congress
December 2 of that year, Secretary M c A d o o stated that on




THE INTER-ALLY DEBTS[161

November 15, 1918, (the date of the armistice, it will be remembered, was November 11) there remained an available
authorization for the establishment of credits in favor of
foreign governments under the terms of the Liberty Loan
acts, amounting to $1,828,000,000. In this connection he
said:
" I t is important that our foreign loans be discontinued
as soon as may be, having due regard to the conditions of our
industries and the essential needs of the foreign governments;
in the meantime they should be held down to a minimum.
Nevertheless, until certain of the allied countries can resume
their normal activities the United States should be prepared
to sell them on credit, even after the declaration of peace,
foodstuffs, raw materials, and manufactured products of
which they may be in need. I shall recommend the enactment of legislation extending the authority to establish credits
in favor of foreign governments for a reasonable period and
within reasonable limits to meet needs growing out of the
war."
In the finance report for 1919, Secretary Glass stated
that, since the last report, credits had been established in
favor of Belgium, the Czecho-Slovak Republic, France, Great
Britain, Greece, Italy, Rumania, and Serbia, and that advances had been made to these countries and also to Cuba
and Liberia under credits previously established. No credits
were established in favor of Russia during the year, nor were
any advances made to that country, and the balance of credits
which had previously been established above the amount of
the cash actually advanced was withdrawn. In certain instances, in which the purpose wras accomplished for which a
credit had been established, or an advance had been made,
without requiring the total amount of the credit or the ad


IZO]BANKERS TRUST COMPANY

vance, the balance of credit was withdrawn or the unused portion of the advance was repaid. Certain other repayments
were made in connection with the routine of the accounts.
He stated that none of the repayments constituted part of
a general program of repayment by any foreign government.
Secretary Glass summarized the facts as follows: the total
appropriation provided by congress for loans to foreign governments was $10,000,000,000; from April 24, 1917, up to
November 15, 1919, the credits established, after deducting
credits which had been withdrawn and the cash advances,
were as follows:
Credits established
Cash advanced
Other charges against credits
Balances under established credits

. .

$9,647,419,000
9,416,372,000
158,237,000
72,811,000

In the finance report for 1920, dated November 20, Secretary Houston stated that no further credits would be extended under then existing legislation and consequently that
no further advances would be made to governments in favor
of which there were no existing balances, and that all balances
of credits in excess of the amount necessary to carry out the
commitments would be withdrawn.
T h e last advance was for $10,000,000 made to France
on September 28, 1920. T h e total net advances under the
Liberty Loan acts to that date were $9,466,000,000. O f this
amount $2,170,000,000 was advanced after Armistice D a y .
These post-armistice advances have been severely criticized as not coming within the terms of the authorizing acts
which limited the loans to be made thereunder to foreign
governments " t h e n engaged in war with the enemies of the
United States." Although the war technically was not ended
by proclamation of the President until July 2, 1921, yet as




THE INTER-ALLY DEBTS[161

active hostilities had ceased, these critics, claim that the government exceeded its powers in making them. The government also is criticized for having allowed supplies bought with
Liberty Loan money to find their way into enemy countries
for relief purposes and otherwise.
It is unquestionably a fact that millions of dollars worth
of products purchased with United States money loaned to
foreign governments were sent directly to Germany with our
sanction, and that $48,000,000 of relief supplies were sent
to Austria indirectly by making loans to Great Britain,.
France and Italy, which those nations in turn used to aid
Austria. It is also true that large quantities of supplies for
relief of other distressed peoples were bought with Liberty
Loan money, w+hile millions of dollars were lent to Great
Britain after hostilities had ceased to enable her to build up
her export trade.
There is no question in regard to these facts, and also
in regard to the fact that considerable loans were made to the
newer countries to help them get on their feet.
As we have seen, immediately following the armistice,
both Secretary McAdoo and his successor Secretary Glass,
sought congressional authority to extend the field of loan
operations. However, all that congress was willing to do at
that time was to grant authority to take the obligations o f
foreign governments in payment for surpluswarsupplies. The
administration then seems to have felt that the "end justified
the means" and to maintain our prestige pending the peace
treaty negotiations and especially in order to prevent a lapse
of the conquered nations into a state of revolution and anarchy, because of a lack of food, determined to go ahead and
make the necessary further advances. It is also a fact that the
food administration was loaded up with supplies of meat and



IZO

]

BANKERS TRUST COMPANY

cereals for which it was essential to find a market outside of
our own country, in order to prevent the necessity of throwing upon our home markets tremendous quantities of food
with a consequent crisis in the markets for such products.
This was in line with the policy of scrapping thousands of
automobiles and motor trucks owned by the government in
order not to bring the automobile industry into ruin.
The taking of the obligations of foreign governments in
payment for surplus war materials sold them was specifically
permitted by an act of congress approved July 9, 1918.
This is also true of the obligations received by the American Relief Administration, the taking of which was permitted
by the act of February 25, 1919. These loans which with unpaid interest on November 15, 1923, amounted to just under
$100,000,000, are a mere bagatelle compared to the postarmistice loans for cereals, other foods, and relief made out of
Liberty Loan money, which aggregated over $1,000,000,000.
The question of these relief loans is treated more in detail
in a subsequent chapter.

Was the Loan Policy Justified?
Unquestionably, yes. Without our aid thus given the
Allies simply could not have successfully prosecuted the war.
Secretary Glass in his report for 1919 tersely sums up the
facts. We can do no better than to conclude this chapter by
quoting his remarks verbatim:
" I t is difficult to exaggerate the great purposes served
and the great results accomplished by these advances to foreign governments. In the most critical stages of the war they
immeasurably assisted America's gallant associates in obtaining the munitions, supplies, and equipment that were so
imperatively needed to meet the enemy's offensives or to



THE INTER-ALLY DEBTS[161

carry the fighting into his territory, and probably of equal
importance was the fact that they served to hearten the allied
armies and peoples by the knowledge that the vast credit
resources of the United States were being shared with them
for the effective prosecution of a common cause. Conversely,
it is not difficult to estimate the disheartening effect that these
loans of billions and the willingness of America to lend for the
prosecution of the war as much more as was needed to the
limit of her ability must have had upon the spirit and morale
of the peoples and armies of the enemy.
" I n the beginning, before the creation of our great army,
the principal assistance of America was necessarily through
foreign loans, and it was then that these advances proved so
very potent in contributing to the final victory. Loans to
Russia in 19x7 kept that great nation in the war and held the
German troops upon the eastern front for six precious months.
Similarly in each grave crisis, whether on the Italian front or
on the battle fields of France or Belgium, the loans from the
United States gave the Allies the means of replenishing supplies and equipment, and inspired their fighting forces and
the peoples behind them with renewed hope and confidence
and with strengthened determination in the face of an advancing foe. The service of these loans in assisting to hold the
battle fronts of Europe until the might of our heroic army
could be felt effectively, made possible, beyond the shadow
of a doubt, the ending of the war in the fall of 1918. Without
this aid to the allied governments, the war unquestionably
would have been prolonged, if not lost, with the resultant
great additional cost in life and treasure."
The status on November 15, 1923, of the loans made by
the United States government to foreign governments as
officially given is printed on page 188.



OBLIGATIONS OF FOREIGN GOVERNMENTS HELD BY THE UNITED STATES TREASURY
ON NOVEMBER 15, 1923
(In "Currency" dollars—ooo omitted)
ACCOUNT OF REACCOUNT OP
SALES OF SURPLUS LIEF SUPPLIES
FURNISHED
WAR MATERIAL

UNDER LIBERTY
BOND ACTS
Country
Principal

Interest
(including
Interest
due N o v .

Principal Interest

15.1033)

Armenia .
Austria * .
Belgium . ,
1347,3"
Czechoslovakia
61,974
Esthonla . .
Finland
. .
France . . *
3.933.365
Great Britain
4.600,oood
15,000
Greece . , .
Hungary . .
Italy
. . . .
1.647.097
Latvia . . .
Liberia . . .
""36
Lithuania
Nicaragua. .
Poland . . .
Roumania. .
33.206
Russia . . .
187.730
Yugoslavia .
36,060

Total

. 9.843,469

ACCOUNT OR
SALES
OF FLOUR

$8,038 11.605 $3,933
34,056
177.433 $39,819 a&fr
13.235 20,604 $3,988 6,428 1.386 3.873
347
12,213
3.443 1.786
£8,282
7*8
407.341
650.051
I.JOO

367.083

5
5,086
48,560

5.918

,168.871

378
3,533
833
4.159
a
176
79.947 13,044
13.923 3,585
30
406
34.978 4,631
595.088

36.931

3,610

15.688

$698

4.330

$11,960
34.056

377,030
91.8H0
13.999
8,383
3,340,607

4,600,000
IS.OOO
1.686

1,647.997
5.13 3
36
4.983
176
155.931
4.163
36,138

533

833
164
51.67 V 10.334
4.466 "713
84,094

Principal

Principal

Principal

Total
Indebtedness

$3,303
4.330
077.433
19.036
3.790
718
650,051

I.500
303
367,083
900

5
996
a
36.540
7.671

193,601
51.03S

56.859

49.303
to.549

10,010 10,578,509

1.331,500

$14,363
38,386
454.463
110,006
16,789
Q.OOO

3.990,658
4.600,000
I6.SOO

I.9S9
3.015.079
6.033
31
5.978
176
183.471

43.799
341.903
61.587

11,800.010

oNo interest due on Nicaraguan notes until maturity, as is also the case of certain Belgian obligations aggregating
$3,384,151-40.
^Interest has been paid as it became due.
. . . . . .
j
.
eAgrtement providing for refunding of these obligations as to both principal and interest executed, subject to approval
of Congress, on M a y 1. 1923. Bonds of Finland amounting to $9,000,000 will be delivered to the Treasury in exchange for
the obligations now held if the agreement 1» approved.
dRefmuting bonds received under terms of agreement concluded pursuant to the A c t of Congress.approved February p,
1933, as amended by A c t of Congress, approved February 38. 1933.
,
* . t ,
Omission of three ciphers accounts for the fact that the Items do not exactly add to totals.




CHAPTER

X

Great Britain as Borrower and Lender
1917-1920
A S we have already seen, the first allied commission to
•L
arrive in the United States after our declaration of belligerency was that from Great Britain. The financial members of this commission were Mr. (now Earl) Balfour, Lord
Cunliffe, Governor of the Bank of England, and Sir Hardman Lever, Financial Secretary of the British Treasury.
A contemporary record states that " t h e most important
tangible accomplishment of this mission was the arrangement
whereby the United States promised to lend a certain sum
to Great Britain each month for expenditure in the United
States."
A s a matter of fact the place of expenditure was not prescribed, although as a practical matter, most of the credits
and a considerable sum in excess were expended on our side
of the Atlantic.
T h e official statement on page 190 gives the facts.
It will be noted that the net expenditures exceeded the
net advances by $638,000,000. This amount includes any
payments for services rendered by Great Britain to the
United States, such, for instance, as for the transportation
or victualing of troops, which the United States made in
dollars in America. It also includes such sums as the British
government had in America from its own resources, arising
from interest on American securities or sales of such securities
which it owned, shipments of gold and other exports to
America.
In this connection it is of interest to note the remarks of




1189

IZO]BANKERS TRUST COMPANY
GREAT BRITAIN
ADVANCES MADE BY THE UNITED STATES GOVERNMENT AND
EXPENDITURES REPORTED BY GREAT BRITAIN FOR THE
PERIODS GIVEN BELOW

(In "Currency" dollars—00,000 omitted)
1918
July 1
to
N o v . 30

Total
April,'17
to
Nov./ao

NET ADVANCED

.

.

. .

EXPENDITURES
Munitions
Munitions (forother G o v ernments)
Exchange and C o t t o n . .

1918
Jan. 1
to
June 30

4.377.o
80,3

ADVANCED

1917
April 6
to
Dec. 31
i,S6o,o

1.315,0

731,0

481.0

4.196.8

i,S6o,o

1,315.0

73i,o

481.0

1.330.6

570,0

393,1

317.4

194.8
1,374.6
361.9
154.6
31.3
48.7

8.3
373.7
385,5
404.8
7.4
60,7
X

9
33,4
467.1
3i9,o
56,3
83.7
1

1.5
XI 1,6
160,8
390,7
35.6
49,8

80,1
15.9

75.9
91.9

114.0
199.1

60.7

1X5,5
46.5
13.3
138.8

Other Foods
Tobacco
. . . . . . .
Other Supplies
. . . .
Shipping
Reimbursements
. . .
Interest
Maturities
Relief
Silver
Food, Northern Russia .
Miscellaneous
TOTAL REPORTED
EXPENDITURES . . . . 7.3*9,4
Less Reimbursements from
U . S. Credits to other
Governments
1.853.6
Dollar payments by U . S.
for foreign currencies .
449,5
Proceeds of rupee credits
and sold from India .
814
«NET EXPENDITURES . .

.

1919-30
July 1
to
Nov. l

ISM

305.5
1,683,4
1.375,4
X,l69.3
99.3
315.3
48.9
19.3
387.7
353.5
16,0
361.6
7,0
47,8

4.834.9

1018-19
Dec. 1
to
June 30

8o,3
080,3

19,3"
3,3
3,7

4.9

5.3

72,1
7,0
19.3

3,736,8

1,665.4

1.679.3

1,133.8

5I3.I

395,0

6s6,3

350,o

30,3

46,3

76,4

158,8

168,1

18,4

3,4

30,5

33,9

13.6

3,310,3

1,393,6

913,7

591,4

35,3

a Repayments in excess of cash advanced.
^Receipts in excess of expenditures.

&I73.I

cOn account of five ciphers omitted
last digits do not exactly add.

Secretary of the Treasury D . F. Houston in his Annual
Report to Congress, dated November 20, 1920. He stated
in substance that the reported expenditures of foreign governments did not represent their total disbursements in the
United States. He explained that under the designation of




T H E I N T E R - A L L Y DEBTS

exchange were included many transactions which normally
would have been settled with the importation of gold or the
sale of exchange, except in so far as they might have been
capitalized through the purchase of American securities held
abroad or of securities of foreign governments held in the
United States, or adjusted by transferred bank balances or
otherwise. We are advised that in the early stages of the war
all commodity purchases by Great Britain were thus merged
in exchange, except the purchases of munitions and sugar,
and that therefore the exchange item in the statement of
expenditures reflected purchases of wheat, food, cotton,
leather, oil under government control, and all transactions
of individual buyers in the United States, and that the
amounts shown under specific headings include only purchases bought under government control after centralized
purchases and finance were established.
The secretary explained that the amount expended by
France for exchange was of a less complex character than the
disbursements shown under the same heading for Great
Britain. He stated that after March, 1917, imports into
France were in general prohibited until after the armistice.
In some cases, however, he said imports from the United
States were authorized and that in such cases the Bank of
France undertook to provide funds sufficient to pay for them.
Prior to November 30, 1918, the dollar funds provided by the
Bank of France constituted the major part of French exchange payments.
Under this heading also were included certain sums expended in New York in purchasing drafts on Paris or in making payments for cotton. Some purchases on French account
were paid for by draft on London, this being particularly true
in the earlier part of the period. The purchases of these drafts



IZO

]

BANKERS TRUST COMPANY

were included in the British item of expenditure and the
amount of transactions as estimated from time to time for
the French and British governments forms part of the reimbursements by the French to the British. The observation
is made that it will be apparent that completely to analyze
the total purchases of exchange is impossible. It is stated
that it was consistently the aim of the treasury department
to have whole classes of transactions, such as the buying of
wheat and food, taken out of the general exchange market
so far as possible, to be provided for by direct payments, and
to determine, as completely as possible, the character of the
remaining exchange transactions.
In regard to the item of reimbursements, the statement is
further made that under this head are included expenditures
consisting principally of payments by France and Italy to
Great Britain for cereals, sugar, meats and munitions and for
neutral freights and other disbursements made to neutrals,
and of payments by Belgium to Great Britain for horses,
gasoline, oats, flour and certain relief supplies furnished by
Great Britain out of supplies obtained actually or constructively from the United States.

The Initial Loan from the United States
The first advance made by the United States to Great
Britain was for $200,000,000. This was the first loan ever
made by the United States government to a foreign government.
This transaction is thus described in a contemporary news
item. " A loan of $200,000,000 by the United States to the
United Kingdom of Great Britain and Ireland was consummated on April 25 with the handing over to Lord Cunliffe,
Governor of the Bank of England, by William G. McAdoo,



THE INTER-ALLY DEBTS[161

Secretary of the Treasury, of a treasury warrant for that
amount. The money to make the loan was obtained by our
government out of the proceeds of the sale of Treasury Certificates of Indebtedness due June 30. The loan to the British
government was purely an emergency loan, and it is understood
that it will be replaced with a bond issue loan just as soon as
the treasury can complete its arrangements for issuing
bonds. The transfer of the big sum was made in Secretary
McAdoo's office at Washington in the presence of Federal
Reserve Board and treasury and British embassy officials.
Lord Cunliffe immediately afterward took the treasury warrant to the British embassy, where it was delivered to Sir
Cecil Spring-Rice, Ambassador from Great Britain. Sir Cecil,
acting on behalf of the British government, gave the treasury
a note for the money bearing the same rate of interest as
that borne by the issue of United States Treasury certificates
of indebtedness. The warrant received Sir Cecil endorsed
over to the United States treasury with a request that the
amount be deposited in the federal reserve system to the
credit of his government."

Our Financial Assistance Vital
We have already noted how much our help was needed by
the Allies but it is of interest in this connection to read an
extract from a letter dated May 4, 1917, written by Ambassador Page from London to President Wilson. This is what he
wrote:
" I heard all the speeches in both houses on the resolution
of appreciation of our coming into the war. . . . It wasn't
oratory but it was well said and well meant. They know how
badly they need help and they do mean to be as good to us
as their benignant insularity will permit. They are changing.



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BANKERS TRUST COMPANY

I can't describe the great difference that the war has made to
them. They'll almost become docile in a little more time.
" A n d we came in the nick of time for them—very true.
If we hadn't, their exchange would have gone down soon and
they know it. I shall never forget the afternoon I spent
with Mr. Balfour and Mr. Bonar Law on that subject. They
saw blue ruin without our financial help."

Did Great Britain Act for Either of the Allies ?
In connection with some of the loans made to the British
government it was stated in the public prints during May,
1917, that considerable portions of the sums being advanced
were in effect for payments for purchases made by the British
government for other allied governments on account of contracts recently placed or then being placed in the United
States.
It was said to be understood that Great Britain was purchasing supplies on behalf of Russia in this country, there
having been up to that time no loan made by our government to Russia.
The facts in the case appear to be that England was using
funds received from the United States to clear up obligations
incurred for supplies purchased by her for her own account
and for account of certain of her allies prior to April, 1917*
This brings up the vexed subject of guarantees which we will
now examine.

Guarantees—Were Any Required or Given ?
It has been claimed by some people that the United States
required the British government to guarantee certain of the
loans made to other nations. In particular, Earl Balfour, in
a letter addressed to the French ambassador on August I,



THE INTER-ALLY DEBTS

[ 161

1922, in a paragraph dealing with the cost of the war to Great
Britain, said "Under no circumstances do we propose to ask
more from our debtors than is necessary to pay our creditors
. . . for it should not be forgotten, though it sometimes is,
that our liabilities were incurred for others, not for ourselves.
The food and raw material and munitions required by the
immense naval and military efforts of Great Britain and half
of the $9,732,000,000 advanced to allies were provided not
by means of foreign loans but by internal borrowing and war
taxation. Unfortunately, the same policy was beyond the
power of other European nations. An appeal was therefore
made to the government of the United States; and under the
arrangement then arrived at the United States insisted, in
substance if not in form, that if our allies were to spend the
money it was only on our security that they were prepared
to lend it."
It is hardly likely that as great an authority as Earl Balfour, who we have already stated was at the head of the
finance mission to the United States when these loans were
arranged for, would have made such a definite statement as
this unless he had felt sure of his position. It would seem,
however, that Earl Balfour, when writing the note to France,
had not clearly kept in mind the exact conditions. Secretary
of the United States Treasury, Mr. Andrew W. Mellon, in a
statement published shortly after Earl Balfour's letter was
issued, stated that a number of inquiries had been received
with respect to the exact status of the obligations of foreign
governments held by the United States, and that especial
attention had been directed to the origin of the indebtedness
of the British government. He said it had been stated that
this liability was not incurred for the British government but
for the other allies and that the United States in making the



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]

BANKERS TRUST COMPANY

original arrangement had insisted in substance that if the
other allies were to use the money borrowed it was only on
British security that the United States was prepared to
lend it.
In regard to these inquiries, Secretary Mellon said, " T h e
statement that the United States government virtually insisted upon a guarantee by the British government of amounts
advanced to the other allies is evidently based upon a misapprehension. Instead of insisting upon a guarantee or any
transaction of that nature, the United States government took
the position that it would make advances to each government
to cover the purchases made by that government, and would
not require any government to give obligations for advances
made to cover the purchases of any other government."
He goes on to say, " T h u s the advances to the British government evidenced by its obligations were made to cover its
own purchases and advances were made to the other allies
to cover their purchases."
In support of this definite statement, Secretary Mellon
quoted from a memorandum which the secretary of the treasury in June, 1918, handed to the British ambassador, which
memorandum reads as follows:
" S o far as the purchases of the allied governments for
war purposes within the United States and its Territories and
insular possessions are concerned, it is the expectation of the
Secretary of the Treasury to continue as heretofore the advances necessary to enable the financing of such approved
purchases. The Secretary of the Treasury quite agrees with
what he understands to be the views of the Chancellor of the
Exchequer that advances shall be made to each allied government for the commodities purchased in the United States by
or from it and that no allied government should be required



THE INTER-ALLY DEBTS

[ 161

to give its obligations for such purposes when merely serving
as a conduit for the supply of the materials so purchased to
another allied government. Any other course would indeed
be incompatible with what the Secretary of the Treasury
deems a cardinal principle which should be followed in respect to such advances, namely, that the allied government
for the use of which the commodity is purchased must give
its own obligation therefor and the obligation of any other
allied government can not be accepted by the United States
as an equivalent."
Mr. R. C. Leffingwell, who was Assistant Secretary of the
Treasury in 1917, in an address which he made on May 12,
1922, before the American Academy of Political and Social
Science in Philadelphia, stated emphatically that the impression which had been created, that the United States
required Great Britain in some sense to guarantee or make
herself responsible for loans to the Allies after the United
States entered into the war was "wholly erroneous." He tells
us that before the United States entered into the war Great
Britain had established the rule that each ally should be responsible for the financing of interallied purchases within its
own borders. He says " t h e same rule was extended to the
United States when it entered into the war. Under that
simple and sound rule the United States financed the requirements of the Allies within its borders; Great Britain financed
the requirements of the Allies within the British Isles and to
a great extent within the British Empire (but not in India,
where the United States financed all the Allies by shipments
of silver for a considerable period); and as to expenditures in
the neutral world, Great Britain and the United States shared
the burden of finance in accordance with a formula agreed
upon between them." He continues " T h e theory of the rule



IZO

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BANKERS TRUST COMPANY

is simple: The people of each belligerent country could and
should respond, in taxes and subscriptions for domestic loans,
to the financial demands of its government. The American
government could raise all the dollars the Allies needed, the
British government all the sterling, the French government
all the francs, and the Italian government all the lire. On
the other hand, because of embargoes on exports of gold and
control of foreign exchange, no government could provide
finance outside its borders, except at the expense of grave depreciation of its currency in foreign exchange. It was a matter
of course that, under the sound rule thus established by
Great Britain before the United States entered the war, and
continued without question thereafter, Great Britain should
continue to be a lender as well as a borrower on international
account.
" I n one case only did Great Britain make advances after
the United States entered the war for purchases by any of the
Allies in the United States—that of Russia—and in that case
only to the extent of contracts entered into by Russia and
guaranteed by Great Britain before the United States entered
the war. The amount is not important."
From an important English source, we have the following
testimony in regard to this question of guarantees. This
authority states that there were only three substantial items
in the British war debt to America which can be said to have
been incurred directly on behalf of the Allies. The most important of these items was in connection with the question
of replacement which arose in two forms in the autumn of
1917, "when the American army was making very urgent
demands from Great Britain for various kinds of equipment
which her own factories were not producing quickly enough.
Great Britain began to put forward a claim that America



THE INTER-ALLY DEBTS

[ 161

should find the raw material, not merely in general but as a
specific allocation against goods manufactured in Great
Britain for the American army. It was clearly impossible to
wait for this material, but we urged, or rather the departments
concerned strongly urged, that actual steel or copper or whatever it might be, should be ear-marked for the department
on this side. This was devised to meet the difficulty created
by the acute competition for priority of material on both
sides of the Atlantic and the American purchasing authorities
fell in with it as a way to overcome the reluctance of particular departments to supply their goods to the American army
in competition with British requirements. The claim fell
through because supplies became subordinate to shipping,
and claims based upon replacement had to take their chance in
accordance with the more general over-riding order of priority.
" B u t while the discussions on this question were still
proceeding, Great Britain raised the same point in regard to
supplies to her allies. As the difficulty of maintaining British supplies increased, we endeavored for supply reasons reinforced by financial considerations, to make our allies go to
the less congested American market. For example, in the
winter of 1917-18, we practically stopped making French
shell steel, the orders in British factories being replaced in
America. The Allies always strongly objected because the
American market was far away; out of touch with their central inspectorate and subject to the risks inevitable to the
early stages of production. In certain cases they established
their point where, for example, highly technical processes had
been started. But after the Inter-Allied Munition Council
was established in June, 1918, all such requests were brought
before that body and Great Britain undertook to supply



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BANKERS TRUST COMPANY

the goods if America would replace the raw material. But
as soon as this arrangement was come to, the treasury at
once pointed out that Great Britain would have to find dollars simply because France or Italy were unwilling to place
particular orders in America. The American treasury admitted the force of the argument, and finally agreed that if
the Munitions Council certified that British orders were being
placed for material in the United States, which would not
have been placed there but for the fact that we were supplying goods to the Allies, they agreed that the material should
be paid for not out of the dollar credits of Great Britain, but
from the dollar credits of the Allies concerned. This arrangement was only agreed upon early in August, 1918, but it is a
fact that the last orders for pig iron and steel for shipment to
British munition factories were paid for out of French and
Italian dollar credits.
" I can not attempt to estimate what sum would be involved, but it is certainly arguable that this rule ought to
have been admitted from April, 1917, onwards and if it had
been,it might have involved a substantial deduction from the
British total debt to America, and a corresponding increase
in those of France and Belgium/'
This arrangement, together with such part of the British
expenditure on maintaining the exchange which can be shown
to have been incurred because of French and Italian purchases
in various countries of the world, plus a certain sum spent
by Great Britain in completing or compensating for the cancellation of orders for Russian type munitions which Great
Britain had placed in America on behalf of Russia previous
to April, 1917, constituted in the opinion of this authority
the three substantial items referred to above, incurred^by
Great Britain in America directly on behalf of the Allies.



THE INTER-ALLY DEBTS[161

Our authority doubts "whether we should accept the
argument that if it had not been for the burden on our
finances of our advances to the Allies, we could have financed
our own essential requirements in America;" this he adds
" i s a very theoretical question."
Another distinguished British authority, Mr. Austin
Chamberlain, then Chancellor of the Exchequer, in reply
to questions in the House of Commons on Tuesday, February
22,1921, stated that no loans were made by the United States
government until after the entry of the United States into the
war, and that " n o loans made by the United States government
to allied governments were ever guaranteed by us."
It would seem to be clear, therefore, that the advances
from the United States to Great Britain, except in so far as
modified by the statements which we have quoted above,
were made directly to Great Britain for her own benefit and
not through Great Britain for the benefit of other allies.

Silver for India
It will be noted that of the sums advanced by the United
States government to Great Britain, $261,600,000 were used
in purchasing silver. During 1918 and 1919, enormous
amounts of silver were necessary to pay for the heavy excess
of goods imported into England from India and China. The
amount of silver required was emphasized because of the
fact that gold exports to India necessarily had to be considerably restricted after 1915. The net imports of silver
into India during the twelve months ending March 31, 1919
amounted to 112 per cent of the world's production during
the same period, as against 26 per cent of the annual average
production in the five pre-war years 1910 to 1914 inclusive.
In the early part of 1918, representations were made to



IZO]BANKERS TRUST COMPANY

the United States government that in order to stabilize the
Indian and Chinese exchanges, it was essential that Great
Britain, if possible, should obtain a large amount of silver
from the United States. The rise in world commodity prices
and extensive hoarding of the metal in interior parts of India
and other eastern countries, were factors contributing to the
scarcity of silver, and therefore to this emergency. Added to
this situation was the difficulty that silver production, since
1914, had been shrinking, as compared with the production
prior to that year.
It was a difficult matter for the United States treasury
to know just how to solve this problem, but finally it was
decided to recommend to congress that an act be passed
allowing the treasury department to lend to Great Britain
the silver impounded as security for the silver certificates.
This arrangement, of course, would necessitate the retirement
of the silver certificates outstanding. T o obviate any shrinkage of the circulation due to this cause, it was recommended
that the federal reserve banks be authorized to purchase
from the treasury an equivalent amount of certificates of
indebtedness and against these certificates of indebtedness to
issue their federal reserve bank notes, with the understanding
that the operation would be reversed as soon as the
emergency was passed and Great Britain prepared to reimburse our government for the advances.
Congress approved of this plan.
About 200 million fine ounces of silver were sold to Great
Britain during 1918 and 1919. This was not entirely paid for
by borrowing. The British government issued to the United
States government its notes for $122,017,000 on account of
purchases of silver and the balance of the account was settled
by rupee exchange made available to the Federal Reserve



THE INTER-ALLY DEBTS[161

Bank of New York for $71,353,000, while gold was shipped
to this country from India in the sum of $9,999,000.
The arrangement made with the British government was
that interest was to be paid in cash at the rate of 5 per cent
per annum semi-annually. The principal was to be paid in
equal annual instalments in the years 1921 to 1924 inclusive.
Until the payment in full of the principal with interest,
in order to afford American nationals an opportunity to acquire rupee credits at the same cost as such credits were
offered to British nationals, the British government agreed
to permit the United States treasury, through the Federal
Reserve Bank of New York, to make tenders to purchase
rupee credits offered by the Indian government in London
or elsewhere in Great Britain, on substantially the same terms
as were open to British nationals, payment to be made in
dollars to the agents in New York of the British government
for the sterling cost of the rupees at the cable rate for sterling
fixed by the Federal Reserve Bank of New York at noon of
the day of such sterling payment in London.
It is unnecessary to go into the details of further arrangements, but suffice it to say that this loan of silver
tided over a serious emergency for Great Britain in connection with her Indian exchanges. The interest on the obligations given by the English government was regularly paid as
it came due, also the instalments of principal and the balance
of principal remaining unpaid March 31, 1923 was finally
merged into the $4,600,000,000 settlement then arrived at
with the British government on account of its gross obligation
to the United States.
The operation is also entirely closed so far as the United
States treasury is concerned, the 200,000,000 ounces of silver
sold having been repurchased in the American market and



IZO

BANKERS TRUST COMPANY

]

returned to the treasury, the obligations issued to the federal
reserve banks paid off and the federal reserve bank notes
issued against them cancelled.

Britain9s Borrowingsfrom Other Nations
In addition to moneys borrowed from the United States, or
their equivalent in munitions, Great Britain borrowed during
the war considerable sums from other nations.
T h e total external debt on March 31, 1919, when apparently it was at its maximum, was $6,641,360,000. Of this
amount £5,240,234,000 were borrowed from governments and
$ 1,401,126,000 were borrowed in foreign markets. The
amount borrowed abroad: from governments other than the
United States was $1,148,794,000 and in foreign markets,
S535>3 23 >°oo,ooo.
FOREIGN INDEBTEDNESS OF GREAT BRITAIN
(In "Currency" dollars—000,000 omitted)
Country in which
Payable
Argentina
Canada
. . . . . . . . .
Denmark
. . . . . . . . .
Fiji, Strait* Settlements and
Mauritius
Certain Allied Governments .
Holland
Japan
. . . . . . . . . .
Norway.
. . . . . . . . .

Spain

MARCH
To Government
94
447
37

SS2"
7

. . . . . . . . . .

Sweden
. . . . . . . . .
Switzerland
. . . . . . . .

To
Market
IS
313
45

9

141
61
13
33

Uruguay . . . . . . . . .
All Countries other than U. S. 1,149
United States
4.091




31,1919

22

S^40

16
535

866
MOT

MARCH 3*. »9

Total

To
T o Govemment Market

log

660

7o

45
553

633

37

16
X4X
61

Total

ts

15

37

633

70
37

13
33

16

33

1,684

693

4.957

4.661

6.64:

5.354

S3
38
X
370

745
4.879
5.634

THE INTER-ALLY DEBTS

[ 161

These data are summed up in the table on page 204,
columns are added giving the status of the debts on March 31,
1923, the latest date for which information is obtainable.
We have already very fully considered the loans from
the United States. Just as was the case with the United
States, in nearly every instance, the loans were arranged to
facilitate exports from the respective countries to Great
Britain.
There were three important exceptions to this rule, namely
the loans of gold from France, Italy and Russia made prior
to 1917 to facilitate purchases of munitions through England
from the United States; and there was also the camouflage
exchange of credits with the Russian Bank of the State.
The former are probably included in the general classification,
"Loans from Certain Allied Governments." They have already been fully discussed in Chapter VIII. The latter do
not seem to appear in the accounts.
Outside of these loans and those from the United States
the only loans of important size were those made by Canada,
which it will be observed totalled on March 31, 1919 the
large sum of $446,700,000 due to the Canadian government
and $212,500,000 due to Canadian banks; $659,200,000 in
all. Canadian "Public Accounts" for the year ended March
31,1917, stated that at that time advances to the imperial government amounted to $169,458,000, while on the other hand
the home government owed Canada $180,938,000, resulting
in a net balance in favor of Great Britain of $11,480,000. B y
the end of the next fiscal year the imperial government was
a debtor to Canada on balance for $111,708,000. A t the end
of the next year (March 31, 1919) the balance against Great
Britain had reached $221,490,000. After this date Great
Britain gradually reduced her obligation, so that on March 31,



IZO]BANKERS TRUST COMPANY

1923, according to British "Finance Accounts," the obligations of the two countries were in balance, the amount due
Canada being offset by a similar amount due from Canada.
The loans made by Canada to Great Britain were chiefly to
pay for guns and other munitions manufactured or produced in
Canada. The munitions included large amounts of cereals and
dairy products. The counter liabilities of Canada to Great
Britain were almost wholly for supplies furnished by Great
Britain to the Canadian army.

Foreign Loans of Great Britain

igij-ig20

We have seen in our discussion of the inter-ally loans
prior to April, 1917, that Great Britain up to that time was
the banker in chief and the chief purveyor and broker in
munitions obtained outside of their own boundaries for the
Allies. In the second part of the war, as we also have noted,
Great Britain continued to be a heavy lender to her European allies and to her dominions, but was able to offset these
loans by borrowing from the United States and in a minor
degree from other nations. That is to say, money values of
amounts borrowed and of amounts lent almost exactly
offset each other, but when considered in terms of munitions
the articles obtained abroad were for the most part of a different category from those supplied to the borrowing nations.
For example, England obtained in America—north and
south of the equator—provisions, cotton, metals, nitrates
and certain classes of partly manufactured goods, as well as a
large tonnage of manufactured goods ready for use. She
probably passed along some of the provisions to those who
borrowed, but her loans were largely in the form of manufactured goods made from British steel, combined with metals
and partly manufactured munitions obtained abroad. She



THE INTER-ALLY DEBTS

[ 161

also exported a heavy tonnage of coal obtained from British
mines. Thus while loans made offset loans received so far
as money values went, goods loaned and goods received were
of quite different categories.
On April 1, 1920, Great Britain was lending $9,891,953,000; or if we deduct the camouflage loan to Russia of $973,000,000 the amount of actual loans was $8,918,953,000. On
the same date the United States was lending $9,580,820,000.
As the latter figures include accrued and unpaid interest,
while the former include only some interest it may be said
that the two great English speaking allies had contributed
to the cause in goods about equal values.
Statistical Table X X V gives the actual status of the interally loans, on or about April 1, 1920.




CHAPTER

XI

French Loans From and To Foreign Nations
1917-1920
E N E R A L P E R S H I N G in his Final Report sums up
tersely the conditions which confronted the Entente
Allies in the Spring of 1917. He writes:
" I t cannot be said that German hopes of a final victory
were extravagant, either as viewed at that time or as viewed
in the light of history. Financial problems of the Allies were
difficult, supplies were becoming exhausted and their armies
had suffered tremendous losses. Discouragement existed not
only among the civil populations but throughout the armies
as well."
These facts were very definitely developed by Lord Balfour and his colleagues on the part of the British and by
M . Viviani and Marshal Joffre for the French in their presentation of the subject to our government in April, 1917.
T h e loans began almost immediately—Great Britain receiving her first loan, $200,000,000, on April 25 and France
her first loan, $50,000,000 on M a y 8.

G

Debt of the French Government to the
United States Government, IQ17-IQ23
T h e records of the United States treasury department
show that the total advances by the United States government to France from M a y 8, 1917, to September 28, 1920
amounted to $2,997,478,00a
France apparently expended in the United States through
208]




THE INTER-ALLY DEBTS

[ 161

or under cognizance of the United States treasury $4,196,247,000. These disbursements were met as follows:
Cash advanced by the United States . . $2,997,478,000
Less refunds and repayments
31*450,000
$2,966,028,000
Reimbursements from United States credits
to other governments
19,302,000
Dollar payments to France by the United
States for supplies furnished to United
States army in France
1,025,438,000
$4,010,768,000
Difference not explained in the Report
of Secretary of Treasury
185,479,000
$4,196,247,000
In the table printed on page 210 compiled from official
statements of the United States treasury department the
statistics are separated by critical periods and the disbursements are partially analyzed.
T h e United States treasury department does not explain
w h y the particular periods used to classify the accounts were
selected. I t will be noted that for the pre-armistice period
they correspond roughly with the development of America's
military and naval activities.
During 1917 our army for the most part was simply in
process of mobilization and training. General Pershing tells
us that "on December 3 1 , 1 9 1 7 , there were 176,665 American
troops in France and but one division had appeared on the
front."
During the first six months of 1918 the American army
was still in process of organization as an effective fighting
force. On March 21, approximately 300,000 American troops
had reached France. B y the end of M a y we had a force of




IZO]BANKERS TRUST COMPANY

600,000 in France. However, during these six months our
men were still largely in training although many of them saw
service with British and French troops and during April,
M a y and June some took part in hard fighting, especially
in M a y on the heights of Cantigny.
ADVANCES MADE TO FRANCE BY THE UNITED STATES
GOVERNMENT AND EXPENDITURES REPORTED BY
FRANCE FOR THE PERIODS GIVEN BELOW
(In dollars—00,000 omitted)
Total
1917
Apr,, *X7 April 6
to
to
Nov., '30 Dec. 31

1918
Jan. 1
to
June 30

1918
July 1
to
Nov. 30

1918*19
Dec, 1
to
June 30

1919-30
July x
to
Nov. 1

3,997,5

1.130,0

535,0

355.0

633,5

7,6

365.0
33.9

NET ADVANCES . . . . 2,966,0

1,130,0

535.0

355,0

634,9

33i.i

313,0
378,0

178.4
35.3
16.4
9,3

146,7
141,1

160,1

3,6

177.7
303,3
47.0
9.3
34.4
11,0
36.5
350,0
40.6
37.1
34.0
3.5
5.7

5,6

18,9
83,8
5.6
35.0
150,0
130.3
14.3
38.0
3,5
16.7

1.081,9

848.9

780,7

934.3

560,5

331.8

370,4

333.9

0,3

537.1

410,3

591,3

540.9

ADVANCED

Refunded

. . . . . . .

31.5

EXPENDITURES
Munitions
837,3
806,6
Exchange and Cotton. .
Foods
395.3
Tobacco
40,7
Other Supplies
. . . .
376.6
Transportation . . . .
33,5
Shipping
133.4
aReimbursements
. . . 1.045,8
Interest on loans by U . S.
368,8
Maturities
. . . . . .
389.7
Relief
143,1
Silver
.
6,3
Miscellaneous
41.3
TOTAL REPORTED
EXPENDITURES . . . . 4,IS>6,3
ILess Dollar payments by
U . S. for foreign currencies
1,035,4
R e i m b u r s e m e n t s from
U . S. Credits to other
Governments . . . .
19,3
N E T EXPENDITURES

. . .

3.151,5

14.5

37,7
IM
10,3
33i,o
35,7
31,7
37,0

34,6
3,3

35,3

3p5.o
59.6
101,0
38,0

0,3

143.5

13,4

74.8
3,4
107.1
3,3
35,4
19.8

13,7
115.7
16,1

10,7

19,3
1,081,9

a Payments made b y France to Great Britain for cereals, sugar, meats and munitions and for neutral freights, and other disbursements made to neutrals.
^Currencies needed by the United States in Fiance for war expenditures in that
country were provided by France under an arrangement whereby the dollar equivalent
of the amounts so provided was made available to France for use to meet her war
expenditures in the United States and thus the needs of France for advances from the
United States were reduced by a corresponding amount.




THE INTER-ALLY DEBTS

[ 161

From July, on to the time of the armistice in November,
our troops took an increasingly aggressive part in the fighting.
From the time of our entrance into the war until its close
our navy did splendid work in convoying the troop ships, in
assisting in running down submarines and in tightening the
North Sea blockade by mine-laying and in other ways.
If there is merit in the contention that the loans should
be cancelled which were made to our allies while we were developing our army in France into an effective fighting force,
then the expenditures of the year 1917 and of the first half of
1918 should be carefully investigated in order to determine
the amount which we might fairly be asked to cancel. A considerable part of the advances for this period was not for
direct military requirements, while a substantial part appears
to have gone to Great Britain to reimburse her for advances
made to France. If the opinion is correct that our contribution to the war while our effective military force was being
organized should have been the munitions required for its
conduct, then the amount to be cancelled for France would
be some part of the $1,130,000,000 loaned her in 1917,
and of the $525,000,000 loaned her in the first half of 1918.
These sums aggregate $1,655,000,000.
As to how much of this amount was expended for direct
military purposes; how much to repay Great Britain for borrowed money; and how much for non-military purposes, such
as provisioning the non-combatants, stabilizing the exchanges,
and for other non-military purposes, the records are not as
clear as they might be. T o get at the full facts each division
of the accounts should be carefully analyzed, especially the
two blind entries, "exchange and cotton purchases" and
"reimbursements."
The secretary of the treasury in his report for 1920 says:



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BANKERS TRUST COMPANY

" I n considering the statements it must be borne in mind
that the amounts shown under the various headings do not
for the most part include expenditures of dollars obtained
by foreign governments otherwise than from the American
government's loans and expenditures in Europe, and therefore do not represent total disbursements."
The amounts borrowed by France in the money markets
of the United States or from sellers of munitions to and including May, 1917, aggregated $774,000,000. Deducting
$95,000,000, the par value of obligations maturing during the
same period, we have a net amount available for purchase
of goods aggregating $679,000,000. From this amount we
must deduct $289,700,000 refunded by proceeds of United
States loans and included in the statement of disbursements
already given. We thus arrive at a net amount of $389,300,000 to be added to our former total of $4,196,200,000.
This gives us a grand total of $4,585,500,000 disbursed by
France in the United States from August, 1914, to September, 1920, inclusive. To meet these expenditures the
United States government loaned France $2,966,000,000;
transfers from credits to other governments provided $19,300,000; the bankers of the United States and their clients
supplied a net amount of $389,300,000; while expenditures
of the United States army in France were offset by credits
given France in the United States for $1,025,400,000. This
leaves the sum of $185,500,000 unaccounted for.
Thus American bankers, merchants, manufacturing, shipping and transportation interests profited to the extent of
over three billion dollars, from French disbursements in the
United States. On the other hand the large disbursements
in France by the American Expeditionary force were similarly advantageous to French business interests.



THE INTER-ALLY DEBTS

[ 161

On November 15, 1923, France owed the United States
government $3,990,657,000 as follows:
Cash advances as heretofore stated . . . $2»997,477,ooo
Less refunds and repayments
64,212,000
For account of army supplies purchased .
Interest accrued
$840,887,000
Less amount paid
190,836,000
GRAND TOTAL

|2»933.265,000
407,341,000
650,051,000
$3,990,657,000

T h e war borrowings of France in the United States money
markets had all been repaid at the end of 1923, except $216,000,000, viz:$45,ooo,oooFrench Cities 6s;$87,745,000 French
Government 8s of 1945 and $82,150,000 French Government
7 # s of 1941.
The year by year borrowings in the United States may be
summarized as stated in the table on page 214.

French Borrowiftgsfrom the United Kingdom
Similar data in regard to the loans made to France by
the United Kingdom do not appear to have been published.
W e have already seen that in or about October, 1914, an
issue of $48,666,000 French treasury bills was placed through
the Bank of England and that on October 15, 1914, Messrs.
Rothschild & Son floated in London $9,732,000 similar bills.
A s explained more in detail in Chapter V I I I , in 1915 Great
Britain agreed to lend France an aggregate of $289,500,000
on condition that France would loan to Great Britain gold
up to one-third of any advances to be received from the
British treasury. This gold was to be borrowed from the
Bank of France and to be used in maintaining the British




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BANKERS TRUST COMPANY

]

WAR AND POST-WAR BORROWINGS OF FRANCE
IN THE UNITED STATES
(In dollars—000,000 omitted)
MARKET LOANS

Year

Borrowed

1914
1915

1916
1917

1918
1919
1920
1921
1922
1923
A dd: Interest accrued and
unpaid on Debt to the
United States Government to Nov. 15, 1923

Total Debt of France in
and to the United
States on Nov. 15,1923

10
335

3*4
US

Paid

10
70
83
74

95

100
100

236
250
58
63
9

1,069

853

Net

10
325
244
32

-74
-141
-150

42

-9

216

From U. S.
Government,
Borrowed

1,130
966
1,208
100

-46
"17

3,34i
650

216

3,99I

exchange with the United States. This proposed loan was
intended to facilitate transactions in British, Canadian and
American markets. B y October 31, 1915, the amount of
treasury bills sold in England was reported to be $198597,000.
In December, 1915, a "substantial a m o u n t " of the first
Loan of National Defense was reported to have been taken
in England. T h e proceeds by arrangement with the English
government were to be devoted to the liquidation of the large
debts which had been contracted there by the French government.




THE INTER-ALLY DEBTS

[ 161

In the spring of 1916 additional treasury bills were placed
with the English government on the same basis as the loans
arranged in 1915, viz: the Bank of France to lend the Bank
of England gold coin in amount equivalent to one-third of
the advances made by England.
In the fall of 1916 an arrangement was consummated
for further advances from the British treasury, but with the
stipulation omitted in regard to a reciprocal loan of gold.
However, " i t was nominated in the bond" that the proceeds
of these bills, except within certain specified limits, were to
be used for payments to be made within the United Kingdom.
Notwithstanding the large borrowings of France in the
United States after April, 1917, the borrowings in England
steadily increased, rising from $988,160,000 at the close of
1916 to $1,934,632,000 at the close of 1917; $2,390,305,000
at the close of 1918; $2,626,730,000 at the close of 1919;
$2,684,437,000 at the close of 1920 and to $3,089,351,000 at
the close of 1921. Goods purchased in England also seem to
have been paid for by credits obtained by France from the
United States government and transferred to England's account, under the head of "reimbursement."
In April, 1918, France sold about $23,160,000 worth of
her internal bonds in Argentina and she also arranged export
credits in 1918 in Uruguay and other countries.
After the close of the war France arranged for export
credits for reconstruction and rehabilitation from Canada,
from Spain, from the United Kingdom and from some of the
South American republics.

Loans Made by France to Other Nations
In February, 1915, France, the United Kingdom and
Russia, represented by their respective Finance Ministers,



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Messrs. Ribot, Lloyd-George and Bark meeting in Paris,
agreed " t o unite their financial resources" for the more effectual conduct of the war. The outcome of this arrangement
was that France and England each made large advances to
Russia. The advances of France were in the form of bills
discounted by the Bank of France.
T h e loans to Russia were made in order to enable that
country to cope with the difficulties in which she was involved because of the closing of her ports. The price of wheat
and other goods purchased by France in Russia was to be
charged against these advances, but when the Russian debacle
came in October, 1917, the French government was caught
with net advances of $1,053,587,000, the repayment of which
by Soviet Russia is doubtful, not to say improbable.
Early in the war France made considerable advances to
Belgium. By the end of 1921 these loans aggregated $711,012,000. T h e Kingdom of Serbs, Croats and Slovenes received the next largest sum, $346,435,000. Roumania followed with $227,933,000. Then Poland with $203,808,000;
Italy with $179,876,000; Greece with $166,173,000 and
Czechoslovakia with $110,782,000. Sundry small loans aggregating $11,194,000 bring up the grand total of all foreign
loans by the French government due to the war or its aftermath to $3,010,800,000. A s we have already seen, the foreign
debt of France on account of the war amounted on December 31, 1921, to $6,863,659,000.
Therefore, moneys due to France from foreign nations,
if collectible, would cancel 43.8 per cent of moneys owed to
foreign nations by France.
For further details of the inter-ally financing of France
reference may be made to the Statistical Tables.




CHAPTER

XII

Financing Belgium 1914-1923
T U S T following the outbreak of hostilities in 1914 word
•J had come to the American embassy in London giving
the most harrowing account of conditions in Belgium. I t was
said that Brussels had only food enough to feed the people
for thirty-six hours. Ambassador Page, three Belgians and
an American business man were in conference as to what
could be done. " U p o n the result of that meeting," says
Mr. Page's biographer, " h u n g the fate of millions of people."
It was evident that the success of such an enterprise
called for the leadership of a great executive. So Mr. Page
realized. Turning suddenly to the American man of affairs
he said, " H o o v e r , you're I t ! " It is recorded that Mr.
Hoover made no reply. He acted. He glanced at the clock,
got up and silently left the room. In a few minutes he returned stating that he had bought by cable several million
bushels of wheat in New York—Belgian relief had started.
T h e flow of food from America for Belgium which began then
lasted until after the armistice—that is until Belgian national life once more was functioning.

Belgium Before the War
Belgium is the most densely populated country of Europe.
In fact the population per square mile is 50 per cent denser
than that of any other European nation. This population
for fifty years prior to the war had been growing denser each
decade, while immigration had exceeded emigration.
T h e principal occupations in order of their importance
were manufacturing, commerce, and agriculture. Manufac[217



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BANKERS TRUST COMPANY

turing and its cognate mining industries occupied over half
of the active workers. .While every square inch of soil
was cultivated it was necessary to import annually 2,800,000
tons of live stock, beverages and foodstuffs in order to feed
the population.
Belgium imported in pre-war days nearly 30,000,000
tons of merchandise annually, five-sixths of which was raw
materials or partly manufactured goods for use in her industrial plants. These imports were valued at around a billion
dollars. Belgium exported some 20,000,000 tons of merchandise, valued at about $750,000,000. The excess of imports
undoubtedly represented Belgium's earnings from her large
foreign investments and the earnings of her banking, insurance and shipping interests from services rendered in international trade.
In order to care for her domestic and foreign commerce,
Belgian railways and ports were highly developed.
In pre-war days the population was exceedingly active;
the people moving about readily to places where their work
was needed.

The German Invasion Brings Distress
All of this activity and prosperity was checked and paralyzed by the German invasion of 1914, and the occupation
of the following four and a half years, accompanied as they
were by requisitions, arrests, deportations and sabotage.
The population scattered in terror, production ceased,
prices soared, poverty increased on all sides with giant
strides.
However, the national misfortune had the effect of arousing new energy and a spirit of union.



THE INTER-ALLY DEBTS

[ 161

The First Steps to Prevent Famine
In the declaration of war, August 2, 1914, the King was
authorized to prescribe measures for feeding the population
and for preventing hoarding. Price fixing and requisitions
followed. A central commission with a delegate for each
province was to study the needs and resources of the different
sections and to supply food as needed. Food was gathered
together in convenient centres for distribution. Arrangements were made for free distributions by means of the
official charity bureaus. Private charity took care of the
needs of as many as possible.
One of Germany's first measures, on establishing herself
on Belgian soil, was to abrogate these measures of relief. The
local authorities were stripped of power; administrative disorder due to the invasion checked the functioning of the
official organs of charity; private money was tied up by restrictions on withdrawal of capital. The need for a vaster,
more efficacious scheme of relief applicable to universal and
unprecedented misery was felt on all sides, although the lines
theretofore followed, were still pursued with heroic * persistence.

The National Relief Committee
In the early days of the occupation of Brussels a national
relief committee was founded under the name of "Central
Committee for Relief and Feeding" with the philanthropist
and manufacturer, Ernest Solvay as President. The protective
patronage of the Spanish Envoy Villalobar and of the American Ambassador, Brand Whitlock, was sought and obtained.
The first meeting of the committee was held September
3, 1914. M. Solvay gave its aim as being to gather sub


IZO]BANKERS TRUST COMPANY

scriptions with which to feed the needy, saying: " I t appears
certain that later on the generalization and extension of our
present movement will follow of themselves; and the intervention of all Belgians who have retained some prosperity,
in behalf of those who have lost all, will be acclaimed and
rendered obligatory."
The committee began by raising money and opening soup
kitchens.
Financial resources were not all, however; the food had
to be found. This was difficult; Belgians were afraid to
bring their produce to market, because of requisitions. B y
the intervention of neutrals, safe conducts in the shape of
posters for the relief wagons were obtained from the Germans.
The communes transferred their stocks of rice, salt, flour,
and other provisions to the central committee, under the
protection of the German poster—this was the embryo of
the Department of Feeding, which was to develop so remarkably.

Seeking Food Abroad
Belgium had always relied on foreign countries for a portion of her foodstuffs, a purchase of which was now doubly
imperative. An American, Mr. Millard K . Shaler, was sent
for the purpose to England, where he was embarrassed by
English fear of endangering the blockade against Germany.
Through the joint actions of the Spanish and American ministers and of the Belgian government it was finally arranged
that the Germans should refrain from requisitioning any
humanitarian food imports; whereupon England consented
to sell on condition that the products should be convoyed to
their destination under the patronage of the Spanish and
American ministers. This brought about the creation,



THE INTER-ALLY DEBTS

[ 161

through the initiative of Mr. Hoover, of an organization—
"Commission for Relief in Belgium," whose mission was to
send and receive products and to make sure that they did
not fall into German hands. How this commission functioned we shall see shortly.

Character of the National Committee
The National Committee on Relief and Feeding was not
a diplomatic creation. Its nucleus developed progressively,
under the action of social forces in disruption, seeking a common centre which should replace the national power, then in
exile.
The National Committee had no political power, it could
not have had such power, and continued to live under the
German regime. Its unofficial character was its safeguard,
permitting neutral powers to work with it, and England to
sell to it.
Political bias and grouping were done away with. Local
committees were composed of representatives from the
different parties.
The committee was independent alike of administration
and of the citizen, hence it was sovereign in its decisions,
which had to be carried out without meeting any objection.
England always stipulated this independence as a sine
qua non for granting the supplies required of her. Germany,
of course, would not have tolerated any political authority
but her own; while the intervention of neutrals was otherwise
impossible.
The protective patronage of the neutral ambassadors
whereby they became go-betweens between Belgium and Germany was of the utmost value. The work of the committee
thereby became the work of the neutral powers also, which



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BANKERS TRUST COMPANY

assumed a mandatory position under cloak of which Belgium
was able to carry on her task in a manner that would otherwise have been impossible.

The Commission for Relief in Belgium
The Commission for Relief in Belgium, which soon came
to be known simply as the C. R. B., like the National Committee, had no precedent in history, its creation came solely
from the feeling of human solidarity which always arises in
the presence of great and undeserved calamities. But this is
worthy of note and honors the Belgian recipients as well as her
generous benefactors: this movement of solidarity did not
have the usual ephemeral fate of movements born of special
emergencies, but persisted vigorously as long as the war
lasted.

Financing the Relief Work
Shortly after the armistice, in January, 1919, Mr. Hoover
was able to announce that there had been no loss of life by
starvation among the ten million people of Belgium and
Northern France, while in Poland and Serbia which were
also under German occupation, one-fourth of the people had
died. During the four years over which the work of the C. R.
B. had extended Mr. Hoover stated that more than four and
a quarter million tons of food had been shipped to Belgium
by the commission.
We give in the words of Mr. Hoover himself, a summary
of the work of the C. R. B. from the financial side:
Accounting and Auditing: " T h e great moral responsibility
for full accounting was realized by the commission from its
first day. Therefore the precaution was taken to engage one
of the leading international firms to audit every ramification



THE INTER-ALLY DEBTS

[ 161

of expenditure and receipts, and to make doubly sure they
were also engaged to undertake the unusual task of themselves actually keeping the books and furnishing their own
accounting stafiF at all principal branches.
How Financed: " T h e commission was born as a purely
philanthropic enterprise, dependent upon the charity of the
world for support, conceived as a few months' emergency
service to defend 10,000,000 people from certain starvation.
However, it became evident that the war was not a struggle of
months but of years, and that if these 7,500,000 people in Belgium and 2,500,000 in Northern France w ^ e to survive, it
must be accomplished by much broader operation than public
charity. The commission, therefore, sought and ultimately
received financial support from the Belgian, French, British,
and later the American governments. These official advances
were, by consent of the Belgian and French governments,
debited to them and were finally placed in the reparations
settlement for preferred payment under the indemnity. . . .
Organization: " A n understanding of the accounts requires some conception of the method of the organization.
A primary division in operations was established between
the provisioning of the population and the care of the destitute. The basic theory of administration was to erect a system of food supply with all of its train of handling agencies,
stretching from the interior of the United States, the Argentine, Australia, India, and other great food centers, focusing
into Rotterdam with a distribution through chains of primary
and secondary warehouses, ultimately, through a ration card,
reaching to the individual family, which paid for the food
supplied at fixed prices.
Philanthropic Side: "Destitution grew rapidly under the
occupation and, of the 10,000,000 people, fully 5,000,000



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BANKERS TRUST COMPANY

were wholly or partially destitute before the end of the war.
A separate branch of administration was organized for the
care of these destitute giving them assistance to purchase
ration cards and by charitable public eating and clothing
establishments. Their needs necessarily extended further
afield than the provision of imported food and clothing—because bare living requirements necessitated supplies of native
foodstuffs, fuel, light, shelter, medical care, as well.
Provisioning Side: " T h e provisioning side was organized
in the form of a commercial enterprise, transferring its cash
receipts to the benevolent side of the administration for the
use of the destitute. This plan of division greatly simplified
the accounting and gained the administrative values of a separate personnel more adapted on one hand to commercial administration and on the other to charitable work.' It further
made possible the exaction of a small profit from the sale of
food to those who could afford it, and thus swelled the resources of the benevolent branch.
Personnel; " T h e principal officers of the commission gave
their services without salary and in many instances paid
the whole of their own incidental and traveling expenses as
well. Shipping firms, accountants, insurance agencies, buying
agencies, throughout the world, gave their services without
charge otherwise than the mere out-of-pocket incidentals.
The distributing committees of over 55,000 members gave
their voluntary services over these many years. Forty thousand Belgian and French women dedicated themselves to the
saving of the child life of their nations. Never was there
greater pressure for economy and efficiency upon an organization. A t no time were the population fed to more than the
point of bare subsistence.



THE INTER-ALLY DEBTS

[ 161

Financial Results: " T h e total administrative expenditure
was held down to less than one-half of one per cent (exactly
42/100 of 1 per cent) of the entire operation. The record of
economy may be extended even further than this, for the
changing tides of war often required the diversion of cargoes
and sales of foodstuffs outside of Belgium to meet emergency
readjustment of purchases or supplies whose shipment or
distribution had already been arranged. Upon these and
similar transactions entirely outside of Belgium and France
a balance of profit of over nine and one-half million dollars
was earned, several times greater than all overhead expenditures. From these profits on outside operations the commission, first, paid its entire administration and overhead expenses; second, paid over to the benevolent department some
$2,600,000 for charitable distribution in Belgium and France;
and third, as at 30th September, 1920, still held available for
relief work in those countries and to meet the expense of
liquidation approximately $3,120,000—since that date largely
distributed. The economy of operation in the organization
has, in fact, even a higher standard of test than this, in that
the average prices maintained for food supplies in this occupied territory during the entire period of war will show from
IS to 20 per cent less than the prices in the allied countries
at the same periods.
. . It was of the utmost concern, however, to those
in official direction, not only that the work might be effectively performed and presented to the world, but that our
honor and the honor of our country in this trusteeship should
never be challenged."
Following is a statement taken from the official report of
the cost of the relief work in Belgium proper:



IZO

BANKERS TRUST COMPANY

]
THE

COMMISSION FOR R E L I E F IN

BELGIUM

BELGIAN RELIEF ONLY

$821,680,358

TOTAL EXPENDITURES
TOTAL RECEIPTS:

British Treasury
U. S. Treasury
French Government:
Benevolent Account . .
Merchandise Account .
Sundry . . . . . . .

188,362,821
257.774,647

$32,685,969
180,922,697
5,098,228

Rotterdam Merchandise Account . . .
C. R. B. Educational Foundation Acct.
Commercial Exchange
C. R. B. Profits Allocated to meet deficiency

218,706,894
16,530.618
22,913.386
6,328,328
111,063,664
$821,680,358

The Total Advances by the
Allied Powers to Belgium
On August 3, 1914, the Germans invaded Belgium. On
the 17th the Belgian government moved to Antwerp, the
army following two days later. T h e Germans entered Brussels on the 20th. Antwerp fell on the 9th of October, the
Belgian government and army having retired on the 3rd and
8th, respectively. From the fall of Antwerp until the armistice, all of Belgium, except a little corner in the extreme
northwest, was occupied by the Germans. During this time
the Belgian government, by the courtesy of the French,
established headquarters at Havre.
Under the circumstances of the case the Belgian government was without any source of income from their own country while in exile. This made it necessary for them to depend
upon loans from their allies. T h e loans were required t o




THE INTER-ALLY DEBTS

[ 161

keep their army in the field, to meet the necessities of the
royal family and government officials sharing their exile and
to provide the relief funds for the people at home.
Up to the date of the armistice these advances amounted
to just under one billion dollars; to be exact $928,559,000.
Of this amount Great Britain lent $392,533,000, France
$364,246,000 and the United States $171,780,000. Of
course the advances from the United States government did
not begin until after April 6, 1917.
There is no information available as to the purposes for
which the advances of Great Britain and France were expended, but we know that $139,500,000 of the advances from
the United States, 81.20 per cent of the total, went for relief.

Germany to Reimburse Belgium
for Pre-Armistice War Debt
By the terms of Article 232 of the Treaty of Versailles,
"Germany undertakes . . . to make reimbursement of all
sums which Belgium has borrowed from the Allied and Associated Governments up to November 11, 1918, together with
interest at the rate of five per cent per annum on such
sums." Provision is then made that the amount shall be
determined by the Reparation Commission, and that the
German government shall "forthwith make a special issue
of bearer bonds to an equivalent amount payable in marks
gold, on M a y 1, 1926, or, at the option of the German government, on the 1st of May in any year up to 1926."
Provision is made that the form of the bonds shall be
determined by the Reparation Commission and that the
"bonds shall be handed over to the Reparation Commission,
which has authority to take and acknowledge receipt thereof
on behalf of Belgium."



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BANKERS TRUST COMPANY

In September, 1921, the Reparation Commission decided
that the amount due to Belgium should be settled on the
basis of the rate of exchange of gold marks on armistice day.
In a Statement of Germany's Obligations . . . at December 31, IQ22, issued by the Reparation Commission the
amount of the Allies' loans to Belgium to November 11, 1918,
is stated to have been 5,624,000,000 gold marks ($1,338,512,000). This is higher by $409,953,000 than the figure
above given of $928,559,000. The difference is probably due
partly to the addition of accrued interest in the Reparation
Commission's statement and partly to the fact that their determination of the amount is made at the rates of exchange
current on armistice day. The commission does not state the
amounts estimated as due to each creditor. Of course, this
estimate is not binding on the lenders, but simply settles the
amount for which Germany is obligated to issue bonds to
Belgium.
Another estimate from an authoritative source places the
amount due from Germany at $1,327,521,000 (5,572,754,000
gold marks) and allocates the share of each nation as follows:
France, $607,541,000; Great Britain, $522,044,000; United
States, $197,936,000. These figures include accrued interest
to M a y 1, 1921.

Physical Conditions at Armistice
During the war Belgium's territory had been entirely
overrun, and, in many parts, had been devastated by the
invaders. Some 75,000 houses and other buildings had been
destroyed or severely damaged.
Her breed of horses, celebrated for their beauty and
strength, had been seriously diminished by constant requisitions; her other live stock had been reduced by forty per cent.



THE INTER-ALLY DEBTS

[ 161

Her great stock of merchandise had been gradually exhausted. Warehouses and public and private stores had
been emptied; trade had ceased to exist.
Industry, as a whole, had suffered appallingly; in particular many important metal works either had been razed
to the ground, or had their machinery, material and tools
destroyed or removed.
The admirable railway system, consisting of 2,712 miles
of main line, supplemented by 2,543 miles of light local railways, which had borne the heavy traffic of nearly all of the
German armies during the entire war period, had been poorly
maintained and very roughly handled during their retreat.
Many canals were rendered useless.
Public highways, to the length of nearly 1,300 miles,
including numerous bridges, were in such a condition as to
require rebuilding.
The direct material damage inflicted on Belgium by the
German invasion is estimated at more than $3,000,000,000.

Post-Armistice Financing
The signing of the armistice restored Belgium to complete autonomy but the government for several months had
to continue to supply food and clothing to the populace and
had to maintain the unemployed during the re-establishment of industry.
The government also faced other serious fiscal problems
such as paying arrears of salaries and expenditure, as well
as re-establishing civil and military services under conditions
of greatly increased cost of living; liquidating requisitions
made by the Belgian government for the organization of her
army in the early days of the war, and above all repaying the
monthly levies made by Germany during the occupation;



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BANKERS TRUST COMPANY

providing indemnities and pensions to soldiers and others
who had suffered from the war; reconstructing public buildings and re-establishing public services; withdrawing the
German marks left in the country; repaying the loans made
to the government by the Allies during the war.

Large Borrowing Inevitable
These conditions made necessary continued resort to
foreign loans and also necessitated large home borrowing.
It was impossible immediately to balance expenses with
revenue receipts.
The United States Liberty Loan acts, under which advances to foreign nations were made, expressly limited such
advances to nations "engaged in war with the enemies of the
United States." Therefore, the financial officers of the government were somewhat at a loss to determine whether advances might be continued after the armistice. However
this doubt was resolved in favor of loans " f o r relief purposes,"
such loans having been construed from the beginning of the
war as incurred as the law requires for the purpose of "providing for the national security and defense and for the
purpose of assisting in the prosecution of the war."
The official termination of the war was to be fixed by
proclamation of the President of the United States. Such
proclamation was not made until November 14, 1921, when
President Harding designated July 2 of that year as the date
when war ended. This was long after all loans to foreign
governments had ceased.
The governments of Great Britain and France, not being
limited by their parliaments as to the purposes for which
advances could be made to their allies assumed the responsibility of making to Belgium loans for reconstruction.



THE INTER-ALLY DEBTS

[ 161

Some discussion arose between the United States and
Belgium, because the Belgian government had made an
arrangement to prefer loans made by Great Britain for reconstruction purposes. This discussion was settled by an
understanding arrived at with Great Britain that our postarmistice loans made for relief purposes should rank equally
in settlements with the British post-war loans for reconstruction for which purpose our government could not make loans.

Belgium's Indebtedness to the United States
However, although as a nation we could not make Belgium loans for reconstruction there was nothing to prevent
our people from so doing. Consequently we find that through
American bankers Belgium placed in the United States, after
armistice day, loans aggregating $155,000,000 which, added
to the post-armistice loans of the United States government
aggregating $175,431,000, make the total capital resources
furnished Belgium from America after the armistice $330,431,000. Of this amount $61,500,000 of the market loans
had been retired up to the close of 1923. On the other hand
accrued unpaid interest on loans by the United States government amounted on November 15, 1923, to $77,433,000,
and surplus war supplies furnished to Belgium in exchange
for her obligations were valued at $29,819,000. Therefore
at the close of 1923 the Belgian government owed $454,463,000 to the United States government and also was indebted for market loans in the United States for $93,500,000;
a total of $547,963,000.

Belgium's Total Indebtedness to Foreign Governments
On March 31, 1923, the British government claimed as
due from Belgium an amount equivalent at par of exchange



IZO]BANKERS TRUST COMPANY

to $43,794,000. A t the same date according to the records
of the lending governments Belgium owed the Dominion of
Canada, $6,291,000 and France, $711,012,000; a grand total,
including the $454,463,000 due the United States government, of $1,215,560,000.
I t is understood that Great Britain has written off the
$392,533,000 pre-armistice debt and she would appear to have
settled in part her post-armistice debt, say for $66,919,000,
altogether at par of exchange $459,452,000.
While French statements apparently still carry the
pre-armistice debt an understanding in regard to cancellation is understood to have been reached.
Belgium's total borrowing from her allies in the Great
War, therefore, may be summed up about as follows:
BELGIUM'S LOANS FROM ALLIED GOVERNMENTS
1914-1923
(In "Currency" dollars—00,000 omitted)
Country

Canada
France
Great Britain
United States
Total

Prearmisticc

Postarmistice

364,2

346,8

6,3
<*392,5

Total

6,3

711,0
503,2

171,8

C282,7

454,5

928,5

746,5

1,675,0

oThts amount appears to have been settled.
iOf this amount $66,9x9.000 appears to have been settled.
^Includes $77,443,000 for accrued and unpaid interest to November 1S, 1923. and
139,819,000 for surplus war supplies upon which interest is being regularly- paid.

T h e statements in regard to the post-armistice debts to
Canada and to the United States substantially agree with
the books of those nations if to the amount acknowledged as
due to the United States we add the accrued interest in-




[ 161

THE INTER-ALLY DEBTS

eluded in our statement. There is a very wide difference
between the figures of the French and Belgian statements as
to the amount Belgium owes France. There is also quite
a discrepancy between the statements of the two nations
as to the debt due Great Britain. T h e y agree as to the reconstruction debt, but not as to the other post-armistice debt.
According to Belgian accounts on October 31, 1922, her
debt to foreign governments was as follows:
BELGIUM'S DEBT TO FOREIGN

GOVERNMENTS

A s OFFICIALLY REPORTED ON OCTOBER 3 1 , 1922

(000 omitted)
Country

In Dollars
at Exchange
Parities

GREAT BRITAIN

For reconstruction
Other advances since armistice
Total

43i794
24,414

68,208

FRANCE

Advances since armistice

53,572

UNITED STATES

Purchase surplus war materials
Purchase frozen meat
Advances since armistice
Total

27,559
2,284
I7547 1
205,314

CANADA

Purchase horses and mules
Export credits
Total

4,528
2,028
6,556

HOLLAND

Cost of internment of troops
Grand Total

24,167
357,817

This is actually a statement of post-armistice debt, r as
Belgium does not carry in her statements her pre-armistice
obligations to Allied Powers.




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BANKERS TRUST COMPANY

Budget Deficits
Since the armistice, Belgium has not published statements of income and expenditure. Therefore only budget
figures are obtainable.
T h e estimated budget deficits for the years 1919 to 1923
have been as follows:
POST-ARMISTICE BELGIAN BUDGET DEFICITS
(000 omitted)
Franca

Year Ended Dec. 31

J9I9
1920
1921
1922

• • • •
. . . .

7,071,531
4,005,451
18,714,669

1923
Total

. . . .

Currency Dollar®

1,178,398
1,364,805
773,052
295,676
3,611,931
462,621
4,074,552

From the close of 1918 to the close of 1922 the debt increased from $1,920,448,000 to $6,392,644,000, an increase
of $4,472,196,000.
This is some $861,000,000 greater than the estimated budget deficits to the same date, indicating that the excess of
expenditure over income was greater than anticipated.
N e w taxes have been instituted progressively at such
times as circumstances have warranted. U p to August, 1923*
tax collections exceeded collections for the corresponding
period of 1922 by 40 per cent. T h e budget for 1924 estimates
that t a x collections during 1924 will yield about 3 8 ^ per
cent more than the collections in 1923.

Status of National Debt at Close of IQ22
T h e exact status of the debt at the close of 1922, compared
with the pre-war and armistice status is shown by the table




THE INTER-ALLY DEBTS

[ 161

on page 236 prepared from official data. The foreign debt is
figured at par of exchange. The table does not contain any
figures for the pre-armistice war debts of $928,559,000. T o
the extent that these debts are unsettled the total debt should
be correspondingly increased.
The increase in the funded debt and in the floating debt
was for the purpose of making good budget deficits. The
new debt for monetary reform was occasioned by the necessity which the government was under of retiring the mark
currency forced upon the people during the period of the
German occupation.
The indirect debt is for moneys loaned to the railways
and other nominally self-supporting services.
The inter-provincial debt was incurred to reimburse the
provinces for German levies.
We have already fully discussed the foreign debt.
Up to mid-year 1923 the budget estimates were being
borne out by actual revenues and expenditure, therefore
when the fiscal results for the year are published it will probably be found that the increase in debt during 1923 was
moderate.

Reparation Receipts
Under the terms of the Treaty of Versailles Germany's
reparation obligation to Belgium was preferred to the claims
of the other allies.
Up to January 1, 1923 Belgium had received from Germany in cash or in kind 1,500,000,000 gold marks, say $357,000,000. No payments in cash were received during 1923,
except the liquidation of certain notes included in the above
total. The value of payments in kind received during 1923
has not been published.



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BANKERS TRUST COMPANY

]

aTHE PUBLIC DEBT OF BELGIUM
(In "Currency" dollars—ooo omitted)
31.
1913

Dec.

INTERNAL DEBT

790,000
Funded
Monetary Reform
Treasury Bonds in exchange for
Monetary Bonds
Advances from national bank
Treasury Bonds replacing Interprovincial Bonds
Inter-provincial Debt
For War Damages
Indirect Debt
Floating Debt
65,000

Total Internal

855,000

Dec. 31.
1918

Oct. 31,
1922

791,652

2,034,171

586,786

362,725
1,061,500

453,125

360,486

92,640

78,028

507,088
562,55*
892,775

1,909,591

5,873,936

EXTERNAL DEBT

Market
France
Great Britain
United States

10,857

Total Market

10,857

Government
Canada
France
Great Britain
Netherlands
United States

Grand Total Debt
a Excluding pre-armistlce war debt.




160,891
6,556
53,572

68,208

24,167
205,314

Total Government
Total External .

10,857
49,125

100,909

357,817

38,000

10,857

518,708

893,000

1,920,448

6,392,644

See pages 231 and 333.

CHAPTER

XIII

Loans for Relief
1918-1923
H E N the armistice was signed Europe faced important
economic problems. Germany and Austria-Hungary
were in great need of foodstuffs, especially fats, while quantities of food were still needed for Belgium and northern
France. Even victorious England, France and Italy were
forced for a time to continue food rationing and for a long
time food control.
On the other hand, America had a great surplus of food
which had been produced under the stimulus of high prices
and had been gathered into warehouses for the use of our
armies and the armies and nationals of our allies. TheAmerican treasury department took the position that under the
Liberty Loan acts the administration was powerless to continue making loans to foreign nations—former allies or
recent enemies.
The British took the position that if American financing
were to stop immediately, the European governments might
find it impossible to go on purchasing food from the United
States at war-time prices. On January 8, 1919, the British
withdrew their monthly buying orders.
Mr. Hoover, as head of the United States food administration, at once wrote to President Wilson setting forth the seriousness of the situation. He said, in part: " I have cablegrams this morning stating that the whole of the customary
monthly orders from the British buying organizations on behalf of the Allied governments has been withdrawn. . . .
237




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BANKERS TRUST COMPANY

The Allied food necessities have been outlined from time to
time. . . . Our manufacturers have provided the particular types of manufacture required by each of these governments and have enormous stocks of these materials in
hand ready for delivery. . . .
"While we can protect our assurances given producers in
many commodities, the most acute situation is in pork products which are perishable and must be exported. We have in
January a surplus of about 400,000,000 pounds, and the
French, Italian and Belgian relief and other customary orders
when restored, will cover 60 per cent of this. The British
orders . . . would have been 140,000,000 pounds and
covered our deficiency. . . .
" I f there should be no remedy to this situation we shall
have a debacle in the American markets, and with the advances of several hundred million dollars now outstanding
from the banks to the pork products industry, we shall not
only be precipitated into a financial crisis but shall betray
the American farmer who has engaged himself to these ends.
The surplus is so large that there can be no absorption of it
in the United States, and, being perishable, it will go to
waste. . .
In a memorandum for agreement with allied premiers attached to this letter, Mr. Hoover pointed out that it would
be impossible to discuss the peace of the world until adequate
measures had been taken to alleviate the fear of hunger, its
attendant anarchy and its danger of possible further military
operations.
"Therefore/' the memorandum reads, "before these peace
negotiations can be opened auspiciously, it is essential to have
the better feeding of the liberated, neutral and enemy territories of Europe in actual progress, as the foundation of sta


THE INTER-ALLY DEBTS

[ 161

bility in government antecedent to the settlement of the
great problems that will come before the conference/'
Mr. Hoover pointed out that in order to support the Allied
governments in wTar, the United States had provided large
supplies of foodstuffs, many of them perishable, which would
have been required by the Allies had hostilities continued,
and that in order to accumulate these supplies assurances and
guarantees had been given to producers. Mr. Hoover then
indicated that while this surplus was no longer required in its
entirety by the Allies it was most fortunate that it was available to meet the necessities of Europe as a whole.
Finally, Mr, Hoover explained where and how this food
could be used for the good of Europe—immediate provision
should be made for the acute need of the Balkan States, for
the liberated peoples of Turkey and Austria, also for Belgium
and Poland. Food should be made available to neutral countries while, foodstuffs should be offered to Germany, "subject
to payment therefor and other conditions that the associated
governments may impose."
Ray Stannard Baker, in Woodrow Wilson and World
Settlement, states that the President acted at once; that new
co-operative arrangements were made with the European
governments whereby the allied nations were to continue
their purchases at war prices, but were to be allowed to resell
to neutral and enemy countries, the proceeds to apply to
further purchases in the United States. There was the further understanding that if this arrangement did not take care
of the situation, " t h e United States treasury will advance
the necessary amounts to pay therefor in the usual manner."
Thus it was, notwithstanding evident hesitation on the
part of the treasury and doubt as to the powers of the secretary in the premises, that loans to foreign governments were



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BANKERS TRUST COMPANY

continued by the United States government until late in
1920.
A t the date of the armistice, our loans totalled $7,077,115,000. When all loans had ceased, September 28, 1920, the
total had reached $9,466,283,000. Thus in a period of two
years of peace, the loans had increased in the great sum of
$2,389,168,000. Of this amount $295,467,000 represented
accrued interest, therefore the actual increase was about two
billion dollars. About one-half of this amount seems to have
gone to clear up war accounts. The balance, and more than
another billion dollars obtained from other resources, appears
to have been spent by foreign governments in the United
States during these two years for food and other supplies.
The total post-armistice loans of all the Allied and Associated Powers aggregated $6,661,373,000. Of this amount
possibly one-half may represent simply accrued unpaid interest added to the $21,599,717,000 loans as they stood on or
about armistice day. Loans directly ear marked as for relief
and reconstruction total just under two billion dollars. These
loans were made by four nations to eighteen nations. The
lenders were France, Italy, Great Britain and the United
States. The large borrowers in alphabetical order were Austria for $153,424,000; Belgium for $308,244,000; Czechoslovakia for $263,246,000; Poland for $420,200,000, and the
Serb-Croat-Slovene State for $551,758,000.
Clause 26 of the Armistice Agreement stated that "the
Allies and the United States contemplate the provisioning of
Germany during the armistice as shall be found necessary/'
It was not until the middle of the following March that the
Allies could agree among themselves as to how this was to be
done. Then arrangements were made to sell Germany for



[ 161

THE INTER-ALLY DEBTS

cash $200,000,000 worth of provisions. There appears to have
been no loan in connection with this transaction.
I N T E R - N A T I O N L O A N S F O R

R E L I E F A N D

Amount

D u e

in

R E C O N S T R U C T I O N

1923

(In Currency dollars—000 omitted)
LENDERS

Borrowers
Armenia
Austria
Belgium
. . . .
Czecho-Slovakia .
Esthonia . . . . ,
Finland
France
.
Franco-Polish . .
Germany . . . .
Hungary . . . .
Latvia
Liberia 4
Lithuania . . . .
Poland
Roumania . . . .
Russia
Serb-Croat-Slovene
Ukraina
. . . .
Total




Great
Britain

France

$4,487

62,308

96

43.794

6,715
1,221

110,782
2,026

United
States

Italy

62,634
34.843

14.263

28,386
264,450
110,906
16,789
9,000
143,137

2,443

626
98

5
193
2,219

82
1,158
20,223 203,808
11,297

92,640

10,389

346,435

161,240

759,357

1,989
6,032

3i

5,978

13,698 182,471
28,292
237

5.177

236

61,587

8

114,104 878,488

CHAPTER

XIV

Payments Under the Treaty of Versailles
H E payments required from Germany by the Treaty
of Versailles may be concisely summed up as follows:
Payments for supplies of food and raw materials . . .
essential to enable Germany to meet her obligations in respect
of reparation.
The cost of the armies of occupation subsequent to the
armistice of November n , 1918.
All sums borrowed by Belgium from Allied and Associated
Powers up to November 11, 1918, with interest at the rate
of 5 per cent, per annum.
Reparations proper.

The Return of War Loot
In addition Germany was obligated to effect restitution
in cash " o f cash taken away, seized or sequestrated, and
also restitution of animals, objects of every nature and securities taken away, seized or sequestrated."
Much of the perplexity which has arisen as to the payments that have been made by Germany is due to confusing
payments under these various headings. Manifestly the return of war loot is not in any sense a payment and yet in
many statements emanating from German sources the payments under the first four heads above mentioned have been
swollen by estimates of the values of returned stolen property.

The Amount of Reparation
T h e amount which Germany was to pay for reparations
proper was not stated in the treaty but was left open to be
242]




THE INTER-ALLY DEBTS

[

161

finally determined by the Reparation Commission by May
I, 1921.
On that date the Reparation Commission set the amount
at 132,000,000,000 gold marks ($31,416,000,000); plus the
amount of Belgium's pre-armistice war debt to her allies
which was afterwards assessed at 5,624,000,000 gold marks
($1,338,512,000).

Purposes for Which Reparatio?is are to be made
Article 232 of the Treaty of Versailles after stating in the
first paragraph that " t h e Allied and Associated Governments
recognize that the resources of Germany are not adequate
- . . . to make complete reparation for all such loss and
damage" provides in the second paragraph that Germany
"will make compensation for all damage done to the civilian
population of the Allied and Associated Powers and to their
property during the period of the belligerency of each"
power.
The damages for which compensation may be claimed
from Germany are defined by Annex I of the treaty as follows:—
(1) Damage to injured persons and to surviving dependents by personal injury to or death of civilians caused by acts of war. . . .
(2) Damage . . . to civilian victims of acts of cruelty . . . and
to the surviving dependents of such victims.
(3) Damage . . . to civilian victims of all acts injurious to health,
or capacity to work, or to honor, as well as to the surviving dependents of such victims.
(4) Damage caused by any kind of maltreatment of prisoners of war.
(5) As damage . . . all pensions and compensation in the nature
of pensions to naval and military victims of war (including members of the air force) . . . and to the dependents of such victims, the amount due to the Allied and Associated Governments




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(6)
(7)
(8)
(9)

(10)

]

BANKERS TRUST COMPANY

being calculated for each of them as being the capitalized cost
of such pensions and compensation at the date of the coming into
force of the present treaty on the basis of the scales in force in
France at such date.
The cost of assistance . . .
to prisoners of war and to their
families and dependents.
Allowances by the Governments of the Allied and Associated
Powers to the families and dependents of mobilized persons . . .
Damage caused to civilians by being forced by Germany or her
allies to labor without just remuneration.
Damage in respect of all property . . . , with the exception of
naval and military works or materials, which has been seized,
injured or destroyed by the acts of Germany or her allies, . . .
Damage in the form of levies, fines and other similar exactions
imposed by Germany upon the civilian population.

In Annex III of the treaty Germany recognizes the right
of the Allied and Associated Powers to the replacement, ton
for ton (gross tonnage) and class for class, of all merchant
ships and fishing boats lost or damaged owing to the war.
The methods by which this provision of the treaty shall be
carried out are specified in great detail.
Annex IV requires Germany to ''devote her economic
resources directly to the physical restoration of the invaded
areas" and defines how this shall be done.
Annex V deals with the delivery of coal while Annex
VI requires Germany to deliver such quantities and kinds
of dyestufFs and chemical drugs as the Reparation Commission
may require.

Assessing the Damages
In due course the several Allied and Associated Powers
made up their bills against Germany and submitted their
claims to the Reparation Commission.



THE INTER-ALLY DEBTS

[

161

The commission, in a report dealing with its work from
1920 to 1922, inclusive, points out the many difficulties involved in analysing the claims and states that "the procedure
followed by the commission (in determining the amount to
be paid by Germany) was such that it is not possible to say
which of the items figuring in the claims were submitted to
reduction and to what degree."
The commission points out that as the claims were stated
in many different currencies, in some cases in 1914 values
and in others in their values as at the time the claims were
submitted, or their supposed values at the time of reconstruction, it was a matter of very great difficulty to convert the
claims into gold marks.

How the Amount to be Paid by Germany
Was Determined
Under the circumstances of the case the commission
finally decided to determine "the gross total of the damages
inflicted by Germany and her allies, without arriving at
separate totals either for the damages suffered by individual
countries, or for specific categories of damage."

The Amount Assessed
On April 27, 1921, the commission announced its decision
as follows:
" T h e Reparation Commission, in pursuance of the stipulations of Article 233 of the Treaty of Versailles decided unanimously to fix at 132 milliard marks gold ($31,416,000,000)
the amount of the damage for which reparation was due from
Germany under Article 232, paragraph 2, and Annex I of
Part V I I I of the said Treaty.



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C O N D E N S E D
AS

S T A T E M E N T

R E P O R T E D

BY

OF

G E R M A N Y ' S

REPARATION

D e c e m b e r 31,

OBLIGATIONS

COMMISSION

1922

(aln gold dollars—000,000 omitted)
1.—Pre-Reparation

O b l i g a t i o n s t o A p r i l 30,

1921

AMOUNTS CREDITED

AMOUNTS DEBITED

Deliveries N o v . it,
1918, to
April 30, 1931
Receipts between M a y i f 1931,
to December 31, 1933
. . .
Balance still due December 3 t .
1933

Coal Advances
N e t Cost of Armies of Occupation, April 30, 1931 (including
U . S. A r m y , 5340,856.000) .
Provision for Inter-Allied C o m missions of Control to April 30,
ZQ3Z
84i

2.—Capital
Amount of Reparation Obligations as
fixed
31,416
Allies* Loans to Belgium . . . 1,338

617
7
317
841

Debt
(a)

(b)

Cessions of Properties
Poland
Soar
Dantzlg
Kiaochow
Others

433
95
74
14
3

608
Further items to be credited
1. Property in Upper Silesia ceded t o Poland
3. Property ceded to M e re el (if any)
3. Other Credits under A r ticle 343
4. Sums
received
from
other ex-Enemy Powers
Balance of D e b t
before
Amortization
33,146

32.754

33,754

Balance of D e b t before Amortization brought down . . . 33,146
Less Amounts of " A " Bonds due
t o be amortized as a t M a y 1,
1933
38

German Treasury Bonds
Series " A "
2*837
Series " B "
9.044
Series " C "
19.510
^Balance of D e b t not covered b y
Bonds
73 r

33,118

A m o u n t of D e b t Outstanding . 33*118

oOriginal In gold marks: converted a t 33.8 cents.
6The final closing of this account either by further " C " Bonds or b y cancellation
Of a part of those already issued necessarily awaits values for items b - 1 - 4 above.




THE INTER-ALLY DEBTS

[

161

" I n fixing this figure the commission had left out of account that amount of damages in respect of which restitution
had been or was to be made in execution of Article 238, and
no credit would consequently be due to Germany on account
of such restitutions.
" T h e commission did not include in the above figure the
sum representing the further obligation incumbent on Germany in terms of the third paragraph of Article 232, 'to make
reimbursement of all sums which Belgium has borrowed from
the Allied and Associated Governments up to n t h November, 1918, together with interest at the rate of 5 per cent, per
annum on such sums.' "

Apportionment of Reparation Payments
The inability of the Reparation Commission to determine
the amount to be paid each power out of receipts from Germany apparently was anticipated by the Allied and Associated Powers for, in July, 1920, their representatives met at
Spa and agreed that receipts on reparation account should be
pro-rated among them as follows: France, 52 per cent;
British Empire, 22 per cent; Italy, 10 per cent; Belgium,
8 per cent; Japan and Portugal each
of I per cent. The
remaining
per cent was reserved for the Serb-CroatSlovene State and for Greece, Roumania and other powers
not signatories to the agreement. No provision was made for
any payment to the United States.

The Account Stated
The status of Germany's obligation on December 31,
1922, as officially reported by the Reparation Commission
is shown on the opposite page. In an official communique
issued by the commission under date of October 5, 1923, it is



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]

stated that the accounts have undergone "few and unimportant changes since the beginning of the current year."

Payments Made by Germany
The payments made by Germany up to June 30, 1923, are
officially stated by the Reparation Commission to have been
as follows:
P A Y M E N T S B Y G E R M A N Y AS R E P O R T E D B Y
R E P A R A T I O N COMMISSION
T o June

30,1923

(oln gold dollars—00,000 omitted)
Cash
Deliveries in Kind
Ships
Rolling Stock
Abandoned War Materials
Coal, Coke and Lignite
Livestock
Dyestuffs
Miscellaneous

452,3
177,0
307,0
79,0
337*0
40,0
15*0
136,9
891,9

State Properties in Ceded Territories (excluding
Upper Silesia Plebiscite area)
Total Payments by Germany
Miscellaneous Receipts

. . . . . . . .

608,0
1,952,1
2,7

Grand Total

1,954,8

a Original In sold marka which we h a v e converted a t 33.8 cent*.

The distribution of Germany's payments among the several Allied and Associated Powers up to June 30, 1923, as
officially reported by the Reparation Commission was as set
forth in the table on the next page.



THE INTER-ALLY DEBTS

[

161

DISTRIBUTION OF G E R M A N Y ' S P A Y M E N T S AS
R E P O R T E D BY R E P A R A T I O N COMMISSION
T o J u n e 30, 1923

(oln gold dollars—00,000 omitted)

NATIONS

6For Cost of
For
Armies of
Balance
Repayment Occupation
For
Available
Exchange
of ipso
cAnd
for
Coal Loans Commission Profit
Reparation
to Germany of Control

Belgium
Czecho-Slovakia
France
Great Britain . .
Greece . . . . .
Italy
Japan
Poland
Portugal
Roumania . . . .
Serbia
Total

. . . .

345,9
5,4

5,4

3I4.4

57,6

429,3

46,8

298,7

229,4

0,5

0,2

3,O

2,6
0,2

6,9

16,1
3,6

2,8
7,6

48,6
93,3

605,2

Suspense

(a) Deliveries in Kind
Portion of Value of Ships
Submarine Cables
Miscellaneous

411,8

58,6

7-3

56,8
22,3

Total

0,7

608,5

3,0

80,6
16,3
3,6

2,8
7,6

48,6
1,307,7

Accounts

93,6
11,6
21,8

127,0

(b) Ceded Property and Portion of German Public
Debt
Poland
422,6
Danzig
73,7
Portion of Value of Saar Lines
23,8
520,1
i,954>8
^Original in gold marks: converted at 23.8 cents.
^Nothing included in this settlement for United States army costs—$255,181,934,
October 31. 1922.
An the absence of definite information, no account has been taken of an amount
of $1,166,300 relative to cost of Commission of Control.




IZO

]

BANKERS TRUST COMPANY

Germany's View Point
We have been furnished by the German government with
a statement entitled "Execution of the Versailles Treaty, its
Preliminary and Subsequent Agreements from November
i i , 1918, to September 30, 1922."
The statistics in this statement are in gold marks and are
summarized as follows. We have converted the gold marks
into dollars at 23.8 cents to the mark.
G E R M A N

P A Y M E N T S

G e r m a n
N o v e m b e r

n ,

A N D

O f f i c i a l
1918, t o

D E L I V E R I E S

S t a t e m e n t

September

30,

1922

(In gold dollars—000,000 omitted)
From:
I. Deliveries from Materials on Hand . . . .
11. Payments and Deliveries from National Capital and Current Production
III. Cash Payments
IV. Other Payments and Deliveries chiefly in
connection with scrapping the naval vessels

6,996
2,645
509
802
10,952

V. Expenditures and Losses within Germany
Total

A

,495

13,447

T h e statement concludes " I f , to this total, the value of
Alsace-Lorraine, of the German colonies, and of the purely
military material in various evacuated territories be added,
the figure representing Germany's total payments and deliveries runs well above 100 billion ($23,800,000,000) gold
marks."
In the foregoing statement sections I, II and III appear
to include the items taken into the accounts of the Repara


THE INTER-ALLY DEBTS

[

161

tion Commission although part of the items in these sections
include payments with which the accounts of the Reparation
Commission are not concerned.
For purposes of comparison we have re-arranged the German statement on the lines of the statement of the Reparation Commission, excluding all items representing property
or claims forfeited by the terms of the treaty. We have also
excluded items representing the estimated value of property
delivered in substitution for war loot.
The statement as thus revised shapes up as follows:—
E X E C U T I O N

OF

November

T H E

T R E A T Y

OF

VERSAILLES

i i , 1918, t o D e c e m b e r 31,

1923

(In gold dollars—oootooo omitted)
Nature of Payments

Cash
Payments in Kind
Ships
Railroad Material
Abandoned War Materials . .
Coal
Live Stock
Dye-stuffs
Miscellaneous
State Properties in Ceded Territories
Property of the Reich and of the
States
Saar Mines
Cables
Total Payments

German Viewpoint

Reparation Commission'S Viewpoint
452

509
177

1,433

207

533

79
237

452
555

124

40
3,097

137

892
608

1,347

242
19

L,6oS
5,214

1,952

It will be noted that one of the principal differences has
to do with the valuation placed upon the ships. There is also
evidence that the commission and the Germans hold widely



IZO

BANKERS TRUST COMPANY

]

different opinions as to what valuation should be placed upon
the other payments in kind and the value of state properties
in ceded territories.
T h e items which we have excluded from the comparison
are as follows:
I T E M S E X C L U D E D FROM C O M P A R A T I V E S T A T E M E N T
(In gold dollars—000,000 omitted)
From Section I
Railroad and pontoon bridges over the
Rhine
3
Shares in Morocco State Bank
93
German property liquidated abroad . . 2,794
Germany's claims on her former allies . 2,047
All of Section IV
All of Section V
Total Excluded Items

4,936
802
3,495
8,233

Unquestionably all of these items represent losses from
the German point of view but not a transfer of property which
could be applied to paying reparations. For example, Section V — " E x p e n d i t u r e s and Losses Within G e r m a n y " has
chiefly to do with the loss suffered by disarmament, while
the principal item under Section I V is the estimated value
of the naval vessels delivered to the Allies. It is conceivable
that the item " G e r m a n property liquidated a b r o a d " which
we have excluded from Section I may to some extent be a
realizable asset, but obviously the other large item excluded
from this section " G e r m a n y ' s claims on her former allies
ceded in accordance with the Peace T r e a t y " is utterly
valueless.




THE INTER-ALLY DEBTS

[

161

Belgium's Priority Rights
We have discussed already on pages 227 and 228 the
status of the pre-armistice advances made to Belgium by
France, Great Britain and the United States.
Inter-allied agreements exist giving Belgium, subject to
various conditions, a priority on satisfaction of her reparation
claim up to the amount of about $480,000,000, after the costs
of the armies of occupation have been met.

In Conclusion
Enough has been elucidated in connection with this matter of reparation and other payments and property transfers
under the terms of the Treaty of Versailles to indicate the
great complexity of the questions involved. It is evident
that they are questions requiring for their proper handling
and solution great tactfulness, unlimited patience and excellent judgment.




CHAPTER

XV

T h e Status of National Debts in 1923
N F O R T U N A T E L Y the reports of receipts and expenditures of many nations since the close of the period
of war financing are quite incomplete. Great Britain and the
United States have regularly published their usual statements
and this is true in a general way of the British dominions,
although some of the latter have changed their methods of
reporting. N o doubt the changes in accounting are wise;
but they are destructive, or partially so, of comparative reports. Some of the dominions have been slower than usual in
publishing their statements. Some of the continental nations
also have changed the form of their accounting and are publishing only partial statements.
Under the circumstances, we have found it impossible for
this period to present a consolidated statement in the form
adopted for the pre-war and war periods.
In a general way, it may be noted that Great Britain and
the United States have absolutely balanced their budgets,
stopped borrowing, except for refunding purposes, and reduced taxation. This has been possible because expenses
likewise have been substantially reduced. Of the former continental allies, Belgium, France and Italy have each had to
meet reconstruction problems of great magnitude which
simply could not be taken care of entirely from taxation.
A s a result, their debts each year have become more burdensome. This state of affairs is due largely to the failure of
Germany to meet her reparation payments.
On or about June 30, 1923, the national debts of five of
the leading participants in the Great W a r stood as follows:
254]




THE INTER-ALLY DEBTS[161
I — N A T I O N A L D E B T S OF T H E G R E A T P O W E R S
J U N E 30,

1923

(In dollars—000,000 omitted)
D e b t , C u r r e n c y Basis

Nations

France . . .
dGrcat Britain
Italy
. . . .
United States

a

Internal

D e b t , c'*ipi3" Basis

j

^Foreign
GovMar- ern
ket
ment

Foreign
Grand
Total

TotaJ

59.058 2,387 19.228 21,615
32.384
381 5.560 5.841
18,534
43 18,550 18,593
33,350

InGrand
ternal M a r - G o v Total
ern- Total
ket ment

80,673 f 14.440
38,225,1 20,759
37,127'; 3.263
32,350} 14,608
i,969,i42:|

^Germany . . 1,969.142

584 4.701 5.285 19.735
180 3.564 3,744 24.503
8 3,265 3,273 6,536
14.60S

406

406

a D e b t at face of the books done into dollars a t par of exchange.
ftForcign debts at face value adjusted to currency values at ratio of New York
Exchange on June 26, 1923, to par of exchange, e.%. 6.137 cents per franc, the rate of
exchange, divided into 19.3 cents, the.par of exchange equals 3.1s times; therefore
the French foreign debt in dollars at par of exchange is multiplied b y 3.15 to determine
the amount on a currency basis. Similar adjustments are made for the other nations.
^Obtained b y dividing the debt of each nation on " C u r r e n c y " basis b y the wholesale price index number of the nation for the month of June, 1923.
cfFigures are for year ending March 31, 1923.

II—NATIONAL

D E B T S A N D I N T E R E S T C H A R G E OF
G R E A T POWERS
vs.
NATIONAL WEALTH AND NATIONAL INCOME
J U N E 30,

THE

1923

(In " 1913" dollars—000,000 omitted)

NATIONS

France
frGreat Britain
Italy
United States
^Germany

a
Interest
Paid and
Accrued National Interest
Debt
% in Fiscal Income
%
Wealth
Year
Income
1923-33

Debt

National
Wealth

19,735
34.503
6,536
14.60S

57.900
70,000
31.350
330,000

34.07

406

55.000

.74

jj.00

30.76
6.35

676

7,000
10,000
3.400
31,000

37

7,000

799
1.017
310

11,41

10.17
6.18
2.18
53

tfln most cases interest was not paid on the inter-nation or " g o v e r n m e n t " debts*
However, we have added to the amount paid on market debts the amount which-accrued during the year on the government debts. Figures in this column were obtained
b y dividing the interest charge of each nation on "currency " basis b y the average wholesale price index number for the fiscal year,
^Figures are for year ending March 31, 1933.




IZO

BANKERS TRUST COMPANY

]

Comparing the debts expressed in " 1 9 1 3 " dollars with
national wealth and national income similarly expressed, we
arrive at the statement as shown in T a b l e II on page 255.
Reducing these figures to a per capita basis, the story is
as follows:
III—PER

CAPITA

STATUS—NATIONAL
G R E A T POWERS
J U N E 30,

(In
Population
(In
millions)
39
47
40
ZIO
61

1 1 1913"

NATIONS
France
aGreat Britain
Italy
United States

DEBTS

OF

THE

1923

dollars)
Interest
Charge
Per
Capita

Income
Per
Capiu

1480.36

2O.40
31.64

179-47
308.33

901.64

.<5/

114-73

Debt
Per
Capita

Wealth
Per
Capita

303-77
321.34

1484.61

163.40

134.02

aGermany

6.6s

331.23
3000.91

3.23
6.13

85.00
381M3

^Figures are for year ending March 31. 19^3.

Statistics for other nations whose statements are available
are given in Statistical Tables Nos. X X I , X X I I and X X I I I .

Germany Repudiates Debt
Although the debt of Germany in currency had reached
nearly two trillion dollars in March, 1923, yet in " 1 9 1 3 "
dollars it amounted to the negligible sum of $406,000,000.
On January 31, 1924, Germany officially repudiated her debt.
T h e correspondent of the New York Times advised his paper
by wireless on that day that " a l l German government bonds,
war loan and similar obligations were wiped off the books, the
government decreeing that the Reich is freed from paying
either the principal or interest of public debts, ' a t least until
all reparation payments have been made/ "




THE INTER-ALLY DEBTS[161

Other Acts of Repudiation
As we have seen, the Russian debt was "settled" in the
same summary manner in 1917.
The Austrian and Hungarian war debts have been apportioned among the successor states. How the holders will
finally fare in regard to these debts remains to.be seen.

The Inter-Nation Debts in

Ip2j

As of about November, 1923, the nations of the world,
some thirty odd, owed to six of their number in currency
$28,261,000,000. In some cases nations were both borrowers
and lenders, e.g. Great Britain was lending $11,171,422,000
and was borrowing $6,489,492,000; France was lending
$3,463,744,000 and borrowing $7,020,616,000; Italy was lending $389,988,000 and was borrowing $4,747,527,000; the
United States was lending $11,861,010,000 and had an unadjusted account with Italy for $2,750,000.
The figures for each borrower and lender are set forth in
Statistical Table X X V I . Of this great indebtedness, the only
accounts in regard to which final arrangements for payment
have been reached are those between Great Britain and her
dominions and the debts of Great Britain and Finland to the
United States.

The American Settlement with Great Britain
The debt of Great Britain to the United States in accordance with the terms of an agreement arrived at on June 19,
1923, was settled as follows:
Issue of Long-Time Obligations: The British government
issued to the United States government bonds for a principal
sum of $4,600,000,000. These bonds are dated December 15,



IZO]BANKERS TRUST COMPANY

1922, and mature December 15, 1984. Interest is payable
semi-annually on June 15 and December 15 at the rate of
3 per cent a year from December 15, 1922, to December 15,
1932, and thereafter at the rate of 3 ^ per cent a year.
Method of Payment: The principal and interest of the
bonds is payable in United States gold coin, or its equivalent
in gold bullion, or at the option of Great Britain, upon not
less than thirty days' advance notice indicating the minimum
amount which it is contemplated to pay at next due date in
gold, cash or available funds, in any bonds of the United
States issued or to be issued after April 6, 1917, to be taken
at par and accrued interest to the date of payment.
How Interest Payments May be Deferred: Great Britain
has the option, by giving not less than ninety days' advance
notice of paying one-half of any interest accruing between
December 15, 1922, and December 15, 1927, in bonds of
Great Britain maturing December 15, 1984, dated and bearing interest from the respective dates when the interest to be
paid thereby becomes due and substantially similar in other
respects to the original bonds issued in settlement.
Principal Payable in Annual Instalments: The principal
is payable in annual instalments on December 15 of each
year from 1923 to 1984 inclusive. The amounts due on each
date are given in Statistical Table X X V I I I .
How Payment of Principal May be Deferred: Great Britain
has the right, by giving ninety days' advance notice, to postpone any payment of principal to any subsequent June 15
or December 15, not more than two years distant from its
due date, but only on condition that if at any time she shall
exercise this option, the payment due in the next succeeding
year can not be postponed to any date more than one year
distant from the date when it becomes due, unless and until



THE INTER-ALLY DEBTS

[

161

the payment previously postponed shall actually have been
made. The payment falling due in the second succeeding
year can not be postponed at all unless and until the payment
of principal due two years previous thereto shall actually have
been made.
Great Britain has the right to anticipate payments in
amounts of $1,000,000 and multiples thereof.
Exemption from Taxation: The principal and interest of
all bonds issued or to be issued under the agreement are exempt from all British taxation, present or future, so long as
they are in the beneficial ownership of the United States or
of a person, firm, association, or corporation neither domiciled
nor ordinarily resident in the United Kingdom.
Exchange for Marketable Obligations: The agreement between the two nations contains the important provision that
Great Britain will issue to the United States at any time or
from time to time, at the request of the secretary of the treasury, in exchange for the bonds originally issued, definitive
engraved bonds in form suitable for sale to the public.
The United States, before offering any such bonds for sale
in Great Britain is obligated first to offer them to the British
government for purchase at par and accrued interest and
Great Britain has the further option, in lieu of issuing to the
United States any such bonds, to make advance redemption,
at par and accrued interest, of a corresponding amount of the
bonds already issued to and held by the United States under
the agreement.
Amount of Indebtedness: The way in which the total
amount due from Great Britain to the United States was
arrived at is shown by the table on page 260,




IZO

]

BANKERS TRUST COMPANY

A M O U N T OF BRITISH I N D E B T E D N E S S F U N D E D
In dollars
Principal amount of demand obligations to be funded . $4,074,818,358
Interest accrued thereon from April 15
and May 15, 1919, respectively, to
December 15, 1922, at the rate of 4 ^
per cent per annum
$629,836,106
Less payments made by Great Britain
on October 16 and November 15, 1922,
on account of interest, with interest
thereon at
per cent per annum
from said dates, respectively, to December 15, 1922
100,526,379
529t309,727
Total principal and interest, accrued and unpaid,
as of December 15, 1922
$4,604,128,085
Paid in cash by Great Britain, March 15, 1923
.
4,128,085
Total indebtedness funded into bonds of Great
Britain
$4,600,000,000




CHAPTER

XVI

T h e Wealth and Income of the Belligerents
5 shown in detail by the accompanying tables, the aggregate pre-war wealth of the active belligerents in the
Great War approximated $630,060,000,000. Their pre-war
national income approximated $93,050,000,000. From these
statements we have excluded any estimate of the wealth or
income of belligerents who did not take part in the war in
a military way, either on land or sea. This qualification is
necessary because it will be remembered that as the war
progressed many nations allied themselves with one side or
the other, but were not called upon to take any active part
in obtaining the decision.
The pre-war wealth of what were known as the Allied
and Associated Powers was considerably in excess of the
wealth of what were known as the Central Powers. T h e
national wealth of the former group amounted to $506,560,000,000 or 80.39 per cent, of the total and the latter to $123,500,000,000 or 19.61 per cent, of the total.
T h e same state of facts is true in regard to the national
income of the belligerents. The national income of the Allied
and Associated Powers amounted to $76,750,000,000 or
82.23 P e r c e n t
total, while the income of the Central
Powers was $16,300,000,000 or 17.47 P e r c e n t
the total.
Contrary to what might be thought on the first review of
the situation, the cost of the war did not result in any important reduction in the total wealth of the belligerents, but
rather in a redistribution of wealth. W e have shown in a
previous chapter that the cost of the war, on a pre-war purchasing power basis of value, aggregated $80,681,000,000.




[261

IZO

]

BANKERS TRUST COMPANY

There should be added to this amount the value of the destroyed property, especially that in the north of France and
in Belgium, much of which never can be replaced because of
its historic association.
The direct cost of the war was unquestionably met during
the progress of hostilities, and in the clean up afterward, from
the earnings of the peoples of the various countries actively
engaged. Therefore, we arrive at the conclusion that the
total post-war wealth of the world is substantially the same
as the pre-war wealth. As a result of careful estimates we
place the post-war wealth on a gold basis at $619,050,000,000.
However, while it is true that the wealth of the world was
not materially changed as a result of the war, we find a different state of facts in regard to the income. This is because of
the dislocation of industry throughout the greater part of the
world, because of the loss of men during the war, because of
the fact that factories were reorganized for war purposes and
had to be changed back before they could be utilized; because
of the inability of the people immediately after such a cataclysm as they had gone through, to settle down again to
their daily working routine. Then again the change in the
political affiliations of millions of people and the antagonisms
against each other which the war aroused, also led to a dislike for work and an inability to set to work again. All these
facts make it extremely difficult to make an estimate of the
post-war income of the former belligerent nations. We have
tentatively adopted a figure of $81,700,000,000 gold, as representing the probable post-war national income of the former
belligerents.
T h e post-war wealth may be roughly distributed $543,550,000,000, gold, to the former Allied and Associated Powers,
and $75,500,000,000, gold, to the former Central Powers; say



THE

INTER-ALLY

NATIONAL
Allied

and

Associated

DEBTS

ALLIED AND ASSOCIATED
POWERS
British Empire
Great Britain

161

W E A L T H

Powers

and

( I n " 1 9 1 3 " dollars—000,000

NATIONS

[

Central

Powers

omitted)

PREAVAR
POST-WAR
WEALTH
WEALTH
PopulaPopulation 1914
tion 1933
Per
Per
In
In
Capita
Capita
Millions Amount
Millions Amount
Actual
Actual
Figures
Figures

Total British Empire .

United States
Total Allied and Associated Powers . . .
CENTRAL POWERS
Austria Hungary
. . . .
Turkey

70,000
8,600
14*650
30.000
1,860
5.000

38

10,000

348

140,1X0

8
40
5
36
53
6
7
174
5
98

New Zealand
Union South Africa . ,
Crown Colonies, Protectorates, etc.

46
5
8
344
X
6

5,750
718.75
57.9OO 1,447-50
2,750 550.000
31,800
605.55
I I , 650
220.07
3,400
400.00
3,500
500.00
58,400
335.63
3.300
400.00
300,000 2,061*85

17
132
d it
110

714.28
5,000
57.900 1484.61
500.00
3,500
531.35
31,250
267M
15,000
400.00
2,400
588.23
10,000
340.91
45.000
500.00
5.50O
230,000 2,090.01

780

506,560

779

543,550

607-75

SO
5
68
21

30,000
3,500
80,500
10,500

600.00
300.00
1,183^2
500.00

C27
5
61
8

14,000
3,500
55,000
4,000

518.51
300.00
901.64
500.00
747.53

1J3I.74
1,720.00
I&3Z.2S
132.05
i£6o.oo
833.34
263.16
0402.61

649.43

47
5
9
347
I
7
40
356
7
39
5
40

n

70,000
9,000
15,000
35,000
2,000
6,000
12,000

300.00

149.000

b4l8.54

T o t a l Central Powers

144

123,500

857*3

101

75,500

Grand T o t a l

924

630,060

681J8

880

619,050

. .

. .

oPer capita figure excluding India, |z,058.75.
fcPer capita figure excluding India. Sx.046.04.
^Successor states: Austria, Hungary, Ciecho-Slovakia.
d Serb-Croat-Slovene State.




1,489.36
1J800.Q0
1,666.67
141.70
2,000.00
857-14

70346

IZO]BANKERS TRUST COMPANY

87.80 per cent to the former and 12.20 per cent, to the latter.
The income may be distributed, $71,950,000,000, gold, to the
former Allied and Associated Powers and $9,750,000,000,
gold, to the former Central Powers; 88.07 per cent to the
Allies and 11.93 P e r c e n t t 0 ^ Teutonic group.

Foreign Investments of the Nations
It is difficult to summarize the amount of money which
before the war was invested by European countries in foreign lands. In the following pages we have dealt with this
matter for each country.
It maybe of interest to note here the characteristic forms of
these foreign investments of the creditor countries of Europe.
The English placed their foreign investments chiefly in
their dominions and colonial possessions and in the less developed countries of the world;—in South America, Asia and
Africa; and also to some extent in Russia. While they purchased substantial amounts of national, municipal and corporate securities, they promoted many industrial, public
service and transportation enterprises, organizing corporations for this purpose which they actively operated, giving
the preference to large enterprises.
The French invested in government securities and large
industrials that would provide them a steady income, but
as a rule did not take an active part in the operation of the
enterprises in which they invested.
Germany placed relatively but little money abroad, except in connection with her banking interests which were extensive, but she played a most important part as a manager
and director of business enterprises. A t the same time she
was drawing on other countries for the development of her
own resources.



[
THE

INTER-ALLY

NATIONAL
Allied

and

Associated

I N C O M E

Powers

and

( I n " 1 9 1 3 " dollars—000,000

NATIONS

ALLIED AND ASSOCIATED
POWERS
British Empire
Great Britain
Australia
Canada
India
New Zealand
Union South Africa . .
Crown Colonies, Protectorates, etc*

Central

PRZ-WAR
POST-WAR
INCOME
INCOME
PopulaPopulation 1933
tion 1914
Per
Per
In
In
Capita
Capita
Millions Amount
Millions Amount
Actual
Actual
Figures
Figures
46
5
8
244
Z
6

10,900
1.300
3,000
3,000
300
800

47
S
9
247
X
7

336.03
260,00
350.00
12.29
300.00
13343

38

1.500
19,600

056.90

8
40
5
36
53
6
7
174
5
98

1,100
7.300
330
3.900
1,600
340
350
7.500
330
34.400

137.50
182.50
66.00
108.33
30.19
40.00
50.00
43.io
46.00
351.02

T o t a l Allied and Associated Powers . . .

780

76.750

50
5
68
31

4.5OO
350
10,500
1.050

X 0,000
1,300
3,400
3,500
360
900

313.76
260.00
366.67
14.17
360.00
128.37

40

Z.500

37.50

356

19.960

bs6.07

7
39
5
40
56
6
17

900
7,000
300
3.400
3,000
34O
1,000
5,600
550
31,000

128.57
179.49
60.00
85.00
33-71
40.00
38.82
42.10
50.00
281.82

71.950

92.36

3,100
350
7,000
400

77.78
50.00
114-75
30.00

98.39

CBHTKAL POWERS
Austria-Hungary
. . . .
Bulgaria
Germany
Turkey

90.00
30.00
134-41
50.00

Belgium
France
Greece
Italy
Japan
Portugal
Rumania
Russia
Serbia
United States

Powers

omitted)

348

T o t a l British Empire .

161

DEBTS

30.47

dn
no
779
C3 7
5
61
8

T o t a l Central Powers

144

16,300

113.19

101

9.750

96.33

Grand T o t a l

924

93.050

100.70

880

81,700

92.84

. . . .

aPer capita figures excluding India, $161.54.
6Per capita figures excluding India. $151.01.
^Successor States:—Austria, Hungary, Czecho-Slovakla.
d Serb-Croat-Slovene State.




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BANKERS TRUST COMPANY

The Belgians and Swiss were also large investors in enterprises operating abroad. Brussels was to a great extent not
only the center for the investments of Belgian capital but a
clearing house and intermediary for the investments of other
nations, particularly of France*
Since the war, Great Britain with her usual astuteness,
notwithstanding greatly unsettled conditions at home, has
already begun to make new investments abroad, expecting
that as a result of such investments she will bring added industrial activity to her people, and thus help to recoup her
position as a world power. France also has followed this same
course, notwithstanding the serious state of her home finances.
She is known to have invested large sums of money in Austrian and Hungarian business enterprises, and to some extent
in the Balkan countries. It is well known that the German
industrial leaders have invested such large amounts in Austria, in Hungary, in Czechoslovakia, and particularly in Italy
as largely to dominate in these countries important industrial
establishments, especially industries engaged in the manufacture of iron and steel.
Similar exchanges between Canada and the United States
may be noted. Recent studies of the situation show that
industrial leaders in the United States have found it to their
advantage to build factories in Canada, and to manufacture
goods there for use in Canada, and throughout the British
Empire* rather than to manufacture and export from the
United States. On the other hand, to some considerable extent, Canadian manufacturers have found it advantageous
to come across the boundary and establish manufacturing
plants in the United States.
During the war, and since, Japan has found an outlet for
a large amount of surplus capital in China.



THE INTER-ALLY DEBTS

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161

Large loans have also been made between the different
nations to stimulate exports. Among other loans of this
nature, may be mentioned those made from time to time during and since the war by South American countries to encourage exports of their products and similar loans made by
Canada. It is interesting to note that at one time Canada
was loaning to South America while, simultaneously, South
America was establishing credits to facilitate exports to England and France.
The most striking change from the pre-war situation is
the transfer of the United States from the debtor to the creditor side of the international balance sheet and her entrance
into the field as a lender of capital on a large scale to the peoples of foreign lands.
In subsequent chapters dealing with the wealth, income
and foreign investments of the respective nations may be
found a more detailed discussion of these matters.

The Re-distribution of Wealth Caused by the War
In the opening paragraph of this chapter, reference is
made to the fact that the wealth of the former belligerent
nations of the Great War had not materially changed as a
result of the war, but that there had been a marked re-distribution of such wealth. This re-distribution has taken place
not only as between nations, but also as between the peoples
within the boundaries of each nation.
As the economists have many times pointed out, while the
war was paid for as it was being fought, the method of
payment has been adjusted very differently in different countries. Our studies of the situation show that in Great Britain
18.4 per cent of the gold cost of the war was met from taxation
and other revenue receipts, 65.4 per cent from borrowing at



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]

BANKERS TRUST COMPANY

home and 16.2 per cent from borrowing abroad. The ratio
of the indebtedness of the British government to the total
wealth of Great Britain in 1913 was 4.91 per cent, while in
1923 the ratio of indebtedness to wealth is 35 per cent, on the
" 1 9 1 3 " basis. As we have already seen, the actual wealth of
the country in real estate and other tangible assets has not
changed materially, but the mortgage on that wealth, if we
may use such an expression, held by the owners of the governments debt, has materially changed. The people of the
United States may be said to have a lien on Britain's wealth
of 4.64 per cent, other foreign creditors of .71 per cent and
home investors of 29.65 per cent. On the other hand, except
in connection with current banking and trade balances and
moderate holdings abroad of consols and other English
securities, there were no foreign creditors of Great Britain
before the war, and the British holders of the debt therefore
had a lien on the national wealth substantially for a full 100
per cent of what was due them which, as already stated, was
4.91 per cent of the wealth.
If now we turn our attention to France, we will find that
very much the same readjustment has taken place there.
The indebtedness of the French government before the war
amounted to 11.4 per cent of the national wealth. Today
(1923) the creditors of the French government may be said
to have a lien of 34.07 per cent upon the national wealth
which may be figured as follows: The United States 4.76 per
cent, Great Britain 4.11 per cent, other foreign creditors
.26 per cent, and home investors 24.94 P e r c e n t - These estimates only disclose one phase of the re-distribution of wealth.
For similar analyses for other nations of the relation of public
debts to public wealth, reference should be made to Statistical Table X X I I .



THE INTER-ALLY DEBTS[161

Many people made large fortunes as a result of the losses
and sufferings which their compatriots underwent because of
the war. The purchasing power of some classes of the population was steadily reduced during the war, old estates had to
be broken up, objects of art sold. The booksellers tell us that
great collections of books have come into the market as a
result of the war and found new owners. Where paper money
inflation has been greatest these changes in wealth have been
most serious; such changes, therefore, have been particularly
notable in Germany and among the peoples who were citizens
of Austria-Hungary. We pass over the Russian situation
because the changed conditions there are not due to an economic situation, but to political upheavals. But to come back
to Austria-Hungary and Germany, the decline in the purchasing power of the mark and the crowTn have affected the
different classes of the population with great unevenness.
The greatest sufferers have been the middle class people, so
known on the continent, the professional men and those
living on fixed incomes, particularly as they have found it
difficult to readjust salaries and incomes to the steadily declining purchasing power of the money unit. T o some extent
the industrial workers have been able to effect such a readjustment, but it is probably true to say that at no time have
wages advanced in proportion to the increased cost of living,
notwithstanding all efforts of the trade unions to keep the
two things in balance. On the other hand, the industrial
leaders have been able to take advantage of the relatively
low price of labor to manufacture and sell goods at prices
which attracted buyers, but returned the producers abnormal
profits.
So we have the picture of some people apparently enjoying
great prosperity, living in luxury and wastefulness, while



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BANKERS TRUST COMPANY

others of the population are being very careful indeed in their
expenditures. Then we see still others actually suffering for
food, clothing and fuel—among them those who by persistent saving had built up capital reserves, those who had
inherited wealth, and even those who had been devoting
themselves to studies which had made possible the great industrial development of these countries.
If the re-distribution of wealth within national boundaries
has been important, so also has been the re-distribution of
wealth between nation and nation. We have already noted
the losses which France suffered in the north but which have
to some extent been offset by regaining Alsace-Lorraine from
Germany. Since the peace treaty, Germany has also lost
other parts of her territory, but the re-distribution in Central
Europe and Russia has been particularly notable. The dismemberment of the Austro-Hungarian Empire, and the redistribution of territory in the Balkans has brought about
notable changes in wealth as between nations. We have
already noted above the changed position of the United States
as a world power from the investment point of view.




CHAPTER

XVII

T h e Wealth and Income of the British Empire

I

N 1903, Sir Robert Giffen, the great English statistician,

estimated the wealth of the British Empire at the equivalent of $108,513,000,000. According to the most reliable
estimates, the wealth of the British Empire in 1913 amounted
to $140,110,000,000. We estimate today, at the close of 1923,
the end of another decade—the decade during which the
World War was the dominating event—that the wealth of
the British Empire, on a gold basis, amounts to around $149,000,000,000.
From 1903 to 1913 the apparent increase in the wealth of
the empire was $31,597,000,000 or about 29 per cent. However, during this decade prices increased substantially so that
the real increase in wealth may not have been more than
about 15 per cent.
From 1913 to 1923 our estimates indicate an increase of
$8,890,000,000, say 6.34 per cent.
Measured on a per capita basis the average national
wealth of the peoples composing the British Empire was
$335.64 in 1903—or adjusted to the 1913 price basis, about
$385. The per capita wealth in 1913 was $402.61 and in
1923, $418.54.
Thus it is apparent that while there was a substantial
growth in total wealth in the twenty years from 1903 to 1923
yet, measured in terms of population, wealth was almost
stationary.
In the following table we give the figures in comparative
form for the three periods for Great Britain and for each of
[271




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BANKERS TRUST COMPANY

]

the great nations which comprise the British Empire, also
very rough estimates for the smaller political units. The
native Indian States have not been considered in making
these calculations and their populations have been excluded
in making per capita estimates.
N A T I O N A L W E A L T H O F T H E BRITISH E M P I R E
(In dollars—000,000 omitted)
1903

s
Great Britain
. .
Australia
Canada
India
New Zealand
. .
Union South Africa
Crown Colonies
Remainder of Empire
Total

>933

19X3

Per
Capita

%

Per
Capita

72,990 1,758.79 70,000 1,5^1-74
8,600 1,720.00
5,596 1,5*2-43
6,569 1,216*48 14,650 1,831*5
30,000 122.95
62.98
14,598
1,860 1,860.00
2,920 561.54
5,000 833-34
10,000 263.16
5,840

. . . . 108,513

at

Per
Capita

70,000 1,489-36
9,000 1,800.00
15,000 1,666.67
35,000 141-70
2,000 2,000.00
6,000 857-14
12,000 30O.OO

163.56
335-64 140,120

402.61 149,000

418.54

oln "1913" dollar*.

The value of the data upon which the estimates in the
table are based varies considerably. For 1913, we have what
may be called quite scientific estimates for Great Britain herself, for the Dominion of Canada, and for the Commonwealth
of Australia, and a fairly good estimate for New Zealand.
The estimate for South Africa is our own based upon a comparison of the income tax statistics and other data. Our
figures for India for 1913 and for 1923 are based upon estimates especially made for us by Mr. G. R. Josyer, M. A.,
President of The Young Citizens' Council, Bangalore, India,
an Indian economist.



THE INTER-ALLY DEBTS

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161

We do not lay claim to scientific accuracy for our estimates of the present day wealth of the nations composing
the British Empire. However, these estimates are the result
of the careful weighing of many factors and we believe reflect
fairly well the true status.

The Income of the British Empire
We now present an estimate for the three periods in question of the national income of the component parts of the
British Empire.
N A T I O N A L I N C O M E OF T H E BRITISH E M P I R E
(In dollars—000,000 omitted)

1913

1903

1
Great Britain
Australia
Canada
India
New Zealand

. .

8,515
2,920

205.18
276.22
343-33
12.60

' ' ' 487

93.65

1,022

1,314

. .

Union South Africa
Crown Colonies
Remainder of Em-

pire

Total

Per
Capita

973

. . . .

15,231

$

1923

Per
Capita

0$

10,900 236.95
1,300 260.00
2,000 250.00
12.29
3,000
300 300.00
800 133-33
1,500
39-47

10,000
1,300
2,400

19,800

19,960

Per
Capita

212.76
260,00
266.67
3,500 14.17
360 360.00
900 128.57
1,500 37-50

27.25
47.ll

56.90

56.07

oln " 1 9 1 3 " dollar*.

An inspection of the table shows that there was apparently
an increase in the national income of 1913 of about 30 per
cent over Sir Robert Giffen's estimate for 1903. The actual
increase when adjusted for price changes was probably not
over 15 per cent.



IZO ]

BANKERS TRUST COMPANY

Parenthetically, we may draw attention to the fact that
we are not now considering the income of the national treasury, that is to say the receipts of the government with which
to meet its expenditures, but the income of the people as a
whole.
It will be noted that the per capita income for the entire
empire is estimated to have been $47.11 in 1903 (adjusted to
1913 prices, say $54); $56.90 in 1913 and $56.07 in 1923.
In this case, as in the case of the national wealth, the per
capita figures are much reduced because of the great Indian
population included in the totals. The per capita income of
Great Britain increased from $205.18 in 1903 (or say $235 in
" 1913 " dollars) to $236.95 in 1913, but, as would be expected,
fell off in 1923, the figure for that year being $212.76. With
the exception of a slight decline in the case of the Union of
South Africa, the dominions do not seem to have lost in per
capita income because of the war. We estimate that each
dominion has at least held its own or had an actual increase
in income since the beginning of the war.

The Foreign Investments of Great Britain
For years the English people have been investing a large
portion of their funds in foreign securities, and in foreign
countries. The concensus of opinion of those best qualified
to make such estimates is that, just before the Great War,
the British people had foreign investments amounting to
from $18,000,000,000 to $20,000,000,000. We are inclined
to adopt the larger figure as more nearly correct.
During the early part of the war, before the United States
came into the arena with her men and money, these investments were very heavily drawn upon to finance the requirements of Great Britain and her allies for munitions of war



THE INTER-ALLY DEBTS

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161

which had to be purchased abroad, chiefly in the United
States. It is estimated that during this period $5,000,000,000 of these investments were sold. Since the wTar the English
people, notwithstanding the need for increased capital at
home, perhaps because of such need, again have been lending
abroad, thus maintaining their hold upon their foreign markets. Such investments since the war have approximated
$2,000,000,000, bringing the total amount of English capital
in use abroad toward the close of 1923 up to around $17,000,000,000.

The History of England's Foreign Investments
England was a pioneer in the field of foreign investment.
She was compelled to seek new outlets for her manufacturing
industries and commercial enterprises, or else these industries
and her commerce would have atrophied and she would have
sunk to the level of a second or third rate power. It will be of
interest briefly to review the story of the growth of England's
investments in foreign lands during the past half century.
In 1872 the value of the foreign investments of Great
Britain was about $5,500,000,000, bringing in an income of
$325,000,000 a year. We have no knowledge of the exact
distribution of this sum either as to countries, or purpose.
England at this time was very much interested in Canadian
and colonial economic development, and held large sums of
United States railroad securities. She also had large Russian
holdings. Probably a very small part, or perhaps no part, of
this total is attributable to European borrowing.
For the next five years there were no foreign loans of importance. It is probable that there was a decrease in these
holdings of some $500,000,000. It is the habit of the English
investor to reinvest the income received by him from foreign



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BANKERS TRUST COMPANY

capital, thus increasing his capital placed abroad. During
this period, the investors kept their income from foreign investments at home, and this use of profits would effect a decline in the total foreign investments.
About 1876, we find that the Russian securities were being
sold to Germany and France. We are not surprised to find
this situation because it is quite characteristic of the policy
of British investors. The Russian securities were becoming
more established; their yield was decreasing; the economic
conditions surrounding them were more familiar, and more
accessible to the investing public. The history of British investments proves that when securities are no longer speculative and therefore they advance in market value, and the
net annual income falls, the English sell them, and enter new
enterprises. New enterprises do not necessarily mean risky
ventures, but new undertakings about which only the well
informed know the details, and the English are careful to
keep themselves well informed.
B y 1881, it is estimated that the foreign securities held in
the United Kingdom amounted to around $6,250,000,000.
This total was divided into, say, $900,000,000 Indian government and Indian railway loans; $3,500,000,000 foreign government bonds and corporation stocks; $1,000,000,000 colonial and foreign railway securities, $125,000,000 colonial
and foreign bank shares and $725,000,000 colonial government and municipal securities.
After 1883, United States railway securities were not sent
to England as the United States was more largely absorbing
its own issues. Up to that time American issues had been a
very important outlet for the export of English capital. In
1884 South Africa became the scene of gold and diamond discoveries and millions were invested in mines.



THE INTER-ALLY DEBTS

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161

By 1886 the South American railway and bank securities
held had reached $290,000,000. These investments were
mostly in Brazil and in Argentina. England also was actively
developing the economic resources of Australia, building railways, docks and harbors; also investing there in land finance
companies and mining companies. In these years, too, her
help hastened the growth of Canada, and the Canadian Pacific
Railway was in the foreground of capital investments.
Indian rails steadily increased in importance in the London
market.
The estimate of foreign securities held by the British
people in 1890 is $10,000,000,000, an increase of nearly
$4,000,000,000 in ten years. The estimated income from these
investments was around $457,000,000. This was a period of
crisis which stopped the export of capital for several years.
The government of Argentina defaulted. There was a revolt
in Buenos Ayres. The mining stocks of South Africa fell in
value, and there were many failures in Australia. In 1893 the
colonies collapsed financially. During this period silver fell
rapidly in value, and it is estimated that the British income
from India heavily declined because of that fact. The United
States also had a very serious financial and political situation
because of the decline in the value of silver and these conditions were reflected in poor railway returns. Therefore our
securities were sold back to us in large amounts at a great loss
to the foreign investors.
The result of all these conditions was that for several
years foreign investment ceased. The surplus capital of the
United Kingdom, instead of being sent abroad, was used for
the development of home railways and industries, while large
sums also were invested in home municipal securities.
In the later '90s, the United Kingdom began to sell what



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BANKERS TRUST COMPANY

small holdings she possessed on the continent and to transfer
the proceeds of these sales to China, to Japan and to foreign
and colonial municipals, Again there was speculation in
South African and Australian gold mining properties, and
Argentine railway securities also were purchased. However,
South America never quite regained her former place in the
estimation of the English investors. Not until after 1896 did
the United States recover. Then her railway securities were
purchased in large amounts, but were resold in a few years in
New York at a profit for the English investor. On the whole,
the rate of increase of foreign investment holdings was slower
in this decade due to this crisis period of 1890.
It is estimated that in 1896 England's foreign investments
were $10,500,000,000, about equally divided between her
dominions and foreign countries; say, $5,500,000,000 in the
dominions and $5,000,000,000 abroad. Of this latter amount
over $1,500,000,000 were at work in the United States;
$1,300,000,000 in Central and South America and nearly
$1,500,000,000 in Europe. The other investments were distributed to the remainder of the "four corners of the earth."
During the Boer War (1899 to 1902), the United Kingdom
needed all her surplus capital. Her income from abroad then
was about $500,000,000. Foreign government loans in London ceased, and the colonial issues declined. The war stimulated the war industries such as coal, iron and shipbuilding.
After the war, we find the $150,000,000 Transvaal loan successfully floated; also large Canadian and Argentine railway
loans being made. Russia was again popular with the English
investor. The chief countries drawing funds from London at
this time were Canada, the United States, Argentina and
Mexico, while Brazil, Chile and other South American countries were important users of British capital.



THE INTER-ALLY DEBTS

[

161

As we have already noted, by 1913 English investments
abroad are estimated to have reached around $18,000,000,000 to $20,000,000,000.
England in these last years was just beginning to take an
interest in industrial enterprises. The most important loans
theretofore had always been for railways. Docks, water and
gas works, electric plants and telegraph lines were economic
developments for which many of the newer loans were made.
It was only in recent times that the English investor had encouraged manufacturing and industrial projects. Such investments were then being made especially in North America,
India and Russia.
The geographical distribution of England's foreign investments on the eve of the Great War is estimated to have
been in about the same proportions as in 1896; say, not quite
44 per cent to her dominions, about 44 per cent to foreign
nations and about 12 per cent, difficult to allocate geographically, invested in foreign shipping, banking, brokerage and
insurance operations.
The income being derived from these investments was
approximately $1,000,000,000.

Savings Out of Income in Great Britain
British economists believe that prior to the Great War
their compatriots were reinvesting abroad almost the entire
income derived from their foreign investments and that, in
addition, ten to twelve per cent of their home income was
saved and added to capital. Therefore it seems probable that
in the years immediately before the Great War the British
people saved from their home income around $1,100,000,000
and that they reinvested abroad about $900,000,000. This



IZO]BANKERS TRUST COMPANY

meant a total saving of, say, $2,000,000,000, or approximately
one-fifth of their entire national income.
It is difficult to estimate the amount of these savings today, but they must be very substantial, if the sales of new
capital issues in the London market give any indication.
Apart from the absorption of new bond issues of the British
government, which may be regarded in the light of refunding
operations and therefore no guide as to the amount of new
capital seeking investment, the London market purchased in
1921 new securities having a par value of around $900,000,000. Similar purchases in 1922 amounted to over $1,000,000,000 while for 1923 they were not quite $1,000,000,000.
Undoubtedly, before drawing conclusions as to the amount
of new savings evidenced by these figures, they also should
be adjusted for refunding operations, but they clearly indicate
a large and increasing volume of saving on the part of the
British people.
A surprisingly large proportion of the post-war investirig
of the people of the British Isles has been in "over-seas"
securities. In the calendar year 1920, the London market
purchased new securities issued by the British dominions
and possessions having a par value of say $153,959,000. Similar purchases in 1921 aggregated $440,751,000; in 1922,
$364,581,000 and in 1923 $451,189,000. Thus, in these four
years, the British dominions and possessions placed an aggregate of $1,410,480,000 securities in the London market.
In the same period securities originating in foreign countries aggregating a par value of $633,067,000 were taken up
by British investors.
The total purchases of securities originating outside of
the British Isles for the four post-war years, aggregated a par
value of $2,043,547,000.



THE INTER-ALLY DEBTS

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161

While the absorption of foreign and colonial securities has
not yet reached the pre-war level, it is clearly on a rising scale
and has already assumed important proportions.
The income derived by Great Britain in 1923 from her
foreign investments was about $729,900,000. T o obtain
Britain's entire income from her foreign business relations,
apart from profits in connection with her foreign trade, we
may add to the return from investments $535,260,000 for net
shipping income and $194,640,000 from miscellaneous
sources. This gives a total income from so-called "invisible
exports" of say, $1,459,800,000.

The Foreign Investments of Canada
With the exception of the Dominion of Canada the other
nations comprising the British Empire have no important
foreign investments. The dominions are still in the development stage and the people of India have not become accustomed to investing to any great extent in securities, especially in foreign securities.
An interesting development of the war has been the loans
made to certain nations by the Dominion of Canada with the
object of promoting international trade. These loans, which
began immediately after the war, aggregated in 1921 over
$40,000,000. Since then they have been much reduced, but
the fact that they were made indicates that the British theory
of winning trade by financing the borrower is endorsed by
this great dominion which is itself a borrower and must so
remain for a long time to come. However, this policy is only
a new development in Canada so far as direct government
loans are concerned, the Canadian banks have long found it
to their advantage and to the advantage of their customers
— t h e farmers, manufacturers and merchants of C a n a d a —



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BANKERS TRUST COMPANY

to stimulate foreign trade by foreign loans. Even as long ago
as 1902 such loans by Canadian banks amounted to $78,000,000. With some fluctuations, they increased until shortly
before the war, on March 31, 1914, they stood at $198,000,000. A t the close of 1920 such advances amounted to $396,000,000. A t the close of September, 1923, they were $348,000,000.
T h a t these loans were made possible largely by foreign
deposits does not change the fact that the Canadian banks,
by making such loans—metaphorically speaking—carried the
Canadian flag to all parts of the world, thus making possible
a world-wide expansion of Canadian commerce.




CHAPTER

XVIII

National V/ealth and Income of France
' I A HE wealth of France at about 1903 may be estimated to
have been the equivalent of $52,000,000,000 and the
national income about $6,400,000,000. The well known
French economist the late M. Edmond Thery, who gave this
question very careful consideration, estimated that in 1908
the wealth of his country had grown to $57,900,000,000.
Between 1908 and 1914 wealth was almost stationary, increasing possibly $750,000,000. M . Pupin estimates that the
income in 1913 was $7,300,000,000. No French authority has
ventured to make an estimate of the wealth or the income of
Franco at the present time and, therefore, we are left to draw
our own conclusions in regard to the matter. From a very
careful consideration of the items of loss and gain during the
war and since we are led to believe that the wealth of France
today may be taken to be substantially the same, on a gold
basis, as her wealth in 1908. It is more difficult to arrive at
a figure for the present probable national income, but after
carefully weighing all the facts, we are led to believe that the
pre-war figure is still being maintained, very nearly. W e
tentatively estimate the national income in 1923 at $7,000,000,000.
We have not included in these figures any estimate for the
wealth and income of the French overseas possessions. These
possessions are becoming more and more important and are
rapidly reaching the point where they may be regarded as
having a decided asset value, but it is impossible from the data
at hand to assign a valuation to them. However, we may
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BANKERS TRUST COMPANY

safely assume that from now on these possessions will be an
increasing source of strength, adding appreciably both to
the wealth and income of what may be called the French
Empire. It is to be hoped that some well qualified French
statistician will soon make a study of the national wealth
and national income as of the present time and when making
this study, will include statistics for the colonial possessions.

French Foreign Investments
The French have always been a saving people and while
they have traditionally favored investments in real estate,
yet as all the real property had long ago been absorbed by
the people, other outlets for savings became imperatively
necessary. The French people have always favored the securities of their own government and of the Credit Foncier de
France, the great mortgage bank of France, but many years
ago they were forced to seek an outlet for their surplus funds
in foreign lands.
In 1850 there were almost no foreign securities held in
France. Twenty years later, in 1870, on the eve of the FrancoPrussian War, such investments are estimated to have been
not less than $2,000,000,000 and possibly as great as $2,750,000,000. The estimated income derived by the French at this
time from their investments in foreign lands is placed at from
$120,000,000 to $150,000,000. The payment of the indemnity
to Germany was greatly facilitated through the sale abroad
of a considerable part of these holdings and the reinvestment
of the proceeds in rentes. Sales made for this purpose and to
provide the new capital required for the industrial and commercial expansion which followed the Franco-Prussian War
so depleted the holdings of foreign securities that for some
time they were quite unimportant.



THE INTER-ALLY DEBTS

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161

However, it is estimated that by 1880 the French people
had so prospered that they had as much capital invested
abroad as in 1870—possibly a larger amount. The French
investor then and since has not cared to invest abroad in new
ventures requiring his personal supervision, rather he has preferred to buy the bonds of foreign governments or of corporations which he believed to be well established. Thus he did
not seek a large return from his lendings abroad. There was
one marked exception to this rule and that was the success
which the promoters of the Panama Canal had in attracting
capital into that unfortunate venture.
A t the end of the next decade (in 1890), the foreign holdings of the French people are thought to have reached
$4,000,000,000, yielding an income of around $240,000,000.
The largest amount was invested in Russia, say about onequarter of the whole. Most of the remainder was invested
in other European countries lying contiguous to France,
although perhaps as much as $400,000,000 was invested
in Turkey and Egypt and around $500,000,000 in America,
principally in South America.
By 1902, it is thought that the investments abroad had
increased to $5,000,000,000 or a little more. In fact, one estimate from an excellent source is as high as $6,000,000,000.
About two-thirds of the total was invested in European countries, Russia leading with about $1,400,000,000, AustriaHungary and Spain coming next with around $600,000,000
each, then Turkey with over $350,000,000 and England with
$200,000,000. The amounts invested in the other countries
of Europe were smaller.
The remaining third of the foreign investment holdings
of France in 1902 was scattered all over the world, the American continent leading with nearly $800,000,000, of which



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BANKERS TRUST COMPANY

$640,000,000 was lent to the Latin-American nations. About
$740,000,000 were being lent to Africa, including, say, $280,000,000 to Egypt. Around $200,000,000 had been utilized in
Asia—about half of it in China. Small amounts had even
been lent in Oceania.
We now come to the eve of the Great War. How much did
the French people have invested abroad at that time—say in
the early part of 1914, or late in 1913—and where were these
investments located?
We believe that the foreign investments held just before
the war broke out amounted to not less than $8,250,000,000,
and that possibly they may have aggregated $200,000,000
to $300,000,000 more. Of these loans around 52 per cent
were to nations subsequently allies, about 28 per cent to
those which remained neutral and about 20 per cent to
nations which became enemies. They were yielding an annual return of around $480,000,000.
About thirty per cent of this investment of French capital—practically all of it drawn in small sums from the savings
of the people—was loaned to the Russian government or
invested in Russian municipal or industrial securities. In the
chapter dealing with the wealth and income of Russia may be
found more detailed calculations in regard to the indebtedness of Russia to France. About $500,000,000 was invested in
Austria-Hungary, $600,000,000 in the Balkans and Greece,
$800,000,000 in Spain and Portugal, about $1,000,000,000 in
the securities of other European countries, about $600,000,000
each in Turkey and in Egypt, about $800,000,000 in Morocco
and, say, $1,200,000,000 in America.
When it became necessary to utilize these foreign investment holdings in financing the war, it was established that
from $1,600,000,000 to $2,000,000,000 were such as could [be



THE INTER-ALLY DEBTS

[

161

mobilized for this purpose. The amount actually sold during
the war is estimated to have been from $800,000,000 to
$1,000,000,000.
After making allowance for such sales and for investments
lost—perhaps forever—because of the Bolchevising of Russia
and the readjusting of the states of southeastern Europe,
France at the end of 1923 probably had productive foreign
investment holdings aggregating $5,000,000,000, yielding an
annual return of around $250,000,000.

How Much the French Owe Abroad
We have already considered the foreign indebtedness of
the French nation.
Prior to the war there was no borrowing abroad either by
the government or by the people of France.
It is true that there may have been joint investment of
foreign and home capital in French business enterprises, particularly in French banks doing business abroad, but there
were no important loans issued by the nation, municipalities
or corporations.
Exclusive of the inter-ally debts and of the debt to the
Bank of England which is really in the same category, French
government, municipal and commercial borrowings abroad
outstanding at the close of 1923 aggregated at exchange
parities, a value of about $623,000,000.
Of these loans $376,000,000 or 60.35 P e r c e n t w e r e government borrowings. We do not include in this amount
French rentes listed on the London Stock Exchange and to
some extent dealt in in New York. Just what the foreign
holdings of rentes may be we are unable to state. Municipal
and departmental borrowings account for $97,000,000 or
15-57 per cent of the $623,000,000 bonds which we estimate



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BANKERS TRUST COMPANY

as held abroad, while $10,000,000 or 1.61 per cent were corporate borrowings other than for railroad purposes and
$140,000,000 or 22.47 per cent were borrowings by the railroads for the rehabilitation, re-equipment, electrification and
extension of their lines.
Thus, today, apart from what may be called the political
borrowings, that is the borrowings from foreign governments
for war purposes,which we have already fully discussed, the
French owe abroad an amount equivalent to only about I2}4
per cent of their productive foreign investments of $5,000,000,000. About one-half of this amount is due to the United
States, about a sixth to London and smaller sums to other
nations.




CHAPTER

XIX

National Wealth and Income of Italy
/ |

b e s t authorities place the pre-war wealth of Italy at
just under $22,000,000,000. It does not seem likely that
the wealth of Italy has seriously declined since 1913.
The war damages which Italy suffered are estimated by
good authorities to have been about $2,000,000,000. However, the provinces devastated by the enemy have now resumed their normal aspect. Most of the houses have been
rebuilt with or without help from the government, and in a
better manner than the old houses which were destroyed.
There was considerable damage to arable lands caused by
lack of care and deficiency of fertilizers, but the productivity
of the land is now said to have been completely restored, with
the exception of part of the damaged woodland.
In view of these facts, we feel safe in assuming that the
wealth of Italy, as geographically constituted before the war,
is today substantially the same as it was in 1913. W e have
adopted a figure of $21,250,000,000 as the sum of the national
wealth in 1923.
If we make allowance for the new provinces acquired by
Italy as the result of her participation in the war, probably
we ought substantially to raise the estimate of present day
wealth above the figure just mentioned. Unfortunately we
have no data upon which to base an estimate of the value of
these new acquisitions and therefore must be content to
allow our estimate to stand with the explanation that it applies to Italy as constituted prior to the war.




[289

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BANKERS TRUST COMPANY

The National Income of Italy
The accepted pre-war estimate of the national income of
Italy was $3,900,000,000. Professor Gini, the distinguished
Italian economist, has expressed the opinion that the revenue
of the Italian people in 1921 lay somewhere between 100
and 160 milliards of lira, or say between $19,000,000,000
and $31,000,000,000. Reducing these figures by the average
price index number for 1921 of 578, we arrive at a pre-war
or gold valuation for the income of from $3,300,000,000 to
$5,300,000,000. Professor Gini admits that "these figures
show a very wide margin, but, he adds, " I believe this margin
necessary by rules of prudence, as before the war to be definite was very difficult and now is impossible." He says that
some economists do not take into consideration agricultural
improvements adopted by non-salaried farmers, which did
not have in pre-war times the importance they have reached
now. He thinks that, in order to obtain a complete valuation
of the national income, another addition should be made relating to domestic work accomplished by people in their own
homes, but apart from this last suggested addition which he
says, if adopted would give a more complete and exact compilation of national revenue, he has " n o reason to think that
noticeable changes should be made in the figure of 20
milliard lira ($3,900,000,000) given for the pre-war period/'
After weighing all of the various factors entering into such
calculations, we have adopted as our estimate of the present
day national income of Italy the figure of $3,400,000,000 gold.

The Foreign Investments of Italy
Prior to the war, Italy was not to any important extent a
creditor nation. Possibly at that time she may have been
lending abroad around $300,000,000.



THE INTER-ALLY DEBTS

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161

Perhaps the most important foreign investment of Italy,
before the war as is the case today, consisted of her Nationals
temporarily or permanently resident in other countries from
whom, metaphorically speaking, Italy year by year "cuts off
coupons" to the amount of many million dollars. The following table gives the remittances of emigrants to the home
country for the years 1913 to 1921, inclusive, the figures for
1920 and 1921 being partly estimated.
R E M I T T A N C E S OF ITALIAN E M I G R A N T S
1913 t o 1921
(In dollars—000,000 omitted)
Currency
Basis

$

1913
1914
1915
1916
1917

102
76
67
57
94

Currency
Basis

"1913"
Dollars
t

"1913"
Dollars

91
259
423
306

22

$

102
80

»9I9

50
28

1921

$

71
67
53

31

It will be noted that on a currency basis the remittances
after the close of the war were in 1919 two and one-half times
what they were in 1913, in 1920 over four times, and in 1921
fully three times. However, the purchasing power of the remittances for post-war years was substantially less than the
purchasing power of the pre-war remittances.

The Foreign Borrowings of Italy
In 1913 Italy was a large borrower of money from abroad.
On December 31, 1913, there were in Italy two hundred and
ninety-two foreign companies employing capital amounting
approximately to eighty-eight million dollars. This was ex


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BANKERS TRUST COMPANY

elusive of some six million dollars invested in assurance
companies and a like amount in steamship companies. Of
these investments aggregating around $100,000,000, about
thirty-six million were Belgian, thirty million French,
twenty million English, nine million Swiss and six million
German. These companies in the main were conducting
public service enterprises such as water works, tramways,
railways, gas and electric plants.
In addition to the registered foreign corporations doing
business in Italy, foreigners had large investments in the
shares and bonds of Italian companies and in Italian government and municipal securities. It is difficult to arrive at
an exact valuation of such investments.
Germany's participation in Italy's economic activity
which is known to have been large, was chiefly in the form
of investment in Italian companies and the introduction of
personnel and methods. As to Italian consols, France always
was the chief foreign holder. Of $8,600,000 paid in interest
in 1913-1914 on Italian consols held abroad, $8,000,000
went to France.




CHAPTER

XX

T h e Wealth, Income and Foreign Indebtedness
of Russia
^HE statistics in regard to the pre-war national wealth
and national income of Russia are not at all satisfactory.
The estimates of the wealth vary all the way from around
$40,000,000,000 to around $65,000,000,000. W e have adopted
as probably nearest to the true state of facts an estimate of
$58,400,000,000.
T h e post-war valuation must be materially reduced because of the radical territorial and other changes which have
followed the war. We venture upon a tentative estimate of
$45,000,000,000.

The National Income of Russia
In the absence of any detailed studies in regard to the
national income, we can only arrive at an approximate figure.
Perhaps we shall not go very far astray if we estimate that
this income was and is around i z } 4 per cent of the wealth or,
say, in round figures $7,500,000,000 pre-war and $5,600,000,000
today.

Foreign Capital Invested in Russia
In our study of the Russian public debt we learned that
in addition to the indebtedness incurred for the purpose of
defraying the expenses of wars, there was also a very large
indebtedness which had been contracted for the purpose of
the construction of railroads. Previous to the late war the
[293




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debt issued for this purpose had reached the sum of $1,594,000,000, or about 35 per cent of the total.
The first railroad construction in Russia was in the year
1836, when the government built a short line from the capital to Pavlovsk, some fifteen miles away. The PetersburgMoscow line was opened in 1851. The Crimean War stopped
the work of railroad building temporarily, but in 1857, a few
months after the Treaty of Paris, a joint stock company called
the "Society of Russian Railroads" was formed, with a capital of $129,000,000, and authorized to build 3,000 miles of
railways which were to include a line from Saint Petersburg
to Warsaw with a branch to the Prussian frontier and another
between Moscow and Nizhni Novgorod.
The first issue of stock representing $39,000,000 was easily
placed, thanks to the abundance of capital, the numerous
issues of bank notes and to the five per cent guarantee given
to the company by the government. Encouraged by the success of the Society of Russian Railroads, a great many railroad enterprises sprang up and concessions were granted for
railways in central, western and southern Russia. These were
financed by domestic and foreign capital. Altogether from
1862 to 1868, $58,000,000 were spent on railroad construction
and all the concessionaires were either assured a flat guarantee
of a minimum interest or else large subsidies from the treasury. The profits realized from the successful operation of
these lines flowed into new enterprises.
In 1868 the government passed a measure which was of
great importance in railroad construction. B y it those who
held railroad concessions were relieved of raising capital for
the construction of new lines. This capital was to be furnished
by the government itself through the issue of special railroad
bonds. The accumulation of capital for the purposes of rail


THE INTER-ALLY DEBTS[161

road construction had a considerable influence on the financial situation of Russia, particularly in the years from 1868
to 1871, when simultaneously with the railroad movement in
the United States, there went on in Russia a vigorous construction of railroads. The sum of more than $500,000,000
was spent within four years.
The masses of Belgian and French capital that poured
into the country caused a temporary inflation, but at the outbreak of the Franco-Prussian War in 1870, the supply from
France was of course cut off. During the Russo-Turkish War,
1877 to 1878, practically all construction was suspended.
This was also true during the period of great economic depression following that war.
From the beginning of the *8os, Russia had been drawn
into the net work of international trade and finance by
her appearance as a grain exporter; therefore she naturally
was bound to feel the long business depression which affected
western Europe from 1877 to 1886. When the revival came,
Russia also shared in full in the strong development of trade
throughout the civilized world. A t this time Russia entered
upon a capitalistic period, and from being a purely agricultural country was transformed into one partly industrial.
This change has been attributed to various factors, and while
it would be impossible to single out one cause, yet it must be
said that one of the most potent of the factors was the further
development of the railroad system resulting in the construction of new lines opening up the great coal resources of the
south.
In a country of such a vast population and continuous
land area as Russia, the opening of a new line of communication brings into relation an enormous number of persons, and
at once opens up new markets. The railroads in Russia usu


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BANKERS TRUST COMPANY

ally dragged behind the population so that when they came
they immediately gave a new direction to previously latent
productive powers.
Besides her expenses for the direct conduct of the Great
War, the Russian government during the war period made
what, under ordinary circumstances, would have been considered heavy expenditures in the development of her lines
of transportation and her harbor facilities. One great undertaking was the construction of 750 miles of railroad running
from Petrograd to the ice-free harbor of Kola in northwestern
Russia. This road was constructed at an estimated cost of
about $34,000,000. The overland route through Finland and
Sweden was improved. A new broad gauge line from Vologda
to Archangel was constructed and the far eastern port of
Vladivostock was developed.
According to the explanatory note of the Russian ministry of finance regarding the estimates of state revenue and
expenditure for 1916, the total length of government railways
under construction and for the construction of which permits
had been granted and plans made at the beginning of September, 1915, amounted to 5,600 miles, at an estimated cost
$554>000>0°0- Of these railways, 3,500 miles were being
constructed (at a cost of $324,800,000). Permission for construction had been granted on 300 miles at an estimated cost
of $27,295,000 and further construction had been planned for
1,800 miles estimated to cost $202,086,000. It is further
stated that concessions had been granted to private companies for the construction of about 842 miles of road at an
estimated cost of $53,000,000. The total length of railroads
in operation in Russia at that time may be closely estimated
at 60,000 miles.
The money for this railroad construction was to a very



THE INTER-ALLY DEBTS

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161

great extent obtained by borrowing in foreign markets. In
January, 1914, the state railway loans were estimated at
$1,594,000,000. These were long term loans bearing interest
at from three to six per cent. Beside these direct loans issued
by the government for the purpose of railroad construction,
the state also guaranteed loans to the par value of $966,000,000. Therefore, the total direct and guaranteed obligation of the state for railroad construction in 1914 was $2,560,000,000. As noted in Chapter V I I Russia owed in 1914 for
loans raised for other purposes than the construction of railroads $2,947,000,000 and was guarantor of securities issued
by the Nobles and Peasants banks in the sum of $1,061,000,000. Thus the total direct and guaranteed pre-war debt of
Russia was $6,568,000,000.
It is difficult to tell just what percentage of the direct and
guaranteed loans of the Russian government was placed
abroad, but it is estimated that between one-third and onehalf thereof were so held. If we strike an average and take
forty-four per cent, as the correct figure, we find that the
total foreign indebtedness of Russia in 1914 on government
account, direct and guaranteed, amounted approximately to
$2,890,000,000. In addition to the bonds directly issued by
the Russian government or guaranteed by the government,
which were held abroad, it is estimated that the commercial
investments of foreigners in Russia in 1914 amounted to
$1,154,000,000. Adding this amount to the $2,890,000,000
government obligations held abroad we arrive at the sum of
$4,044,000,000 as the total pre-war foreign debt of the Russian people.
In the early part of 1922 the Soviet government published an inventory of the foreign capital invested in Russia
in commercial enterprises. This inventory places the total



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BANKERS TRUST COMPANY

at $1,154,000,000 and distributes the amount as per country
of origin as follows:
G E O G R A P H I C A L DISTRIBUTION OF FOREIGN PRE-WAR
I N V E S T M E N T S IN RUSSIAN C O M M E R C I A L ENTERPRISES
(In "Currency" dollars—000,000 omitted)
Amount

France
Great Britain
Germany
Belgium
United States
Holland
Switzerland
Sweden
Denmark
Austria
Italy
Norway
Finland
Total Soviet Estimate

Per Cent.

$377
261
227
165
61

32.6

19

1.6

17
12
8
4
1
1
1

22.6
19.7
14.3
5 2
1-5
X.I

0.7
0.4
0.1
0.1
0.1

100.0

CLASSIFICATION B Y INDUSTRIES OF PRE-WAR INVESTM E N T S IN RUSSIAN C O M M E R C I A L E N T E R P R I S E S
(In "Currency" dollars—000,000 omitted)
Amount

Mining
.
Metallurgy
Real Estate
Banks
Textile Industries
Chemical Industries
Commercial Industries
Manufacturing of Food Stuffs . .
Printing
Shipping
Lumber Industry
Mineral Exploitations
Animal Products
Insurance
Total Soviet Estimate




$429
202
134
122
99
43
42
19
16
14
13
9
7
5
$M54

Per Cent.

37.2
17.5
US
10.6
8.6
3-7
3.7
1-7
1.4
1.2
I.X
0.8
0.6
0.4
100.0

THE INTER-ALLY DEBTS

[ 161

Classified by the character of the industries, it is stated
that the largest part of this sum was invested in mining and
cognate industries. The next largest amount was invested
in real estate, the next in banking, and the next in the textile
industries. These facts are set forth in the previous table.

French Investments in Russia
France was by far the largest creditor of the Russian
Empire. The estimated par value of French investments in
Russia in 1914 is $2,190,000,000. These investments were
distributed about as follows:
FRENCH INVESTMENTS IN RUSSIA IN 1914
(In "Currency" dollars—000,000 omitted)
Government bonds
Railway bonds
Industrial securities
Bonds of Land Credit Banks and of Credit Fonder Mutuel
Other investments

$1,250
373
323
99
145
$2,190

Some French estimates are considerably higher, but the
one which we have adopted is independently arrived at by
two French organizations especially formed to protect the
interests of French investors in Russian securities and properties. These estimates do not include the war debt of the
Russian government to the French government. It will be
remembered that this debt approximates $1,000,000,000.
The commercial investments of the French in Russia
covered practically the entire field. French capital exercised
a dominating influence in the mineral and metallurgical industries, in the working of platinum, in the construction of
machinery and in the building of locomotives and of ships.



IZO]BANKERS TRUST COMPANY

British Investments in Russia
The English have not published their claims on Russia.
Therefore it is impossible to give any tabulated statement.
Apart from the advances made for the conduct of the war
which, according to British Finance Accounts, aggregated on
March 31, 1923, some $3,349,000,000, it is not known what
amount the Russian Imperial Government may have owed
in Great Britain. Estimates of pre-war holdings of such
securities by the English people range from $190,000,000 to
$258,000,000. These investments were distributed a little
over a third in direct issues of the Russian government; and
somewhat less than a third, each, in railway bonds and
municipal bonds guaranteed by the Russian government.
According to the Soviet estimate, the commercial investment of the British people in Russia amounted to $261,000,000. This capital was divided among 144 different enterprises, being of especial importance in the naphtha industry
and exercising a large influence in the production of copper,
in the making of thread and in the manufacture of tobacco.

Belgian Investments in Russia
Belgium's investments in Russia were chiefly in the commercial field, although her citizens are thought to have held
around $125,000,000 of government, municipal and railroad
bonds, and to have had due them some $80,000,000 more
for uninvested capital on deposit in Russia or due on trade
balances.
The Soviets place the amount of Belgian capital invested
in Russian commercial enterprises at $165,000,000. The
Belgians place the amount very much higher—at nearly
$460,000,000.



THE INTER-ALLY DEBTS

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161

If we adopt the Belgian estimates they are creditors of
Russia for around $700,000,000. Assuming that there would
be an accord as to other items than that of the commercial
investments, we may estimate the total amount from the
Soviet point of view at $370,000,000; just about half of the
Belgian estimate.
Belgian commercial investments according to the Soviet
inventory were distributed over 107 enterprises. Belgian
sources state that her citizens' investments were distributed
over 161 enterprises. The Belgians had a monopoly in the
production of glassware and plate glass and had important
interests in mining and metallurgy; secondarily in foundry,
chemical and textile manufactories and thirdly in public
service companies.

German Investments in Russia
The total pre-war investment of the German people in
Russia is very roughly placed at around $1,000,000,000.
According to the Soviet inventory, the Germans had $227,000,000 invested in Russian commercial enterprises. In this
field German capital occupied third place, representing 19.7
per cent of the total foreign capital invested in Russian enterprises. Differing from French and English capital, German
capital was distributed in a much more equal fashion over the
various branches of industry. In a general manner it may be
said that the participation of German capital, and in particular of German banks, in the establishments of commercial
credit of Russia, exercised a profound influence in all fields
of Russian industry, independent of German capital directly
invested in different Russian industrial companies. German
participation in the industrial life of Russia was especially
felt in connection with the management of the affairs of many



IZO

BANKERS TRUST COMPANY

]

manufacturing corporations, also in life insurance and banking lines. Germany also played an important r6le in the
chemical and electrical industries.

XJjiited States Investments in Russia
Except for investments of our insurance companies necessary to qualify them to transact business in Russia, very little
United States capital was invested in Russian securities.

Summary
T o summarize:
FOREIGN INVESTMENTS IN RUSSIA IN 1914
(In "Currency" dollars—000,000 omitted)

Investing Nations

France
Great Britain
Belgium
Germany
United States
Other Countries

. . . .

Total

Gov't,
Municipal
and
Railroad
Bonds

Commercial
Enterprises

Maximum
Total

2,720
333
205
554
10
503

323 to 377
261
165 to 470
227 to 446
58
63

3,097
594
675

4,325

1,097 to 1,675

5,422 to 6,000

I.OOO

68
566

Soviet Repudiation of Foreign Debts
In February, 1918, all of this great sum owed by the
Russian government to the use of which the transportation
and industrial development of Russia largely was due, was
invalidated by the Soviet government in the following decree.
It will especially be noted, see section three, that "all foreign
loans, without exception, are absolutely repudiated." Ap


THE INTER-ALLY DEBTS

[ 161

parently the same policy is being followed in regard to corporate debts.

Soviet Decree Invalidating Russian Public Debt
The decree adopted by the Central Executive Committee
of the Soviets for the abolition of public debt, is as follows:
I- Ail State loans concluded by the Governments of the Russian
landlords and Russian bourgeoisie, enumerated in a special list, are
hereby repudiated as from December 14, 1917. The December coupons
of these loans are not paid.
2. In the same way are all the guarantees repudiated which the
said Governments gave to loans of various concerns and bodies.
3- AH foreign loans, without exception, are absolutely repudiated.
4. Short-term liabilities and Treasury bonds remain in force. Interest on them is not paid, but the bonds themselves have a currency
along with credit notes.
5' Poor citizens who hold State bonds of internal loans to an
amount of not more than 10,000 roubles nominal receive in exchange
certificates, made out in their names, of a new loan of the Russian
Socialist Federal Soviet Republic to an amount not exceeding 10,000
roubles. The terms of the loan will be fixed later on.
6. Deposits at the State savings banks and interest on them remain
intact. All debentures of the annulled loans which belong to the savings
banks are replaced by a book debt on the part of the Russian Socialist
Federal Soviet Republic.
7. Co-operative organizations, local government bodies, and other
democratic bodies or institutions of common utility holding debentures
of the repudiated loans are to be given certificates in accordance with
rules to be drawn up by the Supreme Economic Council in conjunction
with representatives of these bodies, which must prove that the debentures were acquired by them previous to the publication of the present
decree, (NOTE—The local organs of the Supreme Economic Council
have to determine which of the local bodies can be regarded as democratic or of common utility.)
8. The general direction of the liquidation of the State loans is
entrusted to the Supreme Economic Council.




IZO

]

BANKERS TRUST COMPANY

9. The work in connection with the liquidation of the loans is entrusted to the State Bank, which shall immediately begin the registration of all the debentures of State loans and other interest-bearing papers
in the hands of various holders, which may or may not be subject to
invalidation.
10. The Soviets, in agreement with the local economic councils,
appoint committees to determine what citizens are to be regarded as
poor. These committees have the right to annul all savings not acquired by personal labour, even if they do not exceed the sum of 5,000
roubles.

This decree was printed in the Russian newspaper
" P r a v a d a " on February 8, 1918.
It is impossible to forecast what settlement the creditors
of Russia may ultimately be able to arrange in regard to the
amounts due them from the former Imperial Russian Government and from her nationals.
The creditors of Russia have not alone the present Soviet
Republic to deal with but several new nations which have
taken over portions of the territory and of the population of
old Russia.




CHAPTER

X X I

The Wealth and Income of the United States
/T*HE

money value of the economic wealth of the American
people was officially estimated for 1904 at $107,104,000,000. Professor W. I. King, the leading authority for the
United States on this subject, estimates that the national
wealth at the end of 1913 was $197,587,000,000 and, in
" 1913 " dollars, at the close of 1918, $226,475,000,000. Probably we would be justified in adopting a round figure of $230,000,000,000 in " 1 9 1 3 " dollars for the close of 1923.
The preliminary estimates by the Census Bureau of the
wealth of the individual states so far as published up to the
time this book went to press may be found in Statistical
Table X X I X .
The national income for 1903 may be roughly estimated
to have been $21,000,000,000. By 1913 it had reached $34,400,000,000 and in 1923 in " 1 9 1 3 " dollars was probably in
the neighborhood of $31,000,000,000.
It may be a surprise to some that the wealth as estimated
for 1923 does not show a larger increase over the pre-war estimates, but while it is true that in its earlier stages the war
created many war profiteers, at the same time, it had unfortunate effects on lines of activity not directly connected with the
war. After we got into the struggle, so close a check was kept
upon the cost of munitions for our own country and for the
Allies that the making of abnormal profits by American manufacturers, farmers and merchants was largely checked and
such profits in excess of pre-war profits as were made, were
ver$" largely taken by the government through income and
war profits taxes to meet the expenses of the war, including




13<>5

IZO ]

BANKERS TRUST COMPANY

our very large loans to our allies. In the United States, as in
other countries, the post-war situation, until quite recently,
has been one of readjustment from war conditions which has
brought reduced activity in many lines of business and reduced prices in markets to which we send our products, so
that instead of marketing our food and other products at a
profit, we did so for some time at little or no profit or even at
a loss. Therefore, taking all things into consideration, it is
quite obvious that the nation, as a whole, has not profited to
any important extent as a result of the war. On the contrary,
on a per capita basis, it has perhaps even suffered some loss
in wealth.

The Foreign Investments of the United States
It is only in recent years, and as a development of the
Great War, that the United States has become an important
factor in world wide finance.
It is estimated that in 1900 we held $500,000,000 in foreign securities divided as follows as to their geographical location:—Canada, $150,000,000; Mexico, $185,000,000; Cuba,
$50,000,000; Latin America other than Cuba and Mexico,
$55,000,000; Europe, $10,000,000; China and Japan, $5,000,000, and life insurance companies guarantee investments in
Russia and elsewhere, $45,000,000.
Nine years later United States investments abroad are
estimated to have reached a total of $2,000,000,000. Canada
was then a debtor to the United States in the sum of $500,-,
000,000 and Mexico for from $600,000,000 to $700,000,000
while our investments in Europe had reached the relatively
high total of $350,000,000.
B y the close of 1913 we had invested outside of our own
borders around, perhaps over, $2,500,000,000. This figure is



THE INTER-ALLY DEBTS

[

161

higher than the accepted estimates, but we believe it to be
a close approximation to the facts. However, the data from
which to make such an estimate are not as complete as might
be desired. These investments were distributed about as
follows:
FOREIGN INVESTMENTS OF THE UNITED STATES
A T THE CLOSE OF 1913
(In dollars—000,000 omitted)
Coon try

Canada
Latin America
Cuba
Mexico
Central America
South America

Amount

Per Cent

750
100
i»050
50
100

Europe
China and Japan
Philippine Islands
Porto Rico
Total

28.8

1,300

49.9

350
100
75
30

13.4
3.8
2.9
1.2

*2,605

100. o

•Or say In round figures 12,500,000,000

If we may assume that a net return of 6 per cent was being
received, the national income from this source was, say,
$150,000,000.
T h e war brought marked changes in respect to our foreign investments. American investors as a whole for the first
time became familiar with foreign securities. In the early
years of the war, with some hesitation, we loaned money to
France and England, but we required very good collateral in
the nature of our own bonds and stocks which were placed
with N e w Y o r k trust companies as security for the French
and English bonds which were sold to the public. However,
there were some exceptions, the most important being the




IZO

]

BANKERS TRUST COMPANY

Anglo-French loan for $500,000,000 which was placed in
October, 1915, on the joint credit of the governments of
England and France. The success of this loan and the act
that it was paid off promptly at maturity, unquestionably did
a great deal to inspire confidence in subsequent bond issues
from foreign countries.
American investment of new money, since the armistice,
excluding all refunding operations, in foreign, state, municipal
and corporation bonds is estimated to have aggregated to
June 30, 1923, around $2,000,000,000. The estimates range
from $1,800,000,000 to $2,200,000,000. In addition to our
purchases of new issues placed in our money markets, we have
purchased on balance about $800,000,000 bonds issued
abroad. Besides our holdings of foreign, state, municipal and
corporate bonds, our citizens unquestionably have large
amounts of capital invested in real estate and mortgages
thereon, in timber lands, mines, factories and merchandise
not represented by bond issues. We estimate that such investments in Canada alone may aggregate over $1,200,000,000. There must be very large investments of a similar character in Mexico, Cuba, elsewhere in Latin America and in
Porto Rico and the Philippines. We do not venture to give
figures, but the amount is unquestionably large.
Then we must not overlook trade credits made directly
by our corporations or such as are given by our banks. The
aggregate of such credits is no doubt large, but the amount
must fluctuate greatly, depending upon trade conditions.
Tentatively we estimate the foreign investments of the United
States as of June 30, 1923, at perhaps $7,650,000,000 on a
currency basis—say $5,000,000,000 in " 1 9 1 3 " dollars.
In the following table these figures are summarized. They
must not be taken as anything more than an intelligent guess,



THE INTER-ALLY DEBTS

[

161

for the data are most incomplete. It is pleasing to observe
that the United States department of commerce under Mr.
Hoover's progressive management is beginning to make
studies of these elusive questions. In a recently issued supplement to Commerce Reports, American capital abroad in
1922 is estimated at $4,483,000,000, from which, in 1922, the
owners were in receipt of an income of $227,000,000. This
total is for foreign bonds only. Of course, to arrive at the
entire investment, the other elements referred to above, such
as stock issues (or as the English say, "shares") and non-capitalized investments, must be considered.
Our estimate is as follows:
FOREIGN INVESTMENTS OF PEOPLE OF T H E
S T A T E S AS OF J U N E 30, 1923
(In "Currency" dollars—000,000 omitted)

UNITED

Foreign securities sold in the United States since 1913 and outstanding on the above date
Foreign securities originally issued abroad, imported since 1913
Banking and trade credits—say
Corporate and personal investments in Canada since 1913 not
represented by bond issues
Similar investments since 1913 in Mexico, Cuba, the Philippines,
Porto Rico—perhaps

3»050
800
1,000
1,200
1,000

Total new investments since 1913
Deduct—Defaulted Russian holdings—say

7»°5°
75°

Net new productive investments
Add—Pre-war investments
2,500
Less—75 per cent of Mexican holdings
750
Russian holdings
50
Securities paid off and not replaced by refunding
issues—say
35° M 5 0

6,300

1*350

Total amount invested abroad June 30, 1923
. . .
7,650
I Exclusive of amounts due the United States government ]




IZO ]

BANKERS TRUST COMPANY

It will be noted that we have deducted $1,150,000,000
from the estimated value of the investments brought over
from the pre-war period. This we have done because of the
long continued default in the payment of the interest upon
Mexican bonds, also to allow for other possible losses and to
allow for the repayment of bonds which have matured and
been paid off in cash and not replaced by refunding issues.
There is scarcely a nation which is not today indebted to
the United States. Following is a statement of the geographical distribution of our foreign investments. Although an
independent calculation the total checks closely with that of
the previous table.
GEOGRAPHICAL DISTRIBUTION OF INVESTMENTS OF T H E
A M E R I C A N PEOPLE IN FOREIGN COUNTRIES IN 1923
(In "Currency" dollars—000,000 omitted)
America
North
Central
South
West Indies
Total
Africa
Asia
Europe
Oceania

Government

State or Corporate
Municipal
etc.

517
58
. • •

155

2

577
. . .

385

26
130
22

1,844

755

Add—Trade Credits—say
Imported securities, not allocated to country of
origin

2,775
4
544
'97
3,520
1
65
1,245

Total

3,556
4
823

354
4,737
z
476
2,194
22

4,831
1,000

7,430

800
1,800

Deduct—Defaulted securities
Russia
800
Mexico
750 1,550
350
Total invested abroad June 30, 1 9 2 3
7,680
t Exclusive of amounts due the United States government 1




THE INTER-ALLY DEBTS[161

Foreign Indebtedness of the United States
In 1899 the people of the United States owed abroad upwards of $3,000,000,000, possibly as much as $3,300,000,000.
By 191 o this indebtedness had doubled and at the end of
1913 was $7,000,000,000.
We then owed England some $4,000,000,000, Germany
$1,250,000,000, France $1,000,000,000 and Holland $650,000,000, with smaller amounts due to other nations.
From the foundation of the goverment up to 1914, we had
borrowed abroad for every conceivable purpose.
The Revolutionary Debt Abroad: We depended upon foreign capital to fight the revolutionary war to a successful
finish. France, Holland and Spain were the bankers of the
infant republic. This debt, after having been in default for
several years, was refunded in 1790. Including arrearages of
interest, it amounted on January 1, 1790, to $12,081,000 and
was practically all paid by 1795, largely however, by new
foreign borrowing. Every dollar of the foreign debt of the
United States was paid by 1809.
We cannot describe in detail the loans made to this country by France during the Revolutionary War, but, in view of
discussions which from time to time arise on this question,
it may be worth while to note here quite positively that these
loans were fully repaid with interest. The last payment was
made in 1795, except in connection with the final settlement
with the estate ofBeaumarchais which was not made until 1835.
The loans and subsidies which France made to the American States totalled 49,408,000 livres; or, say, $8,967,000—
estimating the value of the livre at 18.15 cents. Of this
amount, $1,193,000 was a free gift. This aid was given at a
time when France herself was at war.



IZO ]

BANKERS TRUST COMPANY

Later Foreign Financing: Following the settlement of the
Revolutionary debt, the United States government did not
again have occasion to borrow abroad until the Civil War
period and thereafter. Even then we did not borrow directly
from foreign markets, but our bonds found their way abroad
and at several periods of crisis we availed of the services of
international bankers.
However, the states, municipalities and the corporations
of the United States until 1914 were persistent and large borrowers abroad for every conceivable purpose. Our railroads
were to a great degree financed with capital obtained in England, in France, in Holland and in Germany. Our farm lands
were frequently developed from the proceeds of mortgages
placed in England and Scotland and by money brought with
them by immigrants or obtained in their home countries.
Our public service corporations also sought capital abroad,
as did our industrial companies. In fact, the United States
owes her present prosperous status largely to the confidence
placed in her integrity by foreign capital. The country could
not have reached its present stage of development without the
use of foreign capital and the work of foreign labor—of the
immigrant.
During the period of the Great War and since we have
been paying off our foreign debts. During the past decade,
according to the most carefully made estimates, we have reduced the claims of foreign lenders from the pre-war status
of $7,000,000,000 by $3,000,000,000. If this estimate is correct, we now owe abroad $4,000,000,000 as against $7,500,000,000, upwards, owed to us, as shown by the table on page
310, so that on balance, apart from the $11,800,000,000 due
the United States government, we are a net creditor nation
for $3,500,000,000, thus reversing t^e pre-war status.



CHAPTER

XXII

The Wealth, Income and Foreign
Investments of Germany
^T us now turn from the consideration of the status as
to national wealth and income of the former Allied and
Associated Powers to that of their principal opponent in the
late war, the German Empire, for so it is called even today
by the German people, although now they have a republican
form of government.
Dr. Karl HelfFerich, Director of the Deutsche Bank, estimated in 1913 that the wealth of Germany at about that time
amounted to 300,000,000,000 marks, or say $71,000,000,000
and that the national income amounted to 40,000,000,000
marks or $9,500,000,000.
If it is difficult to make an estimate of the post-war wealth
and income of France, it is still more difficult to make such
an estimate in the case of Germany. However, we have attempted to arrive at a tentative figure which we have done
by deducting from Dr. Helfferich's figure an estimate of the
value of the territory lost by Germany because of the stipulations of the peace treaty. The fact has been kept in mind in
making this estimate that while some of this territory was
agricultural, and not highly productive, yet the loss of AlsaceLorraine carried with it very important deposits of iron ore
and potash, and industrial works of considerable magnitude,
while the occupation of the Saar Basin has deprived Germany
of extensive coal deposits. We have also taken into consideration the fact that in losing part of Silesia, Germany
lost many industrial plants and large iron and zinc deposits,
and 4 2 % per cent of all the German coal lying within 500




[313

IZO

]

BANKERS TRUST COMPANY

yards of the surface. Taking all these facts into consideration,
we have concluded that possibly a rough figure of the present
wealth of Germany on a gold basis might be taken to be
$59,000,000,000. It is even more difficult to make an estimate
of the national income of Germany at the present time, but,
for the purpose of discussion, we have concluded that we
may assume the present income on a gold basis to be approximately $8,000,000,000.
These estimates are both made on the basis of a temporary occupation of the Ruhr district.

The Foreign Investments of Germany
Dr. Helfferich figured that in 1913 Germany's foreign
investments amounted to about $5,000,000,000. He estimated such investments in 1905 to have been $4,000,000,000
and he gives it as his judgment that between 1905 and 1913
the amount of such investments had not greatly increased
because of the fact that the industrial development of Germany during that period was so great that it absorbed practically all the free capital.
The pre-war foreign investments of Germany were distributed roughly as shown on the following page.
Before the Great War, Germany was next in importance
to France as the continental center of foreign securities.
German investments abroad were cosmopolitan in their distribution. She was a pioneer in developing the newer countries. She colonized first and then followed with banking,
trade and shipping facilities. She was notable as a manager
and director of banks, mercantile establishments and industrial plants, also in mining and oil operations. Thus her influence in the industries and commerce of foreign countries was
very great, making it possible for her to derive a much larger



THE INTER-ALLY DEBTS

[ 161

G E R M A N FOREIGN INVESTMENTS IN 1913
(In dollars—000,000 omitted)
Europe
Austria-Hungary
500
Italy
150
Roumania
200
Russia
1,000
Other European—around
150 2,000
Asia
Asia Minor
China and Japan
Turkey

50
150
300

500

Africa
North America—United States and Canada . . .
Central America, Mexico and West Indies . . . .
South America
Not allocated in the estimates

350
75°
200
75°
45°
5,000

percentage of profits from her foreign investments than was
obtained by other nations. She was a most important factor
in the management of the banking, commercial and industrial
fields in Russia. In fact, there was no important commercial
or industrial center in any country of the world, with the
single exception possibly of France and her colonies, where
Germany's influence was not felt.
In the early part of the war, it is unquestionably true that
Germany parted with a substantial part of her foreign securities, finding a market for them in the neighboring neutral
countries and in the United States. There are no statistics
as to the total amount of such sales. Following the armistice,
it is generally thought that the wealthy people of Germany
have been endeavoring to send as much as possible of their



IZO]BANKERS TRUST COMPANY

property into foreign lands, and it is known to be a fact that
large amounts of German marks and mark securities have
been sold in foreign lands and the proceeds very likely reinvested in the countries where the marks were sold. It is true,
of course, that the proceeds of these sales of marks also have
been used to some extent in meeting foreign payments under
the peace treaty. How much German capital, since the war,
may have found a harbor in foreign lands, it is impossible to
estimate, but the amount must be large.
It is a fact that since the war, German capital has reasserted itself in Austria, in Hungary, in Czechoslovakia and
in Italy to such a degree as largely to dominate in those countries the operations of important industrial establishments,
especially those engaged in the manufacture of iron and steel.
Through corporations organized for the purpose, German
exports are "cleared" through the Scandinavian countries in
such a way that a large part of the proceeds of their sale
remains on deposit outside of Germany.
The apparent ease with which enormous purchases of cotton and copper for German account are financed indicates
that there must be large pools of capital outside Germany
available for the purpose.
However, in the very nature of the case, exact figures are
unobtainable.
Inquiries by the mixed commissions of experts being instituted as this book goes to press may be expected to throw
much light on this situation.




Statistical Tables







Statistical Tables
Money statistics are expressed throughout the book and in these
tables in dollars as follows:
In DOLLARS OR "CURRENCY" DOLLARS: All foreign currencies are
turned into United States dollars at par of exchange:—
£ sterling at $.4.866; Franc, lira, drachma, leu, peseta, finmark,
dinar at I9.3 cents; Crown at 20.3 cents; Mark at 23.8 cents; Krone at
26.8 cents; Florin at 40.2 cents; Yen at 49.80 cents; Ruble at 51.46
cents; Escudo at $1.08.
Thus all statistics given simply in dollars (sometimes referred to as
"Currency" dollars) reflect the face of the books just as published by
the finance departments of the several countries, without adjustment
of any kind.
In " 1 9 1 3 ° DOLLARS: Statistics thus expressed are adjusted for
inflation by dividing the "Currency" dollars by the wholesale price
index number" of the several countries.
The index numbers used were: For Great Britain, Statist; Australia,
Belgium, France, Germany, India, New Zealand, Union of South Africa,
Official; Italy, Bachi's revised; Canada, Department of Labour; United
States, Bureau of Labor; Russia, Eliachcff. For other countries we have
made estimates from the best data available.
These numbers are based upon a combination and averaging of the
prices of groups of commodities which enter into common use. The
prices of the year 1913 are taken as normal, at any rate as prices not
affected by war conditions. These prices are taken as a base ( 1 0 0 % )
and the prices for subsequent years are estimated in percentages of the
base price. Thus it is possible to determine to what extent prices were
increased by the war demand for commodities and especially how they
were inflated by the great increase in the currencies and other credit
facilities developed in financing the war. In short " / p / j " dollars may
be said to be dollars of the year 1913 purchasing power.
Manifestly the statistics when expressed simply in dollars or currency dollars reflect conditions in terms of currencies of varying purchasing power and in the nature of the case are not fairly comparable.
By reducing them to the pre-war or 1913 basis they become comparable.
Table X X V I I gives the wholesale price index numbers for several countries at quarterly periods, 1913 to 1923 inclusive, and the corresponding
purchasing power of their currencies.




[319

NOTES—TABLES IV TO VIII, INCLUSIVE
A N D T A B L E ON PAGE 13
<xThe cost of the war is taken to be the excess expenditure over the
iverage expenditure of the three years preceding entrance into the war.
In some cases the expenditure of the year previous to the war, or the
lverage expenditure of the two previous years, is taken as a basis.
"Direct Cost" —The cost exclusive of loans. If loans made
and loans received are settled in full this will be the final cost of
war to each nation.
"Gross Cost"»Direct war expenditure, plus loans.
"Net Cost" = The actual cost as the accounts stood at the
close of the war. If loans made and loans received remain unpaid
then this will be the final cost of the war to each nation. If any
nation pays her loans in full (vide England's settlement with the
United States) but does not receive payment from her debtors,
then "Net Cost" will be the actual cost to that nation.
b"Normal expenditure" shows what the expenditure would have
been on the pre-war basis.
cA rough approximation.
Data unobtainable. Where totaU are given they include the
omitted items which, however, are not separately given in official or
other sources.
dA rough estimate for five years.
eA rough estimate for two years.
/Proportion for period estimated. Total for six years from official
statement.
^Adjusted. See page 25.
/iThe totals, respectively, of Columns III and VII and of Columns
IV and VI of Table IV should exactly agree, but differing accounting
methods followed by the several nations have made an exact balancing
impossible. It is somewhat remarkable that the figures tally as closely
as they do.
tThat the expenses do not exactly balance with the receipts (Tables
IX to XIV) is chiefly due to the fact that cash balances brought and
carried forward have not been brought into the tables, in many cases
not being obtainable.
./Russia ceased to be a belligerent in September, 1917.
^Greece did not become a belligerent until August, 1916, as the
finances of that year were little affected, the war expenses are taken
as beginning from January i t 1917.
AVhere a minus sign appears on a Cost of War Table, it does not
mean that the cost was less than nothing, but that on the " 1913 " dollar
basis the expenditure was less than the pre-war expenditure.
320]




NOTES—TABLES IX TO XIV, INCLUSIVE
aThe receipts in excess of the pre-war basis. See Note 5.
bAs a rule the average receipts of the three years immediately preceding entrance into the war, multiplied by the number of years that
the nation was a belligerent and for which data are obtainable. In some
cases the receipts of the year preceding the war or the average receipts
of the two preceding years arc used as a basis.
cA rough approximation.
dCovers a period of 3 X years.
^Partly estimated.
/Five years. Even for these years the statistics are quite unsatisfactory. No data whatever are available for the last year of the war.
^Classification approximated.
/(Including $50,000,000 cash on hand at the beginning of the period.
./Includes net receipts from government services and monopolies.
fcThat the receipts do not exactly balance with the expenses
(Tables I to VIII) is chiefly due to the fact that cash balances brought
and carried forward have not been brought into the tables, in many
cases not being obtainable.
/The United States did not become a belligerent until April 7,1917.
mRumania did not become a belligerent until August 27, 1916.
ttGreece became a belligerent August 27, 1916, but as the war conditions only slightly affected the figures of the fiscal year ended December 31, 1916, her war financing is taken as beginning January 1, 1917.
©Russia ceased to be a belligerent September 12, 1917. Therefore
these figures cover a period of approximately 8}4 months.
pTwo years only. Data very unsatisfactory^Includes a period of
1920.




years—January I, 1917, to March 31,

[321

10
w

T A B L E I — P R E - W A R A N N U A L E X P E N D I T U R E S OF A C T I V E B E L L I G E R E N T S IN G R E A T W A R
(In dollars—at
(000,000
omitted)

ALLIED AND
ASSOCIATED POWERS
British Empire
. . . .
Great Britain
. . . .
Australia
Canada
India
New Zealand
. . . .
Union South Africa
cCrown Colonies, etc. .
Total Empire . . .
Belgium
France .
Greece
Italy (ts>!4)
Japan
Portugal
Rumania .
Russia
.
Serbia
United States
Total Allies
. . .
CENTRAL POWERS
Austria Hungary
. .
Bulgaria
Germany
Turkey
Total
Grand Total. . ,

Population

.
.
.

.

exchange parities)

OTOTAL FIGURES
(000.000 omitted)

PER CAPITA FIGURES

PER CENT NATIONAL
INCOME

Public
Debt, InMilitary Total
Debt
Military Total
Civil
Debt
6 Total
terest & Military
Manage- Expenses Expenses Expenses Charge Expenses Expenses Charge Expenses Expenses
ment
96
3
14
49
13
33
9
307

478

39
350
II
103
58
30
14
318
6
33

17
311
43
177
99
IS
17
410
6
440

959

3.013

46
5
8
344
1
6
38
348
8
40
5
36
S3
6
7
174
S
98
780
SO
5
68
31

ISO
8
59
36

144
924

373
1.333

357
14
11
96

139
37
353
69
538
3,601

339
74
17A
340
85
73
IOS
1.078
I
376
31
310
89
31
73
983
13
338
3.056
4

773
38
135
60
995
4-OSI

783
91
197
385
98
96
H4
1.763
103
837
75
490
346
76
103
1,610

34

701
6.038

2.00
.60
1.73
.20

13.00

H6

2.80
1.37
-30

3.83
.24

50
4/7

6.25
2.20
2.86
1.07
3.00
2.00

1.37

2.12

Wo
ifr

17.00

t8.20

24.62
1.58
08.00
16.00
3.00
S.06
12.87
20.92
15.00
13.61
4.64
12.67

1.25

2.30
243
246

..23

440

7-15
7.73

2.58
740
S.IO

21.62
14.60

I.20

1.23

1.081
73
547
155
1,856

3.60

7.884

1.60

" L
1.18
8

1.20
2.58

14.71

9.25
4.80

8.04

I.8Q

3.28
4.08

12.80

1.33

2.81

8.53

7.38

.88
.23

3.27

1.63

3.20

1.08
55

4.33
.60
1.05
3*55
3.42
J.JJ
2.64
3.56
12.30
4.00
2.Q1
2.61
.07
1.23

4.00
3.20
.36
3.47
1.67
1.32

2.41
1.55

7.17
5.00

0.8s
12.83
32.66
12.00
7.60
8.00

4.26

0 37
11.47

6.ig
6.23
4.86

31.67

13.03
4.54

5.47
2.61

1.28
2.62

2.87
14.80
3.36
6.37
3.61
2.70

22.73
12.36

13.37

2043
21.47
10.43
2.04
7.85

24-02
2Q.20
3.21
14.76
11.38
8.47

oln most cases the figures are an average of the expendIturcb for the three fiscal years 1911 ( i g u - i a ) to 1913 (or igi3-i4) Inclusive.
In some cisea the figures for 1913 (or 1013-14). alone, have been taken.
fcOnly the net results of the operation of public services have been taken.
^Estimated.




T A B L E II

P R E - W A R A N N U A L R E C E I P T S OF A C T I V E B E L L I G E R E N T S IN G R E A T WAR
(In dollars—at exchange parities)
(000,000
omitted)

NATIONS

ALLIED AND
ASSOCIATED POWERS
British Empire
. . .
Great Britain . . .
Australia
Canada
India
N e w Zealand , . .
Union So. Africa .
cCrown Colonies, etc.
T o t a l Empire . .
Belgium
France
Greece
Italy
Japan
Portugal
Rumania
Russia
Serbia
United States . . .
T o t a l Allies . .
CENTRAL POWERS
Austria-Hungary
.
Bulgaria
Germany
Turkey
Total
Grand T o t a l . .

.
.
.

OTOTAL FIGURES (000,000 omitted)

Population

Taxes

46
5
8
>44
1
6
38

767
81
136
lag
30
t l
1,261

Other
Total
BorrowRevenue Revenue
ing
51
3
9
321
53
36
36

818
£

389

1,6S1
83
833
43
458
347
77
1*9
1,640
34
701

34«
8
40
J
36
S3
6
7
174
5
08
780

50
33
58l
13
673

U
173
<18
169
56
37
96
1.039
13
39

3,833

2.041

SO
5
68
31

317
31
508
88

I44
9*4
924

934

764
13
46
44
866
3,907
3,907

69
660
«5
3&9
191

35o
83

-41
61
33
33
33
17
113
31
33
33
33
7

-16

PER CENT.
NATIONAL
INCOME

PER CAPITA FIGURES

iTotal
Receipts
777
9i
197
373
106
56
13 3

National
Income
236.0s

260.00
230.00
12.30
300.00
'3333
30.47

Taxes

Borrowing

16.67
16.20

-.89

*S-73
'33

30.00
8.00

3O.10

t.764
103
855
75
400
TOJ
1,640

5.875

—4
206

697
6,081

I,08l
33
554
133

40
6
33

L.OSI
73
560
155

I.800
7,67s
7,675

69
375

2.to
3.62
8.62
16,50
3.00
8.03
3.60

JO.00

3.28

36.00

137*50

182.30
66.00
108.33
40.00

43.10
46,00
351.02
08.30
.po

30.00
134.41

8.33

3-34

3.40
6.86

4-03
6.34

4.20

7-47
4.10

iJSo

7.62
.00

23-00
3.67
.43
.32
2.6 2

A55

6.40

.80

.13
—.17
-2.28

— .04
.26

8.00
.00
1.00
.48
.30

Total
Receipt*

16.80
18.60
34.63
!cS3

106.00
16.00
3.24
3.07
12.87
21.37
13.00
13.61
4.70
12.67
t4-7t
0.43

4.80
7.11

7.82
31.62

14.60

8.33
7.38
1,869
6.48
I3.Q8
,
4.76?
7,950
T 7 3
~~8Ti
.
4.767
7,950
375
5.16
8.62
a l n mort eases the average receipts of the three fiscal years 1911 (or 1911-13) to 1013 (or 1013-14) inclusive
In some cases the figurea for 1913 (or 1913-14) alone have been taken.
inclusive.

ftOnly the net results of the operation of public services have been taken.




30.00
113.19
100.70
100.70

c Estimated.

Taxes

7.03
6.23
6.30

4.31
10.00

6.00
3.32

6.36
6.27
9.04

8.33
7.4i
11.02
20.82

6.36

7.7S
3.22
1.05

4.00

Total
Receipts
7.13
H s
0*3
12.40
3S33
13.00

8.20

8.ot
0.36
11.71

22.73
12.36
13.87

31.67
30.43
21.87
10.43

3.03
7.02

7.04
8.40
&

24.02
20.20

S. 73
JT2
S.12

11.46
T J j
8.34

3.33

14.76

TABLE

III—PRE-WAR

NATIONAL

DEBTS

OF

( I n dollars—at

Internal Debt
ALLIED AND
ASSOCIATED POWERS
British Empire
Great Britain
. . . .
Australia
Canada
India
. . . . . . .
N e w Zealand
. . . .
Union of South Africa
Crown Colonies, etc. .
Empire without India
Total Empire . . . .

Funded
3.098
76
I
83
51

Floating

Total

Total Allied Powers
CENTRAL POWERS
Austria-Hungary
. . .
Bulgaria
Germany
Turkey
. . . .

333
"36'

3.04S

GREAT

WAR

PER CAPITA FIGURES

Foreign
Debt

Total
Debt

Wealth

74-6O

Debt %
National
Wealth

3,436
93
544
1,496
485
614
229

18.60
68.00
6.13
483.00
102.33
6.03

1.321.74
1,720.00
1,831.23
122.05
1,860.00
833.34
26J. 16

4.01
1.08
3-71
4.00
26.07
12.28
2.20

3,346

5,401
6,897

51.03
19.82

1.058.75
402.61

4.00
4.02

855
6,598
72
3.034
S35
504
381
3.S43
70
1.188

38

893
6,508
235
3,034
1,287
703
281
4,541
70

111.62
164.0s
47.00
S4.28
24.28

718.73
1,447-50
350.00
605.55
220.07
400.00
300.00
335.63
460.00
2.061.85

15-53
11.40
8.54
13.02
II.05
20-30
8.03
7-77
3.04
0.67

18,560

1,661

30,331

3,556

400
3o
95
176

3.956
30
1.385
176

164
77

763
199
i,99S

1,188

5.506

667

3,956
174
1,285
843

3.363

35.668

U7.J7
40.14
26.10
14.00
10.48

640.43

25,727

70.12
iS.QO

3.08
13.19
6.96
1.60
8.03

6.317

40.14

600.00
500.00
1,183.82
300.00

6,258

S.447

4.746

43.46

857-63

31,985

34-61

681.88

34-So

aFigures are for the close of the fiscal year next preceding the opening of hostilities, August, 1914.




THE

17
311
863
403
524
339

3.436
76
333
634
83
90

65
3io
49
170

.

IN

4.551

338

70O
6.388
33
3,864
525
340
381
3466
70
968

Belgium
. .
France . . .
Greece . . .
Italy
. . . .
Japan
. . .
Portugal . .
Rumania . ,
Russia . . .
Serbia . . .
United States

Grand Total.

BELLIGERENTS

OTOTAL FIGURES (000,000 OMITTED)

NATIONS

Total

ACTIVE

e x c h a n g e parities)

S-07

T A B L E IV—ATHE COST OF T H E W A R — E N T I R E PERIOD
COVERING THE S i x FISCAL Y E A R S 1914 (OR 1 9 1 4 - 1 5 ) TO 1919 (OR 1919-20) INCLUSIVE

(In "Currency" dollars—000,000 omitted)
(For cost of the war in " 1013 " dollars. gee page 13)
NATIONS

I
DATE OP
ENTERING
WAR

TOTAL
EXPENDITURE

II
ANORMAL
EXPENDITURE

III
DLRF.CT
COST

%

1914
1914
1914
1914
1914
1914

53.907
2.JJO
3.713
3.344
1.141
774

4.693
54«
1,180
3,313
586
576

8.71
33.63
31.70
60.14
St.36
74.42

40,445
1,772
2,321
1,032
555
198

1914

684
10.578

77-20
i6.ot

202

1914

886
66.084

^Belgium
* France
eGreecc Jt
Italy. .
Japan .
c Portugal
«Rumania
./Russia
cSerbia .
United States

1914
1914
1916
1915
19X4
1916
1916
1914
1914
1917

3,004
38,577
560
31.574
3.040
I.I45
i.Soj
35.857
579
39.447

618
5.030
334
3,943
1.476
456
411
S.903
144

30.84
13.01
41.70
tj.64
73.35

T o t a l Allies
CENTRAL POWERS
rfAuatria-Hungary
,
^Bulgaria
. . . .
Germany
. . . .
cTurkey

199.370
AUKOct.
AUKNov.

T o t a l Central Powers
Grand T o t a l




1914
1915
1914
1914

Col. I

39.83
37.3s

22.83
25.17
3.864 7.36
30,646 1S'37

19.801
I.370
50.330
3.199

5,407
473
3,382
932

73.GOO

10.093

6.52
42.38
13-71

1272.970

40,739

14-92

27.31
37.17

V
GROSS
COST

c

ALLIED AND
ASSOCIATED POWERS
British Empire.
Great Britain
Aug.
Australia . .
Aug.
Canada
. .
AUK.
India
. . .
Aus.
N e w Zealand . . .
AUK.
Union of South Africa
Aug.
cCrown Colonies, Pro
tcctoratcs, etc.
Aug.
T o t a l British Empire
Aug.

Aug.
AUKAug.
May
AUR.
Mar,
AUK.
AUK.
AUR.
April

IV
LOANS TO
ALL tcs

CoT?V

40,525
1,386
30,740
326
18,632
564
689
1,092
19,662
435
27,060
147,111
14,394
798
45,001
1,267
61,460
A 208,571

Coi

82. tS
too.oo
01.67
100.00
too.oo
too.oo

8.770
311

too.oo
X3.82

08.54

100.00
100.00
05.65
100.00
06.77

80.81

S.J3

#,981

16.18

3,8R7

8.40

293

1.46

9,523

100.00
91.60
JOO.OO
100.00
100.00
100.00
100.00
100.00
73-07
87.10

V

17 £2

26.03
12M1

21,613

3.047

4.35

3,047

J. 33

ft 23.660

JO.lQ

c $

LOANS
FROM
I ALLIRS

49,2 J 5
1,772
2,532
1,032
555
198

01.30
76.38
63.21
30 M
48.64
23.S8

202

22.80
83.09

55,506
1,386
33,557
326
18,632
564
689
1,092
19,954
435
36,583
168,724

6Q.I6
86.09
58.21
86.36
37.6s
60.17
72.65
77.17
74.83
02.74
84.63

63,507

73.60
62.83
93.48
57.62
86.20

232,231

85.08

14,394
798
47,048
1,267

VI
Deduct

VII
NET
COST

139
56

43,812
1,610
2,540
1,032
426
142

5.743

49,764

S.403
162
- 8

202

I.386
5.397
284
3.911
91
413
3.625
435
397
21,681
R,OOO
476
571
3.047

28,160
42
14,721
564
598
679
16,329
36,186
147,043
13,394
322
47,048
696
61,460

623,738 4208,503

T A B L E V—ATHE COST OF THE WAR—FIRST

I'ART

FISCAL Y E A R S 1 9 1 4 (OR 1 9 1 4 - 1 5 ) TO 1 9 1 6 (OR 1 9 1 6 - 1 7 ) INCLUSIVE

NATIONS
ALLIED AND
ASSOCIATED
POWERS
British Empire . .
Great Britain
.
Australia
. . .
Canada * . . .
India
New Zealand . .
Union So. Africa
cCrown Colonies.
Protect., etc. .
Total British .
(Belgium . .
^France
Italy
. . . .
Japan
(Portugal
. .
(Rumania . .
Russia
eSerbia
. . .
United States

. .
. .
. .
. .
. .
. .

Total Allies

Public
Debt.
Int. &
Man- Direct
Cost
agement

&
9.26
3-33

(»
1,298

8.47

520 100.00
7,140 87.34
4.510 91.80

?o

.86

3S9

83.30

IS

3.21

35.636

84.84

1.383

7.970 109.82
-3S -473.00
14 173.00
875
7.30 10,658 89-90
594 100.00
C*

836

3.46 13.082

C«
530
263

6.33
3.33
— 6 -16.22

c1

('
734
g1
3

5.0S
•43

Total Ccn. Pws.
Grand Total

Other
Special
War
rect
Direct ExCost pendi- Cost
tures

3.28 11.750 84.04 1,281
730
535 82.03
43
i'72
6.71
>7
523 102.96
34
42 1400.00
7 333.34
133 55.70
4.64
II
I I I 120.65
II
11.03

.

CENTRAL POWERS
(Austria Hungary
(Bulgaria . . . •
Germany
. . . .
(Turkey

Military

.




85.30

9744
88,87

Direct
Cost

Direct
Cost

%
Gross
Cost

61

3.30

3,632

6.2S 41.990

86.40

398

3.36

"713
lb
-88

398

2.02 -785

435
140
59
I.824

2.80

Total
ExTotal pendiExp.
tures
for
for
Period Period

•52 13,833 75-70 4,440 24.30 18,273
640
640 100.00
11.25
677
507
—13.02
74.89 ' " 1 7 0 25.11
3
3 100.00
-46 -1333.34
237
237 100.00
30-66
94
92
02 too.oo
-JO
— 32.60
8
8 100.00
8
100.00
.68 15,320 76.87 4,610 23-13 19,930
104
100.00
90.30
100.00
100.00
100.00
100.00
98*41
100.00
34.54

1,781

Gross
Loans %
Gruss Cost
to
Allies Cost

72
72
-<56

520
8,175
4,913
37
151
95
15-07 12,105
207
467
13.06

— 16 -43.24
142 04.04
95 too.oo
9.557 78.05

19.184

Civil
Government

1.S47

5-36
2.85
159.46
5.96

520
9,044
4,913
37
151
95
195 1.50 12,300
207
885 65.46 1,352 '
869

9.67

6,559 13.53 48,549

88.62 20.619
70.02
914
1.367
53.43
0.26 1.150
530
44-72
380
24.21
2.29

350

70-02 35.219
839
62.73
78-41 11.554
76.96 6.384
775
4.77
379
30.84
198
47.08
71.So 17.130

63.38

279
2.068

74-0O 64.815

7,257 60.11 10,503
7,257 100.00
-9.82
3 IO
-8 -3-Sl
-8 -100.00
200.00
74 11,843 89.79 /1.347 10.21 13,190 88.94 14.831
594 56.04 1,060
594 100.00
19,686

93-50

1.347

6.41 21,033

70.06 26.604

3.00 6L676

S8.64

7.906 11.37 69^582

76.11 91.410

-3.98

T A B L E VI—ATHE COST OF T H E W A R — F I R S T PART
FISCAL YEARS 1914 (OR 1 9 1 4 - 1 5 ) TO 1916 (OR 1 9 1 6 - 1 7 ) INCLUSIVE
(In 1 1 1013" dollars—000,000 omitted)
Public
Debt.
Int. &
M a n - Direct
Cost
agement

NATIONS
ALLIED AND
British Empire
Great Britain
Australia
. .

. .
. .

India
N e w Zealand
, .
Union So. Africa .
cCrown Colonies,
Protect., etc. . .

Italy

4.43
7.47
672
-8.20
1.30
6.35

A

7.803 87.2S
359 03.73
435 124.37
3.28
4
104 72.22
105 166.67

933
XI

.

4.37

8,800

00.08

933

241

388 100.00
4.530 03.54

38

31

1.01

. . . . .
.

. .
* .

eSerbia " * '
United States .

. .

T o t a l Allies .

. .

C1

CENTRAL POWERS
^Austria Hungary
.

c»

'-7*14

3
546

cl

^Turkey
Total Cent. Pws.
Grand T o t a l

7-34
-6

. .

%

Direct
Cost

-70 -100.00

443

iPnrttiral
cRumania

Civil
Government

c1
___




30,518

* V.J s
7.02

0.65
.80

3,184 103.20
—31
35 100.00
4.355 77.30
148 100.00
119 141.67

5,337

-74

7.1^7
417

00.34

134.67
87.06
01.68
100.00

-5.30

-503
59
-rap
45
-48
859

1.23

-6.21
1.00
15.37

-70
9,672

4-31

1.08

22,713

-1.374 -34.67
"13
15.20
3.30 -163
2.00

3,963

364
364

05.8I

1,344

245

75 33 3.944 34.77 11,884
375
100.00
476
71*5 " I 3 4 28.13
-122
100.00
144
100.00
63
100.00

83.3T
57.78

44.63
-11 Jo

33.03
17.03

-37.78

I4.A3O
649
1.066
1.034
437
351
373

70.76

18,039

388
5,233

5567
67.58

697
7,743

2,076

58.53

35

3.547
738
363

87.30

5,822
148
666

-13.31
-87.27
34.66
66.07
48.07

10,653
331
1.360

83.00 4.357 16.10

27,070

62.32

43.315

3,963

54.07
-63.01
84.17
47.23

7*209
133
10,368
883

*503

0.50

3.33

100.00

-85 100.00
7,774 80.08 /953 10.02
417 100.00

2.10 -1,550 -12.84

12,069

Q2J68

34,782

86.76

— 3.75

ToUl
Expendlpendi- turea
ture
for
Period Period

&

3.078 24.14 12,750

75.86

3.38

-1.305

-70

100.00

35 100.00
-48 100.00
5,627
06.65 195
148 100.00
84
12.61 " 5 8 3

980

-45.34

Loans
% Gross
to
Gross
Gross Cost
Cost Allies Cost

2,076 100.00

10.71

-38

%

388 100.00
4,731
00.41

9

13,807 106.11
33.335

Direct
Cost

— 3.01 8,940
10.31 -180
375
—12 -3.30
342
-34.21
3.22
-116 -O5.o8 -122
144
38
26.30
63
-46
-73.02

C«

114

T o t a l Empire.
(Belgium
France

395
AS
23
— 10
3
4

Military

Other
Special
War
rect
Dnrect
ExCost
pendi- Cost
tures

7.32

-48

-85

8,727
417
13,022

70.04

18.593

5.310 13.24 40,092

64.78

61,908

953

T A B L E
FISCAL

V I I — A T H E

YEARS

1917

C O S T

(OR

O F

1917-18)

T H E
TO

W A R — S E C O N D

1919

( I n " C u r r e n c y " dollars—000,000
Public
Debt,
Int. &
rect
ManCost
agein ent

&

NATIONS
ALLIED AND
ASSOCIATED PQW.
British Empire
Great Britain.
Australia. . .
Canada . . .
India
. . . .
N e w Zealand
Union of So. Afi
eCrown Colonies,
Protectorates, etc

71.22

3.392 to.88

1,446

4.63

3,082

11.01
23.93
13.18
43.26
32.90

4.140 13.27

22,227

866 100.00
14,842 65.75
227 60.63
10,211
74.44
296 56.17
361 67.10
997 100.00
4,49<> 59.41
228 100.00
18,788 70.65

ci

e»

eBelgium
^France .
Greece .
Italy . .
Japan .
ePortugal
eRumania
/Russia .
eSerbla .
United States

e»
009 12.03
ei
1.769 ' 6.65
e»

.

CENTRAL POWERS
# Austria-Hungary.
(Bulgaria
. . . .
Germany
. . . .
eTurkey

Grand T o t a l .

73.533

ei
62 7.6o
4.984 13.03
ei

—

—

60.95

6.705 03.05
564 60.08
19.176 57.83
673 lOO.OO

=




736
3.77
56
4.03
388 31.30
73
7.10
-37
-11.63
36
33.96
194
100.00

P A R T

INCLUSIVE

omitted)

26,612
1,132
1,814
1,029
318
106

%

Gross
Cost

S6.00
100.00
97.79
100.00
100.00
100.00

Gross
Loans %
to
Gross Cost
Allies Cost

4.330 14.00
""41

87.71
100.00
92.05
100.00
100.00
100.00
100.00
100.00
08.73
100.00
75.48

536
40,865

866
24,513
326
13,719
527
538
997
7,654
228
35,231

62.39
00.71
38.31
00.31
41.66
70.24
76.40
87.70
7S-75
94.25

1,175
27,033
560
15,190
1.365
766
I.30S
8,737
300
37,379

I5.054 12.34 120,175

SO.31

134.555

7,137
806
33,858
673

76.74
76.04
03.37
59-oS

9,301
1,060
35.499
1.130

42,474

00.37

46,999

0.6c' 162,649

80.5S

181.554

3.158

28.56

342

5.128

19.28

6,26

13-507

12.86

105,121

4 . 1 0 3 12.37

433
ISO
4.896

6.05
22.33
14.77

7,137 100.00
806 100.00
33,158 97.91
673 100.00

5. SOS

13.18

41,774

08.35

700

13.04 1 146.895

90.31

15.754 '

64.02

4.102

6S.51

10.682

0A2

7.2S 1 to.ot 51

33.388
1,406
3,445
2.185
611
394

87.06

90S

100.651

03.05
80.51
73J7
47.O0
32.05
23.90
36.19

1.43

87.46

30,942
1,132
1,855
1,029
318
106
194

198

6.5SO

Total '
Ex~Total
pendiExtures
pend.
for
for
Period Period

35,576

4.371 12.29

866
22,565
326
13,719
527
538
997
7,557
228
26,593

9.24

3.21

194 100.00
31,205

3.483
78
1,809
228
177

37,118

ei

T o t a l C e n . Pws

15 "'.83
486 47.23

1919-20)

Direct
Direct Cost
Cost

3,891 10.86

19,420
887
1,217
353
30U
42

3,56s
189
104
"7
47
aS

Civil
Government

72.07
78.33
67.08
34.30
06.83
39.62

13.40
16.70
10.70
11.37
14.78
26*42

ei
3,158 14.00
21 644
i*5oi 10.03
57

T o t a l Empire

T o t a l Allies

Military

Other
Special
A
War
Direct
rect
ExCost
pendi- Cost
tures

(OR

1.948

97

7.OS

1.27

8.638 24.52

/70O

2.0 7
I.65

T A B L E VIII—OTHE COST OF T H E W A R — S E C O N D

PART

FISCAL YEARS 1 9 1 7 (OR 1 9 1 7 - 1 8 ) TO 1 9 1 9 (OR 1 9 1 9 - 2 0 ) INCLUSIVE
(In " 1 9 1 3 " d o l l a r s — 0 0 0 , 0 0 0 omitted)

Si

NATIONS
ALLIED AND
ASSOCIATED POWERS
British Empire
Great Britain
. .
Australia
. . . .
Canada
India
New Zealand . . .
cUnion of So. Africa
Crown Colonies,
Protectorate, etc.
Total Empire

.

c Belgium
jFrance
. . . . . .
Greece
Italy
Japan
. . . . . .
Portugal
£ Rumania
jRuasia
cSerbia
United States . . .
Total Allies

Public
Debt.
Int. &
Man- rect
age- Cost
ment
JJ.02

Other
Special
DiWar
Direct Exrect
Coat pendi- Cost
tures

%

,%

Civil
Govern
mcnt

%

Direct
Cost

Direct
Loans % Gross
Cost
Gross
to Gros* Cost
Cost Allies Cost

Total
Total
ExExpendipend. tures
for
for
Period Period

77.33 1.351 12.12 -237
-2.40 10,317 84.16 1.943 1584 12,259 8304 14.605
03-09
489 100.00
— 73 —14.03
489 64-00
763
96.88
0.82 -60
610 96.06 '"as 3-94
-0.8j
635 31.84
5
1.325
72 30.70
142 100.00
331 233.10 -266 -187.32
142 10.04
1,298
182 267.63
68 100.00
-126 -185.20
68 18.84
361
-8
37 -75.00
— 36 100.00
-55
- 3 6 -14.28
253
—JJ 153.78
-34 100.00
-34 -11.80
308
100.00
1.533 13.18 9.317 80.62 1.587 13.73 -871
-7.53 11,556 85.43 1,967 1455 13,523 71.96 1S.812
c>
374 100.00
274 too.oo
274 47 00
583
8.64 4*1 IH 76.64
600 11.17
I9t
3.55 5,373 89.92 602 10.08 5,975 7042
8,48S
36.23
26.0Q -23
2 —2.Q0 -28
40.58 - 6 9 100.00
— 69 -44.52
155
48
5.84 2,276 94-32
2,413 100.00
-2.15
-52
2,413 62.13 3.884
1.09
93.02
12.79
5 -3.81
-86 too.oo
—11
—86 -13.19
653
139 100.00
139 100.00
139 36.68
379
—153 100.00 -153 too.oo
- 1 5 3 -98.71
ISS
35.77 1,739 94.72
814 46.81
303 17.42
622
97 5.2S 1,836 63.H
3.909
c>
73 100.00
73 too.oo
73
„ 145
798 ' 6-53 8,847 72.45
3.64 2,122
445
17.38 12,212 73.25 4.459 26.75 16,671 88% 18,754

1.34 J
97
74
5
IA

19.84
J 2,1 J
J J*
17.64
22.22

. .

CENTRAL POWERS
t Austria Hungary
^Bulgaria
Germany
cTurkey . . . . . .

Military

7.98o

46S
59i

25,838

- J O 13.38
1,612 14.88
c1

Total Cen. Pws.

c'

3,682

8,01

2.475 167.80

— 54 38.03
65.04
264 100.00

7.143

I >820
-J.ooo

1.218

11.25

859

5.44 33,471
-67J80

82.45 7.125 17.55 40,596

1,475 too.oo

48.59 -142 100.00
7.93 10,831 96.99 /336
264 too.oo

73.95 54.913

1,475 40.33 3.639
-142 125.66
113
3.01 11,167 87.19 I3.8O8
264 36.16
730

9.827

C
>

Grand Total . .

77.20

=




79-07

I.2I&

9.80 — 2 JO —1.69 12,428

97.37

2.63 12,764

73.82 17.390

35.66S

77.70

3.900

8.50

86.02 7.461 13.98 53,360

73-02 73.303

r.6io

3.51 45,899

336

ua

T A B L E I X — a l l O W T H E W A R WAS P A I D F O R — E N T I R E PERIOD
COVERING THE SIX YEARS 1914 (OR 1914-1915) TO 1919 (OR 1919-1920)
(In "Currency" dollars—000,000 omitted)

o

REVENUE IN
EXCESS OF
PRE-WAR
BASIS

NATIONS

A T HOME

%

ALLIED AND
ASSOCIATED POWERS
British Empire
14,042
Great Britain
423
Australia
.
403
Canada . .
530
India . . .
198
N e w Zealand
Union of So. Africa
(Crown Colonies,
297
Protectorate,etc.
T o t a l British E m p. 15,97
(Belgium
France .
rfGreece .
Italy .
Japan
Portugal
. .
(Po
(Rumania
. .
Russia . . .
(Serbia
United Sates

. .
. .
.

3

1,416
98
5,238
750
190
-66
745

War
Receipts

%

War
Receipts

War
Receipts

28,111
37.4S.403
23-3 1,144 63.3 162
13-0 3,140 84-3
46. 3
743 65.2
32.7 302 64.8 120
44.4
i6q
03-9 56

3

4.2
30.1
28.1
Q8.7
24.:
-6.o
3-8

32

9.48s
10
48S
744
15.067

38.8

5.742
1,386
5.39
3S4
3.911

76.4
3-7

3O.0
J'

3

91
63.3 413

1,386
32,031

11.8

68.2

18.3
100.0
1.1

33S

3.528

.

38,063

106,68 a

63.2

31.681

12.S

II.570

80.4

1,000

7.0

Grand T o t a l

.

30-7 78 0-7 476 30-6
41.183 8?.?
12.3
-1.3 7IS 36.3
12-353.546 84.4 2.047

• • 45,889




160.228

-.20.9

21.0

T o t a l Allies .

7,826

3-3

87 1

76.2
61.6

T o t a l C e n t . Powers

fiQ.O23.728

32

100.0
16.1

37-322.627
12.6

9-72

39,615

13,719

1,821

34,958
1,379
2,130
609
407
100

12,570
554
41,193

1,286

90.9

4T902
560
1,180
3,334
634
572

2,533
1,139
605
180

68.2

329

30.8

738

55,588
7 J -3

83.7

10,830

69-2
86.7
38.2
86.4
33.3
62.8
72.6
76.5
75.1
93.7

618
5.130
234
3.940
1.524
456
412
6.032
144
3.SS5

33.3
67-3
33-6
9-7
100. o

1,386
33,447
326
18,634
760
769
1,091
19,775
435
36,743

93-8
71-0
1-3
73-3

228 699
13,396
10
579
1,157 106.0
19,030 96.2
435 100.0
23,024 62.7
130,891

%

Grand
Total

Grand
Total

71.349,000
1,802

76.5
84.1

b RECEIPTS
PRK-WAR
BASIS

%

War
Receipts

10.4

.

245
5,777
-17

2.9

-.08
-134-117
21.3 -114-18,8
-69.4
31.1 -123

.

CENTRAL POWERS
/Austria-Hungary
(Bulgaria
. . . .
Germany
. . . .
(Turkey
. . . .

1.444
73
—2

9.0

00.3
32,699

TOTAL

War
Receipts

11.0

3.625
435
397

.

OTHER
FOREIGN

FROM ALLIES

2S.7

28.7

TOTAL
INCREASED
OR WAR
RECEIPTS

BORROWING IN EXCESS OF PRE-WAR BASIS

Hi
48.8
23.9

168,954 84.4
31.245
77-3

9-1
23.7

31-8

66.2
51.2
76.1
60.2
16.3

30.8

13.3
41-i
13.6
66.7
37-2
27.4
23-3
24-O
73
13-6

14,391
72.7 5.410 27-3
799 62.S
473 37-2
3.36o
6.7
87.746,970 93.3
1,269 37-7 930 42.3
101.3
86.2 10.173 13.S
84.0 41.418 13-r

87.4
60.3

T A B L E X — a H O W T H E WAR WAS P A I D FOR
COVERING TIIE SIX YEARS 1914 (OR 1914-15) TO 1919 (OR 1919-20) INCLUSIVE
(In " 1 9 1 3 " dollars—000,000 omitted)
REVENUE IN
EXCESS OF
PRE-WAR
BASIS

NATIONS

BORROWING IN EXCESS OF PRE-WAR BASIS
A T HOME

%

Basis
ALLIED AND
British Empire
Great Britain
. .
Australia
. . . .
Canada
India
N e w Zealand
. .
Union South Africa
eCrown Colonies,
Protect., etc . .
Total British Emp.

4,521
55
-STF
- U 5
1

-49

%

War
Receipts

18.4
6.1
-s*
-180.8
0.5
"5444

16,08a
65.4 3,009
706
78.4
113
1.158 104.6
61
416 295-0
347 117.1
76
118 IJ /I./
66

-32

4,296

69.7

—18.4 10.619
05.6
95.6
15.0
i.l 3,314
73.0
250.0 i — Q -150.0
135.6
-38.6
M36
«ai6 -107.4
- J ' J 7,633
102.1
' 30.I 13,485
68.8
6.2 53.309
77.2

3.335
663
1.936
74
1.378

3,389
327
198

30.6
100.0
i.i

9,919

144

711
47

13.1
-20.7

H4.8
80.2
08.0
33.1

Total Cent. Pwre. -IM6

— 4-8 35.831

IOO.3

1,106

79.030

83.3

11,035

3,050




20,058
845
1,165
396
210
58
t*
-1400.0
-65

67.0
2.7 22,667
5.5
05-7

23.0

-27.O 6.341
40.5 -182
3.0 19,409
353
-5-4

. .

715

100.0
17.3 606
-107.2 -66
28.1

40

CENTRAL POWERS
/Austria-Hungary
. -1,516
-92
(Bulgaria
398
Germany
-36
(Turkey

G m n d Total

12.0

348

236

R,49I

31

662
13,151

—3

4,592
- 9
276
216
10,157
227
12,683

2.2 64,619
6,952
—/35
19,418
701

9

0.0

43

9

0.0 26,936

11.7

1,500

' 32.3

iJ

TOTAL
INCREASED
os WAR
RECEIPTS

R
<
War
Receipts

11.8 1,067
4.4
12.6
36
2.0
53 — 54 -4-9
— 20 -14.2
36.0 - 1 1 3 -53 6
733.3 — 136
-63

18,737

TOTAL

EP
War
Receipts

War
Receipts

JJ.O

15.6

OTHER
FOREIGN

%

War
Receipts

4,183

{Belgium
-2,047
^Greece
-66
Italy
—50
Japan
. . . . . .
15
(Portugal
— 102
-417
(Rumania
Russia
(Serbia
United Sates . . . ' 5,458
T o t a l Allies . . .

FROM ALLIES

91,555

b RECEIPTS
PRE-WAR
BAMS

R*

R-

Grand
Total

Graiul
Total

81.6 24,579 83.4
900 6t.6
03.0
103.2 1,107 4U
141
280.8
5-9
211
00.3
23.0
9
1.6
644.4

4.90a
560
1,180
3.3 J4
634
573

38.4
31.6
94*
73.0
98.4

Grand
Total
Rcccipts
for
Period

39,481
1.460
3,287
3,375
845
581

67.0

-97

-13.1

738

113.1

641

84.4

26,850

71.3

10,820

28.7

37.670

100.0
118.4
4.4

662
11,104

101.1

4,542
16
174
-201
7,479
227
18,141

it.7
68.4
-4 4.5
60.7
0.4
27.6
-95.2
55.2
61.2
86.7

618
5.U0
324
3.940
1.534
456
41a
6,082
144
2.787

48.3
31.6
144.5
30.3
00.6
72.4
105.2
44.8
38.8
13.3

I.a80
16,334
155
7.483
1.530
630
311
13.561
371
30.938

-150.0
138.6
-107.4
135.8
100.0
69.9

-69

03.8 68,915
127.0
50.5
08.0
105.4

5,436
-227
19,816
665

68.9

50.1
-92.3
85.5
41.7

31.137

31.t

I00.052

5,410
473
3,36o
930

40.0
102.3
Tt-S
58.3

z 0.846
246
33-176
1,595

104.8 25,690

71.6

IO.T73

28.4

94,605

69.6

41.310

30.4

3S.863
135.915

T A B L E XI—AHOW THE WAR WAS PAID FOR—FIRST PART
FISCAL YEARS 1 9 1 4 (OR 1 9 1 4 - 1 5 ) TO 1916 (OR 1 9 1 6 - 1 7 ) INCLUSIVE
(In "Currency" dollars—000,000 omitted)
^NORMAL RECEIPTS
FOR PERIOD

RECEIPTS FOR WAR FOR PERIOD

TOTAL RECEIPTS
FOR PERIOD

NATIONS
Borrowing
Revenue

ALLIED AND
ASSOCIATED POWERS
British Empire
Great Britain
Australia
India
N e w Zealand
Union of South Africa . . .
cCrown Colonies, Protectorates, e t c .
. . . . . . . .

eBelgium
,
France. . . . .
Italy
Japan . . . . . .
< Portugal
em Rumania
. . . . . . . . .
,
. . . . . . .

15,551
631
654
26
127
71

18,246
731
677
56
253
69

-22

26

1.173

1.153

17,038

20,058

318
4.949

530
647
i.ooS

789

520
9,211
4,145

346
3.499
1,374
741
330
"9
4.930
73
709

Other
From
Allies Foreign
672
163
173
71
95

48
14.713

-222
769
62
28

7.775
3.077
-72
113
3
10,087

-46
-tfllt

r.144
34
103
15

-58

-63

Revenue

3,451
40^
1,050
350
320

Borrowing

Total

Revenue

Borrowing

All Receipts

15.551
657
838
93
194
137
39

30.697
I OIL
1.367
1.173
570

36
184
67
67
66

3.451
380
590
ILL 17
317
286

5.146
354
429
1.0 80
376
318

51

369

366

461

5,410

7.969

17.499

395
35.468

63
66
96
31
—

246
3.377
3,143
803
358
73
3.899
73
1,106

583
9.377
4.341
9
131
135
13.331
207
I.750

839
11.554
6,384
813
379
198
17.130
379
3,856

35S

331

123
141
13,231
207
1,738

13

309
3,565
1.470
763
328
103
4.930
72
731

3.173

46,342

49,329

15.859

701

16.560

IS.846

47.043

65.889

7,000
10

10
139
3,913
307

520
8,989
4,914
50
151
95
12,210
207
2,135

13,173
621

7,255
- 9
13,151
595

3.346
99
1.663
396

I20
18
69

3.346
319
1,680
465

3-501
120
1,640
370

7.000
90
13,191
69O

10.501
3IO
I4.8U
1,060

—12

2

— l6

CENTRAL POWERS
eAustria-Hungary
. . . . .
{Bulgaria
. . . . . . . . . .
Germany
eTurkey
.

.

Grand T o t a l




397

1,738

2,987

T o t a l Allies

T o t a l Central P o w e r s .

Total

Total
Receipts
for War

—22

I3.73S
435
378
11
114
39

3,020

T o t a l Empire

^Serbia
(United S t a t e s .

2,695
100
23
30
126
- 2

At
Home

37.49?

6.677

255
21
-22
-26

6,000
-JO
13.163
374

1,000

228

I9.4Q7

1.347

10

20,764

20,992

5.403

307

5.6IO

5.631

30,971

36.602

3.215

56.809

8.03«T

2.181

67.106

70.321

21.363

008

22.170

34»477

68,014

93.491

347

-30

T A B L E X I I — a H O W T H E WAR WAS P A I D F O R — F I R S T P A R T
FISCAL YEARS 1914 (OR 1914-15) TO 1916 (OR 1916-17) INCLUSIVE
(In 1 1 1913" dollars—000,000 omitted)
^NORMAL RECKIPTS
FOR PERIOD

RECEIPTS FOR WAR FOR PERIOD
NATIONS

ALLIED AND
ASSOCIATED POWERS
British Empire
Great Britain
Australia
. .
.
Canada
India
N e w Zealand
. . . . . .
Union South Africa
. . . .
cCrown Colonies, Protectorate*. etc
Total Empire

Borrowing
At
Home

From
Allies

Other
Foreign

9.6JI
309
303

S07
113
154

87
34

50
83

901
16
59
39

1,161

-39
— 98
60
-22
-37

CENTRAL POWERS
c Austr ia-II u n gary
(Bulgaria
Germany .
(Turkey .
.

.

Grand Total




11,039
438
515
29
79
54

Total
Receipts
for Wat
12,200
438
476

Revenue

-69
139
32
-63
"ST —51 —88
-58

3,451
354
406
i.oso
350
330

IO.363

907

833

12,103

13,128

—8355,156
-122 1.674
19
j
-S3 - r83
-99
Si
-2,4055,973

388
370

491

388
6,017

388
5,182

346
3499

535

2,199

6

2,077
6
35
5,732
155
1,182

1.374
741
331
119
4.920
73
686

41

-13

-822 4.073
-14 - 7 0
-427 9,106
-31 191
-1,29413.300
—3,723
37.736

Borrowing

36
184
67
67
66

Total

3.451
3S0
59o
1,117
317
386

Revenue

Borrowing

All
Receipts

3.612
354
367
953
310
198

11.039
464
699
96
146
130

14.651
718
1,066
1,048
456
318

SI

369

281

461

5.410

S.974

13.564

18,538

63
66

309
3.565

246
1,664

451
6,083

697
7.747

96
31

XI

1,470
763
338
103
4.930
72
697

1,252
760
178
so
2.515
73
737

3.395
8
85
35
8,137
155
1.152

3.547
768
263
55
10,652
337
1.879

699

16.536

13,408

30.96s

44.373

I20
18
69

3.346
219
1,680
465

3,424
85
1.335
365

4.784
50
9,133
503

7.308
135
10,368
867

-3
-16

381

1.981
155

I84

88
51
8,137
155
1,141

4.333

1.508

30,266

27,837

15,837

4,784

3,962

9,115
433

8,688
402

3.346
99
1,663
396

14,262

12,968

5,403

207

5.610

4.109

14.469

18,578

44.528~ 40,805

31.340

0O6

22,146

17.517

45.434

62,051

X.141

-2t429
34,426

T o t a l Allies

Total

318
4.949

1.025

cBelgium .
France
nGreece
Italy
Japan
(Portugal . .
„
,
r»» Rumania
Russia
. . . . . . . . . .
^Serbia
/United States

Total Central Powers

Revenuc

RECEIPTS
FOR PERIOD

711
343

9

953

9

5.38 s

1.517

-48

-70 -84

T A B L E XIII—aHOW T H E WAR WAS PAID FOR—SECOND P A R T
FISCAL YEARS 1917 (OR 1917-18) TO 1919 (OR 1919-20) INCLUSIVE
(In "Currency" dollars—000,000 omitted)
6NORMAL RECEIPTS
FOR PERIOD

RECEIPTS FOR WAR FOR PERIOD
NATIONS

ALLIED AND
ASSOCIATED POWERS
British Empire
Great Britain
. . .
Australia
Canada
India
New Zealand
. . .
Union of South Africa
cCrown Colonies. Protectorates, etc . .
Total Empire

. .

(Belgium. . .
France . . .
^Greece . . .
Italy
. . . .
Japan
. . ,
(Portugal . .
(Rumania . .
oRussla . . .
(Serbia . . .
United States

Revenue

11,347
324
379
500
72
82

Borrowing
At
Home
14.376
709
1.762
732
278
130

From
Allies

Other
Foreign

-181

-J03

1,638
98
4,469
688

162

-20

1,766
13,322

20,889

. . . .

35,076

CENTRAL POWERS
^Austria-Hungary. . - •
(Bulgaria
Germany
(Turkey

1,566
224
5,799
9

5.570
107
38,020
441

Total Central Powers

7,598

34.138

Grand Total . . . . . 42,674




-62

4.569
4.7SO
384
2.843
Sr
274
713
338
397

69.190

Total Allies

-140
"36

866

6.408
22
375
743
4.980

103.338

Total

Total
Receipts
for
War

Revenue

19,407
748
1,476
583
280
29

30,754
1,072
1,855
1,083
352
111

2.451
254
406
1,050
350
330

54

303
35,530

866

Barrowing

318

22,577

300
39

54
17.987

.

Total

Revenue

13.798
578
785
I.5SO
333
303

Borrowing

All
Receipts

476

36
184
67
67

66

3,45i
380
590
I,H7
317
386
369

567

105

673

4.949

461

5,410

17.902

33.038

40,940

63

228
21,286

996
7,565
228
34,608

346
3.499
143
1.374
741
331
357
I.I63
73
2,138

36

309
2,56s
234
I.470
763
32S
309
1,162
73
2,164

346
4.137
341
5.843
1,429
393
337
2,928
73
I5.4SO

939
23,886
319
9.347
43
453
96A
5.799
338
31.333

1.175
37,023
560
15.190
1.473
846
1.305
8,737
300
36,773

84,549

58

-30

249
12,953

_

TOTAL RECEIPTS
FOR PERIOD

119,625

13.903

783

14.685

48.978

85,332

134.310

5,570
583
28,020
665

7,136
807
33,819
674

3,164
114
1,662
396

141
18
69

3.164
355
1.680
465

3.730
338
7.461
405

5.570
724
38,038
734

9.300
1,063
35.499
1.139

866

•3*

22,820

228

9,251

22

456

1,016

5,799

24,458
326
13,720
710

618

66

91
96
31
—J

-48

19.407
774
I,66o
650
347
95

33.20S
1.353
3.445
3,300
669
397

47,000
181.310

T A B L E X I V — a H O W T H E W A R WAS P A I D F O R — S E C O N D P A R T
FISCAL YEARS 1917 (OR 1917-18) TO 1919 (OR 1919-20) INCLUSIVE
(In " 1 9 1 3 " dollars—000,000 omitted)
6 NORMAL RECEIPTS
FOR PERIOD

RECEIPTS FOR WAR FOR PERIOD
NATIONS

ALLIED AMD
ASSOCIATED POWERS
British Empire
Great Britain
Australia
Canada
India
N e w Zealand
Union South Africa
. . . .
c Crown
Colonies.
Protectorates, etc
Total British Empire

. .

3,360
55
—19

-157

-59
-27

Borrowing
At
Home

From
Allies

Other
Foreign

6.45:
397
856
416
160
84

3.402

166
10
- i r j
-49

9,019
407
650
367
131
4

—14

— 14

"03
' * ' 36

-17

5
3,158

8.364

3.318

-1,2/3
-66
72
- 4
-49

^Belgium
France
^Greece
Italy
Japan
^Portugal
cRumania
oRussia
cSerbia
United States

5,463
— /I
1.640
4
154
165
1,660

1.556
74
753

—273

. .

Grand Total




' II,'34V

308
73
198

38,783

5.587

-694
-78

-118
115

-66

34

6,725

CENTRAL POWERS
^Austria-Hungary
cBulgaria
, , . ,
Germany
. . . . . . . . .
^Turkey

-35
-63

53

-17

2,168

—112

Total

Total
Receipts
for War
12,379
462
631
210
72
-23
- 9

Revenue

3.451
354
406
1.050
350
320
318
4.949

10.303
162

106

48

13,531

153

6,773

41.304

5.740

13,722

274
7,134
- 3
2,393
4
188
165
2,020
72
11,542

274
5,922
-69
2,465
139
—/5J
1,747
72
16,959

346
3.499
136
1»374
741
331
357
1,163
73
3,058

34,353

41,078

13,835

1,474

3,164
114
1,662
396

-65

47

825
—5

10,564

2,168

27i

5,417

T o t a l Allies

T o t a l Central Powers .

Revenue

10,303
268

-143

11,128
263

Borrowing

Total

GRAJ*D TOTAL RECEIPTS
FOR PERIOD
Revenue

Borrowing

36
184
67
67
66

3.451
2 Bo
590
1,117
317
386

5.811
309
387
893
191
193

51

369

33 3

461

S.410

8.107

63
66
88
96
21

309
3,565
334

33

1.470
763
228
309
1,162
73
3,090

346
1.387
70
1.446
737
183
39
889
73
7.475

11,574

583
8.487
155
3.935
763
367
156
2.909
144
19,049

776

14,601

30,550

35,139

55,679

141
18
69

3,164
355
I,68O
465

1.470
36
3.487
391

2,168
76
10,321
337

3.638
113
13,808
738

- J

9.OI0
433
834
434
198

All
Receipts

70
37
H.025
337
7,200
85
3.489
35
185
117
2.020
73

14,830
743
1.221
1.337
389
263
360
19.133

12,674

-17

12,722

4,336

328

4,S64

4.384

13.903

17,386

47,027

53,800

18,161

1,004

19.T65

34.934

48.031

73.965

T A B L E X V — N A T I O N A L D E B T S OF A C T I V E B E L L I G E R E N T S
IN T H E G R E A T W A R
STATUS AT CLOSE OF FISCAL YEAR 1916 OR 1 9 1 6 - 1 7
(In "Currency" dollars—000,000 omitted)
INTERNAL DEBT

aFunded

6Floating

U.937
518
340
681
207
96

303
18

15.779

4j8t

10.566
33
4.761
531
443
8,993

3.921
53
1,406
15
208
443
9.634

14.487
75
6,167
546
594
886
18,637

I.OI5

267

1,283

4M96

20,328

6,349

ALLIED AND
ASSOCIATED POWERS
British Empire
Great Britain
Australia
. .
Canada . . .
India
. . . .
New Zealand
. .
Union South Africa
Other . . .
Total Empire
Belgium
France
Greece
Italy
Japan
. . . . . . .
Portugal
Rumania
Russia
. . . . . . .
Serbia
United States (Apr. i)
(Total Allied Powers
CENTRAL POWERS
Austria-Hungary . . ,
Bulgaria
Germany
Turkey
Total Cent. Powers
(Grand Total

EXTERNAL DEBT
To
To
Foreign Foreign
GovernMarments
kets

. . .

386

I 1.995
18,344
60,840

Total

17.959
539
643
699
307
113

671
333
181

X.I44
52
558
847
354
596
358

1.198

3.809

647
14
1.043
13

789
231
2S
68 j
185

3.6*29

3*308

62,824

6,543

8,030

4.916
160
4.451
4SO

12,265
160
16446
450

473

9.977

38,331
9M45

347

667

7.363

8,883

853

^Includes debts maturing after one year.
Mndudes treasure bills and all other debts maturing In or within one year. Issues
deposited as collateral security for external debt* deducted.
(Excluding Belgian and Serbian figures, as these countries were then in enemy
hands.

336]




T A B L E

X V I — N A T I O N A L

D E B T S

O F

ACTIVE

BELLIGERENTS

S T A T U S A T C L O S E OF F I S C A L Y E A R S
( I n " 1 9 1 3 " dollars—000,000
INTERNAL DEBT

1 9 1 6 OR

IN

Funded

T o t a l Empire .

6.866
357
aos
5J3
137
68

frFloating

r.981
IS
183
14
ta

8.165

Total

8,847
373
387
546
137
80

Total

889
196

Total
Interest
National Charge
Debts

"47'
30

10,369

663
381
4S3
178

9.736
568
«J2
1.208
418
533
178

364
19
37
39
IS
25
9

3.443

3rs
160
109

3.104

13*473

498

411
IIS

743
133
411
542
226
35
3.276

7.481
160
2,110
975
625
256
9.485
750

130
47
31
15
317
16

slt

336
662
234
433
178

France
Greece
Italy
Japan
Portugal
Rouraania
Russia
United States (April 1)

4.SH4
II
1,31?
421
359
ill
3.998
594

387
13
140
XIO
3.3II
156

6.738
38
1.699
433
399
331
6,309
750

T o t a l Allies .

18,785

8,071

36,856

4.096

3,173
60
3.903
394

7,268
60
TO,738
394

388

7.672
175
10,728
884

6,439

18.350

388

19.459

. .

CENTRAL POWERS
Austria-Hungary
. .
Bulgaria
Germany
Turkey
. . . . . . .

"7.835'

Total Cent. Pows,
eGrand Total

. .

30.706

1.834
37

333
7
401
14

542
312

3,003
5.006

a. b and (.—See notes on Table X V .
rfThesc figures without India would be 117.93; 4*41; 11.14; 2.73.




Debt

211.63
113.60
104.00

406
53

Debt
Interest
Per
Per C e n t
Cent.
PrePreInterest
War
War
National
Charge
Wealth Income

4-05

418.00
S8.83

701 13.01
3Jio 6.60
337 3.68

.16
15.00

403
22.47

3 34
1.46
1.33

4.17 10.66
.34
1.78

I.30
5.00
312
.60

8.80

4.82

4*63
dl43 dg.62 d2.3t

638.71
18702

35.315
404
115

45.306

W A R

PKR CAPITA
(PRE-WAR)

NATIONS

CERTAIN ALLIED AND
ASSOCIATED POWERS
British Empire
Great Britain < . .
Australia
. . . . .
Canada
India
N e w Zealand . . .
Union South Africa
Other

G R E A T

omitted)

EXTERNAL DEBT
To
To
Foreign Foreign
Govcra- Markets
nents

T H E

1916-1917

12.92

13.OO2.20
3.82
333
333 0.68
3.08
.89
837
3.04
104.16 5.17 26.04 13.02
4.38
36.57 2.14 I'3'
3.80
54-51 135 16.24
7.65 .16
•37 .05
46.04
i.7o 7.08
1.73
38.61
18.40

153.448.62 35.57 9.58
4.00
35.00 2.00
7.00
157.76 3.97 13.33 3.87
42.09
2.53
8.42
5.05
135.13 6.23 15.76 5.53
8.80
2.41

T A B L E X V I I — N A T I O N A L D E B T S OF A C T I V E B E L L I G E R E N T S
IN T H E G R E A T W A R
STATUS AT CLOSE OF FISCAL YEAR 1916 OR 1 9 1 6 - 1 9 1 7
(In dollars at Exchange on New York)
INTERNAL D E B T
NATIONS
aFunded
ALLIED AND
ASSOCIATED POWERS
British E m p i r e
G r e a t Britain
. .
Australia
. . , .
Canada
India
N e w Zealand
. .
Union South Africa
Other

.

.

.

T o t a l Allied Powers
C E N T R A L POWERS
Austria-Hungary .
Bulgaria
Germany
. . . .
Turkey
T o t a l Central Powers
(Grand Total

3.939
20
303
17
16

Total

17.589
527
643
684
203
no

671
232
181
71
43

Total

Total
National
Debts

1,144
52
558
847
354
596
258

1.815
2S4
739
847
425
639
258

19.404
8N
1.383
I.S3I
628
749
258

15.461

Total Empire
France
Greece
Italy
Japan
Portugal
Rumania
Russia
United States

13.650
507
340
667
203
94

tFloating

EXTERNAL DEIIT
To
To
Foreign Foreign
MarGovernkets
ments

. . . .

4.295

19.756

1,198

3.809

5.007

34.763

9.344
22
3,403
544
203
266
5.396
I.0I5

3.468
53
1,007
15
109
266
5.780
267

X2.8I2
75
4»4*S
559
312
532
11.176
Z.2S2

647
14
I.043

14.248
330
5.483
1.242
509
671
17,113
1,28 3

35.659

15,260

9,142

12

789
231
25
683
185

3.629

2.308

1.436
245
1,068
683
197
139
5.937

50.9X9

6.543

8,030

I4.7J2

65,631

6.493
96
12.53S
370

473

186

473
186

3.353
270

347

667

x,OI4

6.966
383
13.535
1,384

12.801

6,593

x 9.394

820

853

1.673

31.067

48,460

21,853

70,3x3

7.363

8,883

16.385

86,698

3.659

a, b a n d c . — S e e n o t e s o n T a b l e X V .

338]




T A B L E

X V I I I — N A T I O N A L

B E L L I G E R E N T S

IN

D E B T S

T H E

OF

G R E A T

S T A T U S A T C L O S E O F F I S C A L Y E A R S 1 9 1 9 OR
( I n " C u r r e n c y " dollars—000,000
INTERNAL DEBT
NATIONS

ALLIED ANIJ
ASSOCIATED POWERS
British Empire
Great Britain
Australia
. .
Canada . . .
India
. . . .
New Zealand
Union South Africa
Other

t Float>
ing

24.24s
1.263
2,067
970
497
207

7,844
49
414
359
39

Total

A C T I V E
W A R
1919-1920

omitted)
EXTERNAL DEBT
To
To
Foreign Foreign
Govern- Markets
ments

32.089
1,312
2,48!
1.329
497
346

5.068
239
128
36

1.154
304
56I
937
354
564
365

Total Empire

29,349

8,705

37.954

5.471

4.239

Belgium
. . . .
Prance
Grecce
Italy
Japan
Portugal
Rumania
. . . .
Russia
. . . . .
Serb, Croat,
Slovene
State
United States
. . . .

1,099
20,215
54
10,145
738
1,204
769
8,993

2,357
14.554
272
3,793
241
58o
869
9.634

3.456
34.769
326
13.938
979
1.784
1,638
18.627

242
5.397
33
3.900

83
1,084
265
II
653
177
512
2,308

4S4
3.006

484
24,298

64

Total Allied Pows.

03,758

138.253

18,840

CENTRAL POWERS
Austria Hungary
Bulgaria . . . .
Germany
. . .
Turkey
. . . .

10.624
t6
21,896

9.642
756
34,990
89!

20,266
772
46.8S6
891

Total Cent. Pows.

32,536

36,379

68,815

Grand Total . . .

126,294

80.774

207,068

103
2
3,629

357
202
667

10,558

a Includes debts maturing after one year.
Mndudes treasury bills and all other debts maturing in or within one year; except
issues deposited as collateral security for external debts.
(Germany claims to have loaned £476 million to Bulgaria. Bulgaria also owes
$434 million war indemnity under the Peace Treaty.




[339

TABLE

XIX—NATIONAL

DEBTS

OF

ACTIVE

BELLIGERENTS

S T A T U S A T C L O S E O F F I S C A L Y E A R S 1 9 1 9 OR
( I n " 1 9 1 3 " dollars—oootooo
INTERNAL DEUT
NATIONS
Funded
ALLIED AND
ASSOCIATED POWERS
British Empire
Great Britain . . .
Australia
Canada
India
New Zealand . . .
Union South Africa
Other

b Floating

7.746
54 3
804
490
251
135

3,506
161
181

Total

10,353
563
965
671
351
149

3,333
103

64

Total

Interest
Total
National Charge
Debts

369
130
207
946
179
343
157

3,591
333
307
946
343
364
157

13.843
796
1,173
1,617
494
513
157

9,058

3.893

13,851

2411

3,330

4.741

360
4.I5I
14
1.374
330
343
64
3.998

817
7»I39
83
I.75I
305
507
136
6.309
97
9.999

86
3.134
14

39
383
no
3
154
323
470
1.373

115
3,516
124
1,603
154
35 3
473
3.376
13

8.763

557
3,988
68
477
75
165
73
3.2II
97
1.337

933
9,655
306
3.354
459
859
608
9,485
109
9,999

T o t a l Allied P o w e r s

38,053

11.840

39.893

8.391

13.365

3.541
I
3,971

3.314
65
3,391
131

6.755
66
6.362
121

917
19

7.673
85
6.363
855

6.513

6.791

I3.304

873

1,670

34-566 1 18.631

53.197

9.264

15,035

Total Cent. Pows.
Grand Total

.

. .

1,600
139

383
19
338

396

a. b and c.—See notes an table X V I I I .
dThese figures without India would be 153 60; 7.31; 14.51; 4-46.




GREAT

WAR

Interest
Debt
Per Cent
Per
PreCent.
War
PreInterest War
National
Charge Wealth Income

PER CAPITA
(PRE-WAR)
Debt

270.10
150*30
146.50
6.63

18.35
0.25
8.03

404.00
73.28

20.00
2.86
.31

26.56
10.26
1.37

dS0.5S
43
438
6
176
26
43
36
303
6
451

13-30
7.40
6.13

4.13

53.358

CENTRAL POWERS
Austria-Hungary
. . .
Bulgaria
Germany
Turkey

616
37
49
47
20

17,593

Belgium
France
Greece
Italy .
Japan
Portugal
Roumania
Russia
Serb, Croat & Slovene St.
United States

Total Empire

THE

omitted)

EXTERNAL DEBT
To
To
Foreign Foreign
Govern- Marments
kets

IN

1919-1920

d2.2Q

116.50
341.37
41.20
03.17
8.66
143.17
86.86
34.51
21.80
102.03

5.37
10.95
1.20

68.28
431
5
371
51

.10

d

12.55
16.21
16.67
7.40
15.38
306
35.70
17.37
16.24
4.74
5.00

4.89
.49
7.17

5.14
1.74
1.20
4.60

2.98

9.80

153*44
17.00

8.62

40.71

2.43

8.14

5.26
3.34

13,12

1.00

03.56 3.0S

35.57
3.40

7.90

IO.83

T A B L E X X — N A T I O N A L D E B T S OF A C T I V E B E L L I G E R E N T S
IN T H E G R E A T WAR
STATUS AT CLOSE OF FISCAL YEARS 1919 OR 1919-1920
(In dollars at Exchange on New York—000,000 omitted)
INTERNAL DEBT
NATIONS
ALLIED AND
ASSOCIATED POWERS
British Empire
Great Britain
. .
Australia
Canada
India
. . . . . .
New Zealand
. .
Union South Africa
Other
Total Empire

6FloataFunded
ing

.
.
.
.

19.328
1.007
1.891
977
396
16 5

6,253
39
379
361

Total

EXTERNAL DEBT
To
To
Foreign Foreign
Govern- Markets
ments
5,o68
239

31

25.581
1.046
2,270
1.338
396
196

128
36

Total

Total
Narional
Debts

R.154
304
561
937
354
564
365

6,232
543
561
937
483
600
365

3*.8 03
1,589
3.831
3,375
878
796
365

. .

33.764

7.063

30,837

5.471

4.239

9.710

40,537

Belgium
France
Greece
Italy
Japan
. . . . . . . .
Portugal
Rumania
Russia
Serb,Croat &SloveneSt.
United States
. . . .

529
9.529
33
3.107
711
279
69
5432

1.663
16,390
192
4.269
943
413
148
11,352
97
24,298

242
5.397
33
3.900

83
1,084
265
II
653
177
512
2,308

21,292

M34
6,86i
160
1,162
333
134
79
5.S20
97
3,006

, 335
6,481
39 8
3.911
653
279
514
S.937
64

1,988
23,871
490
8,ISO
1,596
692
662
17.189
161
24,298

Total Allied Pows..

64.744

25.748

90,492

18,840

9.333

28,172

118,664

CENTRAL POWERS
Austria-Hungary . . .
Bulgaria .
Germany
. . . . . .
Turkey
. . . . . . .

393
I
I.396

357
69
1.479
204

750
70
3.775
304

500
C

357
202

857
202

571

667

1,238

1.607
272
3.775
M42

Total Cent. Pows..

1.690

2,109

3.799

1,071

1,226

2,297

6,096

Grand Total . . .

66.434

27.857

94.391

I9.9II

10,558

30,469

124,760

102
3
3.639
64

ot b and c.—See notes on Table X V I I I .




[341

T A B L E X X I — N A T I O N A L D E B T S OF A C T I V E B E L L I G E R E N T S
IN T H E G R E A T W A R
STATUS AT CLOSE OF FISCAL YEARS 1922 OR 1922-23
(In "Currency" dollars—000,000 omitted)
EXTERNAL DEBTS

INTERNAL DEBTS

CERTAIN OF THE
FORMER ALLIED AND
ASSOCIATED POWERS
British Empire
Great Britain . . .
Australia
Canada
India
New Zealand , . .
Union So. Africa
Other
Total Empire
Belgium
. .
France
Greece
Italy
Japan
Portugal
. .
Rou mania .
United States

aFunded

35.832
1,468,
1,935
996
539
212

6 Floating

6,552
14!
440
369

. .
. .
. . . .

CERTAIN OF THE
FORMER CENT. PWS.
Bulgaria
Germany
Turkey

2,597
31.652
606
U.599
1,088
2,530
904
16,872

3,377
37.406
715
6.935
275
1.745
2.508
5.478

32.384
1.4S2
3,375
1.36S
539
331

5,874
59.058
I.32I
18,534
1.363
4.375
3413
32,350

5.62s

5.354
445;

38.476

30,982

. .

Total

To
| To
Foreign Foreign
Total
Govern-j Marments | kets

S09
825
,969,14211.984.475
79,
79

S4 Zi

542
547

1,168

1,168

6.000,

3.424;

9.424

7Q7J
6,105
72!
4.372;

1271
758,
250
IO
677
172

834
6,863
323
4.383
677
267
893

648

'648

143!
58;

95

536
641
36s

192

a Includes debts maturing after one year.
^Includes treasury bills and all other debts maturing in or within one year. Issues
deposited as collateral security for external debts deducted.
On account of the many territorial changes since the Pcacy Treaty it has been impossible to make these tables entirely comparable with those for the war and pre-war
dates. Index numbers and exchange quotations have also been lacking in some cases.

342]




TABLE XXII

NATIONAL D E B T S OF A C T I V E B E L L I G E R E N T S IN T H E G R E A T
STATUS AT CLOSE OF FISCAL YEARS 1922 OR 1922-1923
(In "1913"
INTERNAL DEBT

CERTAIN OF THE
FORMER ALLIED AND
ASSOCIATED POWERS
British Empire
Great Britain
. . .
Australia
Canada
India
New Zealand
. . .
Union South Africa
Other
. . . . . .

0
Funded 6 Floating

Total

. 16,559
941
1.159
550
.
311
.
165
.

4,300
9
363
304

Total Empire . . . 19,685

4.769

34.454

Belgium
638
France (July 1,1923) . . 7.739
Italy
3,043
Japan (March 31. 1932)
541
Portugal (Dec. 31,1923)
195
United States
11,027

805
6,701
1,331
137
135
3.581

1.443
14.440
3,363
678
330
14.608

33
403

To
To
Foreign Foreign
Govern- Marments
kets

33
406

CERTAIN OF THE FORMER
CENTRAL POWERS
Bulgaria
. . . . . . .
Germany

# *3

93

30,759
950
1.433
754
311
358

Total

Total
Interest
National Charge
Debts

Debt

Debt
Interest
Per
PerCent.
Cent.
PostPostwar
Interest
war
National
Charge
Wealth Income

180
63
338
645
327
501
157

3.744
347
338
645
304
SOI
157

34.S03
1,297
1.750
1.399
615
750
157

1,017
69
So
56
5
6
11

3,926

2,IOO

6,OA6

30,480

1,344

c83.62

C3-40 C20.46

C6.23

333
4,701
3,365

40
584

0263
5.385
3.273
338
439

1.705
19,735
6.536
1,006
&769
14.608

63
799
310

243-57
505-77
163.40
17-96
128.17
134-02

8.86
20.40
3.23
.73
2.J3
6.13

6.80
11.41
6.18
2.05

10.80
6.65

.61

3.564
385
77

156

328
383

cThese figures minus India would be 366.80; 10.90; 25.31; 7.33.




PER CAPITA
(Post-WAR)

EXTERNAL DEDT

NATIONS

WAR

40$

41

67%

37

521.34
25940
194-44
5.69
613.00
108.43

3.92

21.64
13.80
8.80
• 23
3.00
8-37
.28

33.00
14.41
11.67
4.00
30.73

12.63
1.31

34-10
34-07
30.76
6.71

33.04

10.17
3-31
3-33
1.60
1.39
0.67
0.73

6-35

2.16
-74

.33

T A B L E X X I I I — N A T I O N A L D E B T S OF A C T I V E
B E L L I G E R E N T S IN T H E G R E A T W A R
STATUS AT CLOSE OF FISCAL YEARS 1922 OR 1922-23
(In dollars at Exchange on New York—000,000 omitted)
INTERNAL DEBTS

EXTERNAL DEBTS

NATIONS
CERTAIN OF THE
FORMER ALLIED AND
ASSOCIATED POWERS
British E m p i r e
G r e a t Britain
. . .
Australia

6FloataFunded
ing

5,354
445

US

3X.XS6
1.395
2,333
880
519
3*9

29.524

7,108

36,632

896
10.050
36
2.671
1,031
Z20
34
16,872

1,131
8,701
43
I.S97
361
82
94
5.478

2.027
18,751
79
4,268
1,292
302
128
22,350

0
71

28
9.107
13

28
9,178
13

I92

24.876
1.382
1,901
642
5I9
204

6,310
13
432
238

.

Italy
Japan
. . . . . . . .
Portugal
Rumania
. . . . . .
United States
. . . .

India
.
N e w Zealand
. . .
Union South A f r i c a .
Other
T o t a l Empire

.

Belgium
France

CERTAIN OF THE
FORMER CENT. POWERS
Bulgaria
Germany
. . . . . .
Turkey

Total

a , b and explanatory n o t e . — S e e T a b l e X X I .

344]




To
TO
Foreign Foreign
Govern- M a r kets
ments

Total

Total
National
DebU

277
97
547
I.I68
393
583
365

5.631
542
547
1,168
536
641
365

36,817
1.937
3.880
2.048
I,O55
960
365

6,000

3,430

9.430

46,062

707
6,105
72
4,272

127
758
250
10
677
172

834
6,863
322
4,282
677
267
893

2.861
25.614
401
8.550
1.969
469
1,031
32,350

192
648

648

220
9.178
661

*43
58

95

T A B L E X X I V - I N T E R - N A T I O N INDEBTEDNESS A T NEAREST DATES TO ARMISTICE D A Y
NOVEMBER II, 1918
(In "Currency" dollars—ooo omitted)
LENDERS

m T,

(M B O R R O W E R S

EI5F*

British Empire
Great Britain
Canada
New Zealand
Union of South Africa .
British Sou tit Africa Co.
Crown Colonies

Great Britain
to Allied
Governments

238,920
•214.133
144,146
80,023

693,434

443,796

0431.376

6152,314

Russia

1,365,160

United States Argentina

3,696,000

93437

431,376

152.314

1,265.160

96.625
176

78.051
3,737.005
90.715

36

220,406
955,157
297.413

9.307.490

444,008

93,437

6,775.507

10,000
4.180,853
245,317
3,210,075

1,031.000

932

932

61,273

61,373

364,280

4,886,900
398.733

8,369

3,148,237

398,457

187,730
10,605

6,972

382,719

•Canadian figure. Great Britain's figure is $352,337.
a 1393.162.000 (gold).
frlSo.674.ooo (gold!.




6.082,073
338,920
314.133
144,146
80.933

1.128,659
11.933

10,000
1,970,000

154.979
171.577

2,007,322

3,696,000
171.780

534.610

11.923

90,338

Total

1.946
4.433

443.796

3,114,228

. . . .

Italy

8,933

422,269

. . . . .

Greece
.
Italy
Montenegro
Portugal
Roumania
. . . . . . .
Russia
. . . . . . . . .
Serbia
United States
. . . . . .
Grand Total

France
Including
Supplies

8.933
1,946
4.433

. . . .

Total British Empire .
Belgium
Belgian Congo
Cuba
. . .

Canada

1,265,160

7,077.115

391.088
93.427

21,599,717

T A B L E X X V - I N T E R - N A T I O N INDEBTEDNESS^, 1 9 2 0 d u e t
(In "Currency" dollar,_HXX) omitted)
GREAT BRITAIN

CANADA

LENDERS
To
For
Allied
Relief
Govern*
and
meats
ReconIncluding strucMaterials
tion

BORROWERS

British Empire
Great Britain
Australia
Canada
N e w Zealand
South Africa
British South Africa C o .
Newfoundland
. . . .
Crown Colonies
. . . .
T o t a l British Empire .

Total

/171,209

350,998

.

FRANCE
To
For
Allied
Relief
Governand
ments
ReconIncluding strucMaterials
tion
430,031

ITALY
T o Allied
( Govem_ . i 1 ments
Total
l n d u d t
ing
Materials
430'03:

t h e

g r e a t

W A R e

ARGENTINA

UNITED STATES

For
Relief
and
Reconstruction

To
Allied
Governments

4,261,000

133,788

For
Relief
and
Reconstruction

Total

16,000 4,377.000

URUQUAY

To
To
Allied
Allied
Govern- Governments
ments

38,973

93437

144,145
76.738
9.493
1,946
4»433

487.753

487,752 171.309

18,463
456459 #35,790
17,375

18,463
483.349
17,375

1.154
973

V.I54
973
.505,3X1

(.505,3X1

6,333

430,031

43°'°F-

6534.6x0

To
Allied
Governments

4.361,000

16,000 4,377.000

42,65:'
I.3SI3«-

34.843

105,374

105,374

' 3,747

155,558

,335,562
65

6,004

171.577

iVV,s7r

3,854.340
2.443

364450

93.427

349.3X4

61,256

84,764

'.325,562

""83
4.S84
'V.8i8
6,131

83
4.584
90,736
106,500
3.737,005
108,949

' 965
335,367
19.443
36

330,406
955.157
397.4X3

38,973

144.145
76.738
9.492
1,946
4433

6,861,329

10,000
61,356

x,083,066
17.375
X 0,000

X43.I37 3.997.477

5461.675

15,000

15.000

" 3*78,706

16,000 1,631.338

4,018481

39
65.079

9,891,953 211,172 & 3 . I 3 7 , 4 6 I

36

"•"it335,26*' *

193
VL',387

36

35,000

35.000
187.739
36,780

13,698

SSJ
750

337
336
8

187.739
X.34X

393,360 3 4 3 0 , 8 3 ^
275.884 IX4.IO4 £9.039,413

25,539

90,726
371.113
4,886,899
404.633
385469

551.408 9.580,830

16,000 6 , 8 7 7 . 3 3 9
81,097
390,340
139,906
2,334

1,6x5,338

33.583

383.7X9

<19,826,874

Total

16,000 d6,389,577
350,998

1,158

90,726
98,683
3.737.005
103,838

Relief
and
Reconstruction

6,373,577
350.998

63,634

534.61**
43.653
X,35i
386

5.50O

133.788

96,624
37
155,S5i'

65

GRAND TOTALS

144.145
76,738
9.493
1,946
4.433

350,998

' 144,145
76.738
9492
1,946
4.433

Austria
Belgium
Belgian Congo
. . . .
Cuba
Czecho-Slovakia
. . . .
Esthonla
Finland
France
French Polack
. . . .
Greece
Germany
Italy
Latvia
Lettonia
* .
Liberia
Lithuania
Poland
Portugal
Rou mania
Russia
Serbs, Croats ^ S l o v e n e s Ukrania
United States
Other
Int.-Allied Comm. on Danube
Grand Total

To
Allied
Govts.
Including
Materials

q

93437

81,097
1^72,306
17.275
10,000
139,906
3,334

386

386
5,604,8x3
2,443
278,706
5
S
16,000 4,034.481
65
65
1*158
X.X58
36
36
1.047
1,047
253.549
253.549
90,736
33,8x8
2 3 7 4.887.136
32,089
436,712
143.137
2443

1

8

11,387
39

8

385469
11.387
29

28,972 33,868,363 1 , 0 3 3 , 9 5 1 2 4 , 8 9 2 , 3 1 3

.
"Wit** reference to the matter of interest payable on the loans made b y the British G o v e r n i n g
wo™.
interestto the Allies the following statement was mSde in the House of Commons on March 8, 1920, W
the Chancellor of the Exchequer:
5
, f5»a^edj°t?r?8t:,
,
,
_
p „
t
" I n the case of the Belgian W a r D e b t no interest is charged, and it has been agreed that
t h i s t o t a l i s t h e sum of f 1,365,160.000 lent b y Russia to Great Britain, viz.:
M i e d and Associated governments shall accept German gold bonds in discharge o ^ p r i n d ^ 9 ^ ^ ^ ^ ^ o f
« e d i t s and loan of 5393^60.000 gold
See text page 137.
f r o m
o p e r a U . o n a . f r o n > August. 1914.
of the debt. Further, no interest has been charged down to the Armistice on loans to Serbia a c j
'This
R ? t
^
A
j
Montenegro.
In the case of the other Allies, interest is not actually paid except in the case ^
f l Ma is the Canadian net figure. British Finance Accounts give the net amount due Canada
one special transaction, but the amount, in some cases, at 5 per cent., and in others at Bank R a t ^
mimon.
is added periodically to the principal outstanding/*

346]




TABLE XXVI—INTER-NATION INDEBTEDNESS

IN 1923 DUE TO THE GREAT WAR

(In "Currency" dollars —000 omitted)
GREAT

Canada

BRITAIN

ITALY

FRANCE

LENDERS

For
To
Relief
Allied
and
GovernReconments
Including struction
Materials

*

BORROWERS

British Empire
Great Britain
Australia .
Canada
New Zealand
South Africa
British South Africa C o .
Newfoundland
Crown Colonies

.

Total British Empire . .

439.831
67,198
143,459
57.827
9.681
1,946
3,719

723,661

723,661

11,010,182

4487
62,308
43,794
6,715
1,221

4487
62,308
43,794
17,275
6,715
1,231

Total

To
Allied
Governments

/I,265,160

For
Relief
and
Reconstruction

4,661,000

GRAND

Total

TO
Allied
Governments

TOTALS

For
Relief
and
Reconstruction

133,788

Total

4,661,000 6,489492

6,489,493
439,831

67,198
143459
57.837

9,681
1,946

9,681
1,946
3.719

69.731

359,823

6,291

C7H.0I3

359,8AI
96
110,782
2,026

133.788

133.788

9*
711,013

62,634

110,781
3.026

34,843

96,624

5.730
7.530

98

108,996
636
3,568,591
98

82

83

1,158

30,659
99,593
11,297
135,886
4,331,976
10,389
137,850

303,808

166,173

" 166.17:
193

"163,857
* 3.219

20,223

37

1,265,160

4,661,000

110,906
16,789
9,000
3,847,521 1 4 3 . 1 3 7

i.itf
13,698

3 3 582
6,973

337

33 582
7.209

3.14*

236
8

17.275

110,906
16,789
9,000
3.990,658 6 , 8 7 7 . 4 7 9

3.377
8
3,750

375.884 114,104 389.988

153,424

308,244
263.346
20,036
9,000
143.137
3,443
5

16,500
1,989
6,032
3I
5,978
176

13.698

7.313,153

18,750
907.316

5

37

2.750

14.263
28,386
454463

3.719

7.213.153

3.443

2,015,079

203.80^

3,704,387 759.357 3463.744

4,661,000

14,363
28,386
190,013 264,450

34.843

163,8s:
3,3 Ij'

337,931
20,449
227.9 33
55 DI,073,080 9 3 , 6 4 0 1.165.72*
2,509 346.435 348.944

109,766

62,634

96,624
3,443
5

161,240 I t , Z 7 I 4 3 2

To
Allied
Governments

STATES

143.459
57.827

cProbably Includes some money for relief and reconstruction.




$359,833

2,927,604

626

UNITED

67,198

^Include $973 million interchange of credit.

3 4 8 ]

«33.788

RUSSIA

439,831

69,731

439,831
67.198
143.459
57.827
9,681
1.946
3,719

Armenia . .
Austria
Beleium
Belgian Congo
17,275
Czecho-Slovakia
Esthoma . .
Finland
France . . .
2,927,604
Franco Polish
Germany . .
Greece . . .
108,996
Hungary
. . . . . . . .
Italy
Latvia
Liberia
Lithuania
. .• . . .
. . .
Nicaragua
. .
Poland
436
Portugal
99.593
Roumania
114,589
Russia
04,321,976
Serbs, Croats & Slovenes . .
I27461
Ukrania
. . ,
United States
Grand T o t a l

Total

Total

359.833

To
For
To
Allied
Relief
Allied
Govts.
and
GovernIncludReconments
ing
Including strucMatetion
Materials
rials

To
Allied
For
Govern- Relief
ments
and
Includ- Reconing
strucMatetion
rials

182,471
15,507

28,292

16,500
299,216
1,989
2,015.079 4 . 7 4 7 , 5 3 7
6,032
31

5,177

43.799
341.903

61,587

336,726

61,587

411,060
5.638,809

30,036
9,000
7,020,616
3.443

5

2,808
8,349
31

4.747,537
8.349
31

420,200

7,218
176
420,636

30,589

99,593
450,649

176

436
99.503

263,246

299,216
2,808

7,218

5.978

176
182,471

18.750
153434
1,2 X 5,560
17.275

133.HI

98.054 5 , 7 3 6 , 8 6 3
551.758
418,647
8
8

3,750

2,750

1,365,160 10,982,346 878,664 I I , 8 6 L , O I O 2 6 . 3 4 T . 7 3 S 1 . 9 1 3 , 3 6 5 2 8 , 2 6 1 , 0 9 0

^Including $192,000,000 paid the Bank of France for discounting Russian Government bonds.
million gold.
/Included $973 million for interchange of credit. Balance is gold.

e$8o

(349

TABLE XXVII—WHOLESALE PRICE INDEX NUMBERS AND
I N T E R N A L P U R C H A S I N G P O W E R OF C U R R E N C I E S
Taken as percentages of 1913 values
GREAT
BRITAIN

CAHAPA

lb

II
1914
January
April
July
October
1915
January
April
July
October
1916
January
April
July
October
1917
January
April
July
October
191S
January
April

July

October
1919
January
April
July
October
1920
January
April
July
October
1921
January
April
July
October
1922
January
April
July
October
1933
January
April

FRANCE

UNITED
STATES

o
sz

t*

21
G

0.3

21

ITALY

P
a*

l l

Price
Index
No.

Purchasing
Power

96
96

103
104
104
95

99

loo
100
xox
107

100
100
99
93

96

104

100
98
loo
99

xoo
103
100
xox

xoo 1 0 0
too 1 0 0
xoo 1 0 0
1 1 7 85

113
134
135
129

89
81
80
77

91

124
135
143
158

81
74
70
63

133

75

99
100
101
xox

xox
xoo
99
99

135
141
X49
145

80
7i
67
69

14s
157
153
166

69
63
65
60

179
190
186
198

56

74

50

xxo
XX7
XX9
X34

91
85
84
75

X48
148
159
153

67
67
63

187
203
203
212

53
49

219
223
227
333
224
217

98

los

264

135

sis

53
54
51

150
171
185
X80

67
58

47

248
268
284

239
265
304
350

56

X56 6 4
X63 63
X7I 58
199 50

46
45
44
43

206

313
333
337
360

33
30
39
28

367
407
435
443

185
190
198
304

54
53
5i
49

203 50
303 49
206 49
333 43

45
46
4l
38

213
206
218
223

348
333
349
383

39 337
30 330
39 3 6 3
36 399

303
303
218
233

49
49
46
45

263 38
286 35
33 9 39
563 18

3t

248
365
362
225

40
37
38
44

X.256
X.567
1.367
1,466

7.9
6.4
7-3

X*439
X>326
X.438
3460

6.9
7.5
7.0
4-*

3,665
6*355
10*059
56,601

48

177

348

56

49

289
313
399
282

33

26l

33
35

256
234

487
588
496
502

232
199
lS6
163

43
50
54
61

203;
187
176
169

407
347
330
331

34
39 5 8 4
3 0 530
30 599

177
154
143
150

56
65
68
66

156
158
157
153

S34 166
6
166
S4
6 5 162

168

314
314
335
337

33

138
X43
155
154

73
70
64
64

163

387

153
157
147

66

47
40
37
35

34

17

30
20

504
664
604
659

643

33
31

29

577
537
558
601

26 575
X56
159
34 5 8 8
566
131
68
35
October^ ISO 6 7 163
431 34 563
X53
See page 319 for explanation of table. oSix 000,000

3 5 ° ]

GERMANY

65
64

168
166




415
407

378476
64
53X,X58
63
6 6 7,478,700
07*100
65
omitted.

6.8

2.7
1.6
.99
.177
.036
.019184
.001337X3
.0000014X

TABLE X X V I I I — P A Y M E N T S DUE ANNUALLY BY GREAT
B R I T A I N A C C O U N T OF D E B T T O T H E U N I T E D S T A T E S
(In "Currency" dollars—00,000 omitted)
Year

1923
I924
1925
1926
I927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
194O
I94I
1942
1943
1944
1945
1946
1947
1948
I949
1950
1951
1952
1953

Principal

Interest

23,0
23.0
24,0
25,0
25,0
27,0
27,0
28,0
28,0
30,0
32,0
32,0
32,0
32,0
37»o
37,0
37,o
42,0
42,0
42,0
42,0
46,0
46,0
46,0
51,0
5*,o
51 »o
53,o
55.0
57.o
6o f o

I38fO

137.3
136,6
135.9
135.2
134,4
133.6
132,8
131,9
I3M
151,9
150,8
149,7
148,5
147,4
146,1
144,8
143,5
142,1
140,6
139,1
>37,7
136,0
J34.4
132,8
131,0
129,3
127,5
125.6
123,7
121,7




Total

Year

I6l,0
160,3
160,6
160,9
160,2
161,4
160,6
160,8
159,9
I6l,l
183,9
182,8
181,7
180,5
184,4
183,1
181,8
185,5
184,1
182,6
181,1
183,7
182,0
180,4
183,8
182,0
180,3
180,5
180,6
180,7
181,7

1954
1955
1956
1957
1958
1959
i960
1961
1962
J963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984

Principal

Interest

64.O

119,6
"7,4

64,0
64,0
67,0
70,0
72,0
74,0
78,0
78,0
83,0
85,0
89,0
94,0
96,0
100,0
105,0
110,0
114,0
119,0
123,0
127,0
132,0
136,0
141,0
146,0
151,0
156,0
162,0
167,0
175,0
175*0

112,9
"0,5
108,1
105,6
103,0
100,2
97,5
94,6
91,6
88,5
85,2
81,9
78,4
74,7
70,8
66,8
62,7
58,4
53,9
49,3
44,6
39,6
34,5
29,2
23,8
18,1
12,2
6,1

Total 4,600,0 6,505,8

Total

183,6
181,4
179,1
179,9
180,5
180,1
179,6
I8l,0
178,2
180,5
179,6
180,6
182,5
181,2
181,9
183,4
184,7
184,8
185,8
185,7
185,4
185,9
185,3

185,6
185,6
185,5
185,2
185,8
185,1
187,2
181,1

11,105,8

t35I

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Index
Accord of 1915, British, French
and Russian, 121
Allied Wheat Executive, 174
Allies
Advances to Belgium, 226-228
Finances—Grave c o n d i t i o n
1917,

152,

Income,National—Pre-war,261,
265; post-war, 264, 265.
Loans between, 120, 150, 189,
208, 232, 233, 237 (See also
Inter-Ally Debts)
Wealth, National—Pre-war, 261,
263; post-war 262, 263
American Army—Organization in
1918, 209
American Expeditionary Force—
Expenses, how financed, 112
American Foreign Securities Com*
pany—Makes loan to France,
1916, 100
American Relief Administration,
9»

186

American Revolution—French aid,
99
Argentina—French internal bonds
sold there, 103; loans to France,
215

Armenia—Debt, internation, 188,
348, 349
Australia—
Debt, Public, 324, 336-344
Expenditure, public, 13, 322,
325-329

Fiscal burdens vs. those of other
countries, 265, 273, 337, 340,
343
Receipts, public, 323, 33°-335
Wealth, national, 263,272
Austria, 188
Austria-Hungary—
Debt, public, 324, 336-34*;
apportionment to successor
states, 257




Austria-Hungary, Continued
Expenditures, public, 13, 325329

Fiscal burdens vs. those of other
nations, 26, 337, 340
Germany, loans from, 149
Income, national, 265
Receipts, public, 323, 330-335
Wealth, national, 263
B
Bachi, Prof. Riccardo, 29, 52
Balfour, Arthur J., Earl, 171, 189,
194, 208
Bankers Trust Company, New
York, 101
Banks—
Bank of Algeria, 96
Bank of England, 81-86, 123,
^

133-135,

137

Bank of France, 95,96, 141, 142
Bank of Italy, Bank of Naples,
Bank of Sicily^ 148
Bankers Trust Company, New
York, 101
Canadian Banks, 147
Guaranty Trust Company, New
York, 101
Germany—Imperial German,
115; loan banks, 117
Italian—Three banks of issue,
104
Japan, Bank of, 144
National City Bank, New York,
100, 145, 146
Russia—Bank of the State, 107,
108, n o , 137, 141, 142
Yokohama Specie Bank, 143,
Barings (Baring Brothers & Co.,
Ltd.), 135
Bark, Pierre L., Russian Minister
of Finance (1914-1917) 105, 122,
136-138, 216
Baruch, B. M. f New York, 175
[3S3

IZO ]

BANKERS TRUST COMPANY

Belgian Congo, debt, 346, 349
Belgium, 1914-1923, 217-236
Advances from Allies, 226
Borrowing, post-armistice, 229
Budget, post-armistice, 234
Central (National) Committee
for Relief and Feeding, 219,
221
^
Commission for Relief in, 221;
creation and persistence, 222;
accounting and auditing, 222;
financing, 223, 225, 226; organization, 223; personnel,
224; philanthropic side, 224;
provisioning side, 224; receipts and expenditures, table,
226
Cost of German invasion, 229
Debt — Foreign — 1914-1923,
table, 232; October 31, 1922,
table, 233; Canada, 232, 233;
France, 216, 228, 232, 233;
Great Britain, 228, 231, 232,
2.33; Holland, 233; reconstruction loans, 231; United States,
188, 228, 231, 232, 233; prearmistice war debt, 228; public, 324,336-344; status a t
close of 1922, 234; table, 236
Expenditures, public, 234, 322
Exports, pre-war, 218
Financing—post-armistice, 229;
war, 227
Fiscal burdens vs. those of other
nations, 26, 27, 337, 340, 343
Food from England, 220
Food supply, 219, 220, 222, 224
Foreign Investments—in Russia, 300, 301
Foreign investments, pre-war,
character of, 266
German invasion, 1 9 1 7 , 2 1 8 , 2 2 6
Germany to reimburse prearmistice war debt, 227, 228
Imports, pre-war, 218
Income, national, 265
Industries^ pre-war, 217




Belgium,—Continued
Invasion by Germans, 218, 219,
226
National Relief C o m m i t t e e —
See Central Committee for
Relief and Feeding
Needs for war, 125
Physical conditions at armistice,
228
Population, pre-war, 217
Public debt, table (1913, 1918,
1922), 236
Receipts, public, 234, 323
Relief, 217
Reparation — Priority rights,
253; receipts, 235, 249
Russia—Investments in, 300
Wealth, national—Pre-war vs.
post-war, 263
Belyaeff, General, Russian Chief
of Staff, 1916, 138
Bonbright & Company, New Y o r k
— E x p o r t s credits for France,
101

Bordeaux—American loan, 1916,
101

Borrowing, National—See Statistical Tables and under each
Nation: Debt a n d R e c e i p t s
Borrowing
Bradbury's—See Great Britain,
Currency Notes
British E m p i r e —
Cost of the war to, 22
Expenditures — Pre-war basis,
22; war time, 22
Income, national, 1903, I9'3»
1923, 265, 273
Loans—From Allies, 22; to
Allies, 22
Wealth, national, 1903, I9I3«
1923, 263, 271, 272
Brookings, Robert S., 175
Brown Brothers & Company, New
Y o r k , 101
Bulgaria—
Debt, public, 324, 336-344

THE INTER-ALLY DEBTS[161
Bulgaria, Continued
Expenditures, public, 13, 322,
325-329

t

Germany, loans from, 149
Income, national, 265
Receipts, public, 323, 33°-335
Wealth, national, 263
C
Canada—
Debt, Expenditures and Receipts, 322, 323, 324, 336-344
Foreign Investments, post-war,
281,282; in the United States,
266
Great Britain, Advances to and
from, 205
Income, national, 265, 273
Wealth, national, 263, 272
Central P o w e r s —
Income, national, 261, 265
Wealth, national, 261, 263
Certificates of Indebtedness—See
United States, D e b t
Chamberlain, R t . Hon. Joseph
Austen, Chancellor of the Exchequer (1919-1921), 201
Conferences and Missions, Financial—
1915 — France-Great BritainRussia, 121, 122, 127, 135,
137, 142; Great Britain-Italy,
148
1916 — F r a n c e - J a p a n , 1 4 3 ;
France-Great Britain-Russia,
138

1917 — France-Great BritainItaly-Japan to the United
States, 170, 171
Cost of the W a r — S e e War, Cost
of
Council of National Defence, 175
Credits, Foreign—How made possible, 79
Crosby, Oscar T . , Assistant Secretary of Treasury, United States
(19I7)I

175




Crown Colonies (British)—
Debt, public, 324, 336-344
Expenditure, public, 13, 322,
325-329

.

,

Income, national, 265, 273
Receipts, public, 330-335
Wealth, national, 263, 272
C u b a — D e b t to the United States,
9, 181, 345
Cunliffe, Lord, G . B. E.» Governor
of the Bank of England (19141918), 122, 171, 189
Currency ( M o n e y ) —
"Currency" dollar defined, 319
" 1 9 1 3 " dollar defined, 14, 319
Depreciation of the purchasing
power since 1913, 14
France, 50, 95
Germany, 115, 116, 118
Great Britain, 81
Italy, 104
Purchasing power of, during war
period — France, Germany,
Great Britain, Italy, United
States, 36, 350
Russia, pre-Soviet, 107
United States, 73, 114
Currency Notes—Sec Great Britain
Czechoslovakia—
Debt, inter-nation, 346, 349
Loans—from France, 216; from
United States, 188
D
Dawes, Brig.-General Chas. G.,
112
Deane, Silas, 165
Debt, public, 324, 336-344
France (See France, Debt), 9799, 101-103
Germany (See Germany, Debt),
115,118,324,336-344; reparation debt, 242-253
Great Britain (See Great Britain, Debt), 80-95, 324» 336344

IZO

]

BANKERS TRUST COMPANY

Debt, public, Continued
Great Powers, The, 1923, 256
Growing up to the debt, 73
How affected by changing purchasing power of currencies,
72
Inter-Ally—General survey, 4;
April, 1917, 121; November,
I9i8» 345;
1920, 346; in
I 9 2 3»348
Interest burden, 73
Interest charge per capita vs,
income per capita, 256, 337,
340, 343
Italy (See Italy, Debt), 103,
, 3 2 4 . 336-344
Market loans, 71
Per capita vs. wealth, 256, 337. 340, 343
r
Repudiation of, 257
Russia (See Russia, Debt), 105,
r 324, 336-344
Stated, pre-war, mid-war, postwar, tables, 75
1923, table, 255
United States (See United States,
Debt), 112-115, 324, 336-344
foreign, revolutionary. 311
Versus wealth and income 1923,
table, 255
Dollar
" C u r r e n c y " dollar defined, 14
" 1 9 1 3 " dollar defined, 14
Purchasing power (1914-1923),
table, 350

Eliacheff, Dr. Boris, 3 1 , 1 0 6 , 1 4 0
England—See Great Britain
Esthonia—Debt, inter-nation, 188,
346,349 .
Exchange, foreign—
British and French transactions
with the United States government, 191
Stabilization of, 91
Exchequer bills—See Debt, Public




Expenditure, public—
British Empire, 13, 22, 322, 325329

France, 13, 25, 26, 28, 322, 325*
329; in United States, 210
Germany, 13, 36, 37, 38, 322,
325-329

Great Britain, 13, 23, 24, 322,
325-329; in United States, 190
Italy, 13, 29, 30, 322, 325-329
Russia, 13, 31, 32, 322, 325-329
United States, 13, 33, 34, 35r
322, 325-329
Expenditures for war—(See also
War, Cost o f ) —
Classified, table, 16
In United States, 150, 151, 176,
190, 210; How paid for, IM;
supervision of, 174; War industries Board, 176
Export Credits for France, 99-103
Federal Reserve Board—Anxiety
re foreign loans, 153
Financial Commissions—See Conferences and Missions, Financial
Finland—Debt, internation, 188,
FiUgekl<?, 4 John J., M . C., 160,
165

Food—Scarcity in Europe, surplus in the United States, 1918,
237~Sec
also Relief—Belgian;
Relief—Loans for
Fordney, Joseph W. f M . C., 179
Foreign Indebtedness (general)—
French, 287
Italian, 291
Russian, 293-304
United States, 311
Foreign Investments—
Canada, 281
France, 284; in Russia, 299;
sold for war, 7
German, 314; in Russia, 301

THE INTER-ALLY DEBTS
Foreign Investments, Continued
Great Britain, 274; in Russia,
300
Italy, 290
United States, 306; in Russia f
302
France—
American attitude toward, 164
American securities, borrowing
of, 130
Assistance to United States in
Revolutionary War, 164, 165,
168
Cost of war to, 25; table, 26
Credits for war, Foreign, 77, 79;
American, 99, 213, 214; British, 102, 127-131; gold shipped in exchange for, 128;
other, 215
Currency, 95
Debt, 324, 336-344—
Floating, 95, 98; bank loans,
96, bills of national defense,
97; treasury bills, 97
Foreign, 99-103,121, 345-348;
French cities, Bordeaux,
Lyon, Marseilles and Paris,
l o x ; in Argentina, 103; in
Great Britain, 102, 103,
127-131; in Japan, 99; in
Netherlands, 99; in Spain,
99; in United States, 99,
102, 188, 208-210; in Uruguay, 99
Funded, 98
Expenditures, public, 13, 26, 28,
.322,

325-329

Fiscal burdens vs. those of other
nations, 26,27, 255, 256, 337t
^ 34?, 34.3 J . J
Foreign indebtedness, general,
287

Foreign investments, character
of, 264; pre-war, 7, 284-286;
post-war, 266, 287; sold for
war, 7, 287; in Russia, prewar, 299
Income, national, 265, 283




[ 161

France, Continued ^
Inter-Ally (nation) loans, 26,
131, 215; Argentina, 215; Belgium, 131, 216, 228, 232, 233;
Boulogne Gold Agreement,
135; Conferences of 1915,122,
l27t I35» 137; Conference of
1916, 138; Conference of
1917, 171; Czechoslovakia,
1921, 216; Great Britain, 102,
127-131, 213; Greece, 1921,
131, 216; Poland, 1921, 216;
Roumania, 1921, 216; Russia,
I3i. # 132, 141, 142, 216;
Serbia, 131; Serbs-CroatsSlovenes, 1921, 216; status,
April 1, 1917, 131; United
States, 99, 208, 213, 214;
Uruguay, 215
Military expenses, 26
Munitions—Allies cooperative
purchases, 126
Occupation b y Germany, 125
Public debt charge, 26
Reconstruction expenses, 26
Receipts, borrowing—See Credits, Debt, Inter-Ally Loans,
323, 33°-335; revenue, 13, 48,
50, 323, 330-335
United States, Revolutionary
loans to, 99
War purchases in foreign markets, 78
Wealth, national, 263, 283
Wealth vs. Debt, 268
Franklin, Benjamin, 165
French-Pylack Debt, 346-349
G
George, Lloyd, Chancellor of Exchequer (1908-1915), Minister
of Munitions (1915-1916),Prime
Minister (1916-1922), 120-123,
127, 134, 1 3 6 , 2 1 6
Germany—
Borrowing in foreign markets,77
Cost, of the war to, 36; table, 37

IZO

]

BANKERS TRUST COMPANY

GoldBorrowed by Great Britain
from France, Italy and Russia, 6, 133, 136, 139, m 8 ;
• Shipments, manner in which
made, 139
Used in financing purchases in
United States, 136
Graham, George S., Si. C., 166
Grain Corporation, 9
Great Britain—
322, 325, 329
t
Fiscal burdens vs. those of other
Advances to Dominions and
nations, 26, 27, 255, 256, 337,
Allies—See Loans to
Alliance—Financial with France
^ 34?,343
f
f
and Russia, 120-126
Foreign investments, 314; ItalAmerican dollar securities mobiian, 292; geographical distrilization, 91
bution in 1913, table, 315; preBanker for the Allies, 6, 8o, 120
war, character of, 264; postwar, character of, 266, 316;
Borrowing, 13, 47, 80-95, 323,
Russian,301; use of to finance
330-335
war, 315
Foreign—Allied, 147, 17 *»
Income, national, 1913, 1923,
189, 206; market, 88-95;
313
table, 90
Loans to Allies, 37, 149
Internal, 80-88;
currency
Mark, purchasing power, 1914
notes, 81, 83; exchequer
to 1923, 36, 350
bills, 84; floating debt, 83Military expenses, 36
86; treasury bills, 84,86; war
Public debt charge, 37
loans, 86, 87; ways and
Receipts, borrowing, 13, 70, 77,
means advances, 83, 86
115-119, 323, 330-335; revCanada, advances from and to,
enue, 13, 62-70, 330-335
205
Reparations—
Cooperation with France and
Debt, per Reparation ComRussia in purchasing supmission, 246
plies, 126
Payments — comparison of
Cost of war to, 13, 23, 325-329
German and Reparation
Currency notes, 81, 83
Commission statements,
Debt, 80-95, 324, 336-344
251; distribution of, 249;
Currency notes, 8i, 83
German official statement,
Floating, 83-86; treasury bills,
250; Reparation Commis84; ways and means adsion statement, 248
vances, 83
States of, relation to Imperial
Foreign—Oovernment, 121,
189-206,345,346,348; from
government changed, 38
United States, 189-204;
Wealth, national, 313, 314
table, 190; market, 88-95;
Giffen, Sir Robert, 271
table of creditor nations,90;
Glass, Carter, Secretary of the
United States, loans from,
Treasury, United States (191891-95; table of loans from,
1919), 179, 181, 183-186

Germany, Continued
Currency, 115; amount outstanding, 118, 119; purchasing power of, during war
period, 36, 350
Debt, 115-119, 324f 336-344;
floating, 115; reparation, 246,
repudiated, 256; status, 1923,
255» 256; table, 118
Expenditures, 13, 16, 19, 37, 38,




THE INTER-ALLY DEBTS
Great Britain, Continued
92; settlement with 257260; table, 351; table of
creditor nations, 204
Funded—Exchequer
bonds,
87; national war bonds, 87;
short term, 86; war loans,
87
Dominions—Loans to and from,
147

Expenditures, public, 13, 23, 24,
322,325-329; in UnitedStates,
table, 190
Financial Commission to United
States, 189
Fiscal burdens vs. those of
other nations, 26, 27,255,256,
^ 337» 340. 343
, J r
£
Foreign credits required for financing imports, 125
Foreign Exchanges—American
— J . P. Morgan & Co. stabilize, 93
Foreign investments—History
of, 274-281; income from, 279,
281; pre-war, 7, 274; character of, 274-279; post-war,
266, 275, 280; sold for war,
274, 275; in Russia, 300
France-Financial arrangements
with, in 1915, 127
Gold — Boulogne Agreement,
135; loans of, from France,
128-130; Italy, 148; Russia,
133. 136, I37» 138,
Guaranties for other nations to
United States, were any given?
Income, national, 265, 273; savings from, 279
Income from foreign investments in 1923, 281
Income tax, 45
Inter-Ally loans—Conference of
1915, 121, 122, 127, 135, 137,
142, 148; Conference of 1916,
138, 143; Conference of 1917,
170,

171




[ 161

Great Britain, Continued
Loans from Allies, 23; Canada,
147; France, 132, 213; Italy,
148; Russia, 133, 136, 137,
138, 139; United States, 189206
Loans to Allies, 121, 206, 345,
346, 348; Belgium, 228, 232,
233, 236; France, 130; Italy,
148; Russia, 132-141
Loans to and from dominions,
147

Military expenses, 23
Public debt charge, 23
Principal on which the war was
financed, 45
Receipts—
Borrowing 43, 47, 189, 297,
323, 330-335
Revenue, 43, 45, 48, 323, 330335; Principle upon which
laid, 45
Taxation, 45, 46, 47
Russia purchases supplies for, in
United States, 194
United S t a t e s —
Advances from;—first loan,
192; silver for India, 201;
table, 190; used t o meet obligations incurred before
b e l l i g e r e n c y of U n i t e d
States, 194; vital, 193
Votes of credit, 23
War purchases in foreign markets, 78
W a y s and means advances, 83
Wealth, national, 263, 272; vs.
debt, 255, 256, 268, 337, 340,
343
Greece—
Income, national, 265
Loans from Allies—France, 215,
216; United States, 188
Wealth, national, 263
Guaranty Trust Company, New
Y o r k , 101

BANKERS TRUST COMPANY

IZO ]

H
Harding, Warren G., President of
the United States, 182
Helfferich, Dr. Karl, Director of
the Deutsche Bank, 313, 314
Hoover, Herbert, 217, 222, 238
Houston, D. F., Secretary of the
Treasury, United States (192a1921), 180, 190
Hungary, loans from United States,
188
I

Income—
From foreign investments —
France, 284-287; Great Britain, 275-281; United States,
3<>7, 309
National — A u s t r i a - H u n g a r y ,
265; Belgium, 265; British
Empire, 265, 273; Bulgaria,
265; France, 265, 283; Germany, 265, 313, 314; Greece,
265; Italy, 265, 290; Japan,
265; Portugal, 265; post-war.
262, 265; pre-war, 261; Roumania, 265; Russia, 265, 293;
Serbia, 265; Turkey, 265;
United States, 265, 305
Indebtedness (General)—
Foreign, 79; American, 3 1 1 ;
French, 287; Italian, 291;
Russian, 293-303
Inter-nation—
Status 1917, table, 121
Status 1918, table, 345
Status 1920, table, 346
Status 1923, table 348
India—
Debt, 324, 336-344
Expenditure, 13, 322, 3 2 5~3 2 9 Income, national, 265, 273
Receipts, 323, 33°*335
Silver, requirements supplied b y
United States, 201
Wealth, national, 263, 272
Inter-AIIy Council on W a r —
Purchases and finance 175




Inter-Ally (Nation) Debts, 4, 16,
120-150
Amount due 1923, tabic, 241
Armenia, 348
Australia, 121, 345*349
Austria, 346-349
Austria-Hungary, 149
Belgian Congo, 12 i t 345-349
Belgium — General discussion,
226-233; 1917, 121; 1918, 232,
345;1920, 346;1923, 233, 348
British Dominions, to Great
Britain, 206
British E m p i r e — 1 9 1 7 ,
121;
I9i8» 345; 1920, 346; 1923
348

British South Africa Company,
121, 345, 346-349
Bulgaria, 149
Canada (also see Canada), 121,
„ 205, 345;349
Crown Colonies (British), 121,
^ 345-349
Cuba, 9, 345-349
Czechoslovakia, 346-349
Esthonia, 346-349
Finland (see Note C, table, 188),
346-340
France (also see France), 26,
I 2 i , 345-349
French Polack, 346-349
Germany (also see Germany),
149. 346-349; loans to her
allies, 37
Great Britain (also see Great
Britain), 23, 121, 260, 345349; Canada, 10, 205; United
States, 257; tables, 260, 351
Greece, 121, 345*349 ,
Guarantees, 194; not demanded
by United States, 197
Hungary, 346-349
Italy, 121, 345-349
Latvia, 346-349
Lettonia, 346
Liberia, 346-349
Lithuania, 346-349
Loans, actually of munitions, 6

[ 161

THE INTER-ALLY DEBTS
Inter-Ally (Nation) Debts,
Continued
Loans for relief, 237; table, 241
Montenegro, 345
Newfoundland, 345-349
New Zealand, 121, 345-349
Nicaragua, 346-349
Poland, 34 6 *349
Portugal, 121, 345*349
Post-armistice loans, amount, 9
P o s t - a r m i s t i c e l o a n s , raison
d'etre, 8
Purchases 01 Allies in United
States, 197
Roumania, 121, 345-349
Russia (also see Russia), 121,
^ 345-349
Serbia, 121, 345
Serbs-Croates-Slovenes, 346-349
Silver, loan by United States,
201
Summary statement for entire
period of war, 17
Turkey, 149
Ukraina, 346-349
Union of South Africa, 121,345* 349
United States (see also United
States), 345-349; banker for
Allies, (1917-1920), 7, 150;
loans discontinued September, 1920, 240; loans to Allies,
34, 150; post-armistice loans,
240; settlements, 9, 10, 188
Inter-Ally Loans—See Inter-Ally
Debts
Inter-Nation Debts—See InterAlly Debts
Investments, Foreign—See Foreign Investments
ItalyCost of W a r to, 29
Currency, 104
Debt, 103, 188, 324, 336-344;
floating, 104; foreign, 105;
funded, 105
Emigrants — Remittances of,
table 291




Italy, Continued
Expenditures, 13, 29, 30, 322,
325-329

t

Fiscal burdens vs. those of other
nations, 26, 27, 255, 256, 337,
^ 34?, 3^3 l
j
Foreign indebtedness, 291
Foreign investments, 290
Income, national, 290
Inter-Ally financing, 29, 148,
188
Liberated territories—Expenses
for, 29
Lottery, state, 53
Military expenses, 29
Monopolies, 52
Public debt charge, 29
Receipts, government, 54, 55,
323.330-335

Taxation, new forms created for
war, 52
Wealth, national, 263, 289
Japan—
Debt, public, 324, 536-344
Expenditure public 13, 322,
325-329

Foreign investments in China,
266
Income, national, 265
Loans to France, 99
Receipts, public, 323, 33°-33?
Russia, credit operations with,
143

Wealth, national, 263
Joffre, Marshal, 208
Josyer, G . R. f M . A., 272
K
Kenyon, William S., M . C. f 168
King, W . I., Professor, 305
Kitchen, Claude, Chairman Committee of W a y s and Means,
1917, 158, *59» 161, 162
Kroupensky, M., Russian Ambassador a t Tokio, 144

IZO ]

BANKERS TRUST COMPANY

Kuhn, Loeb & Company,
Y o r k , IOI

New

L
Lane, Franklin K. f Secretary of
the Interior (1914-1920), 156
Latvia—
Debt, inter-nation, 346-349
Loans from United States, 1S8
Law, Andrew Bonar, Prime Minister and First Lord of the Treasury (1922-1923), 194
Lawrence, John, 165
Leffingwell, R. C., Assistant Secretary of United States Treasury
(1917-1920), 162, 197
Leon, Maurice, 9^
Lettonia—Debt, inter-nation, 346,
347
,
Lever, Sir Hardman, Financial
Secretary of the British Treasury, 1916, 189
Liberia—
Debt, internation, 346-349
Loans from United States, 188
Lithuania—
Debt, inter-nation, 346-349
Loans from United States, 188
Loans for R e l i e f —
1918-1923, 237
British advise intention of stopping food purchases from
United States unless loans are
continued, 237
Foreign post-war food purchases in United States, 240
Hoover advises continuance of,
to insure market for American surplus food, 238
Lenders—Borrowers, 240
United States — Distribution,
237, 240; right to make,
questioned, 237
Lovett, Robert S., 175
Lyon—American Loan, 1916, 101

Mann, James R., M . C., 162
Marseilles—American Loan, 1916,
lox

Mason, George, 165
McAdoo, William Gibbs, Secretary of Treasury of United
States (1913-1918), 171, 182,
185, 192, 196
McCumber, Porter J.T M . C., 167
McKenna, Reginald, Chancellor
of the Exchequer (1915-1916),
^ 136, 139, 148
Mellon, Andrew W., Secretary of
Treasury of United States from
March, 1921, 195
Millerand, Alexandre, Minister
of War (1914-1915), President
of France from 1920, 128
Money—See Currency
Montague, Andrew J., M* C , 164
Montague, Rt.Hon. Edwin Samuel,
Financial
Secretary,
British
Treasury Department (19*41916), 122
Moore, J. Hampton, M . C., 163,
164
Morgan & Company, J. P., New
York, 93, 100-102
Munitions—
Foreign, how paid for, 79
Surplus, disposition of, 9
N
National C i t y Bank of N e w York,
145, 146, 190
National Debts—See Debts, Public
National Defense Council, 155
National Wealth—See Wealth,
National
New Z e a l a n d —
Debt, public, 324, 336-334
Expenditures, public, 13, 322,
T

M
Madden, Martin B., M . C f 163




325*329

.

Income, national, 265, 273
Receipts, public, 323, 33<>-335
Wealth, national, 263, 272

THE INTER-ALLY DEBTS[161
Nicaragua—
Debt, inter-nation, 348, 349
Loans from United States, 188
P
Page, Walter Hines, Ambassador
to Great Britain (1913-1918),
156, 193, 217
Pans—American loan, 1916, 101
Pershing, Gen. John J., 208
Poland™
Debt, inter-nation, 216, 346-349
Loans from United States, 188
Portugal—
Debt, public, 324, 336-344
Expenditure, public, 13, 322,
325-329

Income, national, 265
Receipts, public, 323, 330-335
Wealth, national, 263
Prices—See Currency
Prohibition—
Effect on Revenue—Russia, 55;
United States, 58
Public Debts—See Debts, Public
Pupin, Rene, 283
R
Raffalovich, Arthur, 140
Railroads—Russia, 294, 297
Rainey, Henry T . , M . C., 163
Rathbone, Albert, Assistant Secretary of Treasury, United States
(1919-1920), 180
Reconstruction—
Belgium—Expenses for, estimated, 229; foreign loans for,
230, 231
Italy—Expenses for, estimated,
289
ReliefAmerican Relief Administration, 9
Belgian, 219-226
Loans for, 9, 237
Reparations—
Amount, 242; how determined,
244»245




Reparations, Continued
Belgium's priority rights, 247,
253
Germany's obligations, per Reparation Commission, December 31, 1922, 246
Payments—Apportionment of,
247; comparison of German
and Reparation Commission
statements, 251; distribution
of, to June 30, 1923, 249;
German official statement,
250; Reparation Commission's
statement to June 30, 1923,
248
Purposes underVersaillesTreaty,
243
Terms, of under
Versailles
Treaty, 242
Revolutionary War, American—
Foreign debt for, 311
French aid for, 99, 164, 165, 168
Ribot, Alexandre, French Minister of Finance (1914-1917),
100, 122, 127, 129, 130, 141, 216
Rothschild, N , M . & Son, London,
102, 127, 213
Roumania, 2 1 6 —
Debt, public, 324, 336-344
Expenditures, public, 13, 322,
325-329

Income, national, 265
Loans from United States, 188
Receipts, public, 323, 33°-335
Wealth, national, 263
Rubini, Italian Minister of Finance, 1914, 51
Russia—
Borrowings from Allies, 31
Boulogne Gold Agreement, The,
136

Commercial investments
in,
tables, 298
Cost of war to, 31
Credits for purchases in England, 135
Credit high, pre-Soviet, 105
Currency, pre-Soviet, 107

BANKERS TRUST COMPANY

IZO ]

Russia, Continued
Debt, 324, 336-344
Floating—Treasury bills, 108,
Foreign, 112, 132; loans—
from Allies—credits of 1915
137; credits of 1916, 138;
gold abroad vs. intangible
credits, 137; from Great
Britain, 132,133, 140; from
France, 216; from Italy,
132; from Japan, 132, 143;
from United States, 132,
145,188; repudiation of,302
Guaranteed, 106
Interest charge, 31
Internal, 105, 113.
Pre-war, 105; wide distribution, 107
Public, 324, 336-338
Repudiation by Soviets, 257,
302, 303
Russian merchants financed,
135

Table, September, 1917, i n
War, 107, 109
Expenditures, public, 13, 31,
322,

325-329

Financing, foreign, 132
Fiscal burdens vs. those of other
nations, 27
Foreign investments in, classification b y industries, 298
G o l d — L o a n s of, to Great Britain, 133, 136-138
Income, national, 265, 293
Loans to Allies, 31
Military expenses, 31 ^
Munitions—Cooperation
with
Great Britain and France in
purchasing, 126
Railroad — Construction, 294297; financing of, 106
Receipts, public, 323, 33^335
W a r ended for her October 8,
1917.

31

W a r purchases in foreign markets, 78
Wealth, national, 263, 293




S
Sabath, Adolph J., M . C , 161
Saunders, Edward W . , M . C., 167
Serbia—
Debt, public, 324, 336
Expenditures, 13, 322, 325-329
Income, national, 265
Needs for war, 125
Receipts, 323, 330-335
Wealth, national, 263
Serbs, Croats and Slovenes (Yugoslavia)—
Debt, inter-nation, 346-349
Inter-Ally loans, 216
Loans from United States, 188
Services, Public—See Receipts
Shaler, Millard K . , 220
Simmons, F . M . (Senator), 167
Simon, M . , French Inspector of
Finance, 1917, 171
Silver
Indian requirements supplied
from United States, 201;
Pittman A c t , operations under,
201
Solvay, Ernest, President of Central Committee for Relief and
Feeding in Belgium, 219
Spring-Rice, Sir Cecil Arthur,
Ambassador from Great Britain
(1914-1918), 193
Switzer, Robert M ; , M . C., 166
Switzerland—Foreign investments
pre-war, character of, 266
T
Thery, Edmond, 283
Treasury B i l l s — S w Debt, Public
T r e a t y , Versailles—
Financial Sections, summary,
242
German obligation to Belgium
preferred, 235
Turkey—
Debt, public, 324, 336-344
Expenditures, public, 13, 3 2 2 »
325-329

THE INTER-ALLY DEBTS[161
Turkey, Continued
Germany, loans from, 149
Income, national, 265
Receipts, public, 323, 330-335
Wealth, national, 263
U
Ukraina—Debt, inter-nation, 346349
Union of South A f r i c a —
Debt, public, 324, 336-344
Expenditure, public, 13, 322,
r

325*329

.

f

Income, national, 273
Receipts, public, 323, 330-335
Wealth, national, 272
United Kingdom of Great Britain
and Ireland—See Great Britain
United S t a t e s —
Allies, loans to
Authorized by Congress, 158
Belgium, 228
Debate in Congress, 158:
foreign market issues, should
they be retired with proceeds? 161; limited to Allied Powers and to duration of the war, 160;
" M o n e y should be spent in
United States," 161; our
attitude toward France,
156, 164, 168; " T h e Allies
fighting our battles," 162
Expenditures—Of Allies in
United States, 176; supervision of purchases, 174
First loan made, 171
France, 208, 209, 210, 213,
214
Great Britain—Advances to,
table, 190; silver, 201; expenditures for war in United
States, table, 190; guarantees for loans to Allies not
required b y United States,
^ 194
Guarantees, 162, 194-201




United States, Continued
Interest account, table, 181;
on miscellaneous loans, 182
Interest arrangements, 177
L e g i s l a t i v e action—April,
I 9 I 7» 153-169; September,
1917, 169; March, 1918,
170;
June, 1919, 170;
March, 1920, 170
Loan policy defended, 153
Making the loans, 170
Post-armistice, 182
Russia, 145
Status, November 15, 1923,
table, 188
Was policy justified? 186
American Expeditionary Force,
how financed, 112
Cost of the war, 33
Table, 34
Debt, 112-115, 324, 336-344
Expenditures, 13, 33-35, 322,
325-329

Military, 34
Public debt charge, 34
Fiscal burdens vs. those of other
nations, 27, 255, 256, 337,
340, 343
Foreign investments, 266, 302,
308,

3 0 9 , 3 "

Income from, 307, 309
German ships seized in April,
1917, 154, 155
Income, national, 265, 305
Investment securities of, owned
abroad utilized for war credits, 6, 7
Loans to Allies and others, 34;
1917-1920, 150
Munitions—
From, important source of
supply from beginning of
war, 33
Sales, 1914-1917, 150
How paid for, 151
Receipts, 323, 330-335
Revolutionary debt abroad, 311

BANKERS TRUST COMPANY

IZO ]

United States, Continued
Revolutionary aid from France,
99

W a r declared against Germany,
April 6, 1917, 7, 154
War, official end of, July 2,
1921, 182
Wealth, national, 263, 305, 352
Wealth of the States, December 31, 1922, 352
Uruguay—
Loans, foreign—to France, 215
Villalobar, Spanish E n v o y to Belgium, 219
Viviani, Rene, Minister of Justice,
1917. 171,208
W
WarCost o f —
British, 2
How paid for, 3
Cost of the Great, 1, 12, 13, 16
\9f

325;329

,

Allocation of, 15
Annually, table, 19
Battle deaths per cent, population, table, 21
British Empire, table, 22
Civil government expenses
during the war, table, 16
Compared with cost of government in Great Britain
since 1688, 2
Compared with cost of government in United States
since 1791, 3
Compared with national
wealth of Great Britain, 1
Compared with national
wealth of France and Italy,
2
Compared with value of
United States railways, 1
Definition of term as used in
book, 12, 15




War, Continued
Direct, 12
Expenses classified t table, 16
First part, 18; relative burden
of each nation, 18
Food for civilian population,
17

France, table, 25, 26
Great Britain, six years, table,
23
In currency dollars, 12; term
defined, 14
In " 1 9 1 3 " dollars, 12; term
defined, 14
Indirect cost, 11
Inter-Ally loans, table, 16
Interest on war debts, 15, 16
Loans to Allies, table, 16
Military expenses, 15, 16
Per capita, tables, 19, 21
Per cent of national income,
tables, 19, 21
Per cent of national wealth,
table, 21
Relative cost to Great Powers,
table, 21
Second part, burden bearers,
20
United States, 33
Yearly cost to each group of
belligerents, table, 19
See also under each nation
How paid for, 330, 335
Borrowing — A t home, 71;
foreign market, 77; Allies,
77, 78; German borrowing,
77; Inter-Ally, 72
Financial methods used, 40
France, 48
General discussion, 40
War Industries Board, 175, 176
W a r Materials—See Munitions
Washington, George, President,
165
Wealth, National, 261, 263, 271,
272, 283, 289, 313, 3 1 4 — ^
also under Names of Countries

THE INTER-ALLY DEBTS
Wealth—Redistribution caused by
the war, 267
Whitlock,' Brand, United States
Ambassador to Belgium (19191921), 219

161

Wilson, Woodrow, President,
United States (1913-1921), 239
Wirth, Doctor Joseph, German
Minister of Finance, 1920, 62
Wood, William R., M . C , 162

REG. COM. (SEINE) NO. i35940




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