expressed in terms of that currency, had increased. With few
exceptions, neutrals as well as belligerents (the United States
standing alone in this respect) had ceased to be on a gold basis,
and in any case the value of gold itself in terms of commodities
had diminished to about one-half. International trade had been
dislocated, and diverted from its normal channels. The inability
of Europe to export during the war had forced normal customers
to look elsewhere, and to develop production at home or in new
centres overseas; and Europe's need for imports had compelled
realization of her foreign capital holdings, which were thus no
longer available as a credit basis. Instability and depreciation
of exchange impeded both buyer and seller. With half the
world producing less than it consumed and having insufficient
exports to pay for its imports, credits alone could bridge the gulf
TABLE V. Notes in Circulation (000,000' s omitted), 1913 and
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Country
Notes in Circulation.
1913
1919
Belligerent Countries of Europe.
Belgium (Franc)
1,067
4,786
Bulgaria (Leva)
189
2,299
France (Franc)
5,713
37,327
Germany (Mark) ....
2,562
62,036
Greece (Drachma) ....
311
1,412
Italy (Lira)
2,783
18,814
Portugal (Milreis) ....
91
382
United Kingdom () .
35
449
Austria-Hungary (Krone) .
2,494
54-481
Finland (F. Mark) ....
113
1,124
Rumania (Leu)
571
6,603'
Neutral Countries of Europe.
Denmark (Krone) ....
151
489
Holland (Gulden) ....
3'7
1,099
Luxemburg (Franc) ....
6-2
224
Norway (Krone)
1 08
454
Spain (Peseta)
1,924
3,856
Sweden (Krone)
234
748
Switzerland (Franc) ....
318
i, 06 1
Countries Outside Europe.
Argentina (Peso) ....
777
1,278
Australia () ....
9.9
56-8
Brazil (Milreis) ....
899
1,748
British India (Rupee)
645
1,829
Canada ($) . ....
211
44 2
Japan (Yen) ^ ....
426
1,336'
New Zealand () ....
1-7
7-8
South Africa () ....
2-4
9-o 2
United States of America ($)
1,069
4,212
Uruguay (Peso)
21-5
69-3
1 Includes notes of National Bank of Rumania and notes issued during the German occupation; excludes kronen, ruble notes, etc. 2 March 1920. 'February 1920.
between seller and buyer, and credits were rendered difficult by the very causes which made them necessary.
Such being described as the position in 1920, the Conference came to its recommendations. And the Report premised that, first and foremost, what the world still needed was peace. "Finance" was, after all, only a reflection of commercial and economic life; as the wealth of the world consists of the products of man's work, the sum total of human prosperity could only be increased by an increase of Production; and all that organized international action could provide would be conditions favour- able to Production, the most important of which lay outside the financial sphere. Social content, and the "will to work," must first be restored. Yet, even if a maximum Production were to be attained, it still required a financial system which would facilitate exchange and distribution, and herein lay the problems which the Conference had met to consider. The financial state- ments presented by the various countries showed that, on the average, about 20 per cent of national expenditures was still being devoted to armaments, and the Conference affirmed that " the world cannot afford this expenditure." There must be an agreement to reduce it. In nearly three out of four of the countries represented, and in nearly n out of 12 of European countries, budgets in 1919-20 did not balance, and many of them showed no prospect of doing so in the near future. Where na- tional expenditure was higher than existing revenue, fresh tax-
ation must be imposed. Government subsidies; concealing the real cost price of commodities, must be abandoned. Loans required for urgent capital purposes must be raised out of the real savings of the people; and since these savings had so largely been pledged ahead for past war-credits, the first step must be to fund undigested floating debts. Currency inflation (which had substantially represented undertaxation or the existence of an unscientific system of taxation) must be stopped, and it was desirable to take any possible steps towards the restoration of an effective gold standard; but deflation must be carried out gradually and with great caution, and the Conference regarded it as useless to attempt to fix the ratio of existing fiduciary currencies to their normal gold value, nor would it recommend any scheme of "stabilization" for the value of gold, believing that neither an international currency nor an international unit of account would serve any useful purpose. Attempts to limit fluctuations in exchange by artificial control on exchange operations were futile and mischievous; but in countries where there was no central bank of issue one should be established, and if the assistance of foreign capital were required for its pro- motion some form of international control might be necessary.
TABLE VI. Comparison of Foreign Trade in 1913 and 1919 (value in dollars).
Imports
Exports
Value
Value
Countries
1919
1919
1913
1919
as %
1913
1919
as%
$(ooo,ooo's)
of
$(ooo ooo's)
of
1913
1913
EUROPEAN
United Kingdom
3,206
6,401
200
2,554
3,454
135
Germany
2,567
1,487
58
2,407
392
16
France .
1,625
4,044
249
1,328
1,114
84
Belgium.
895
665
74
701
271
38
Italy
704
1,835
261
485
539
III
Switzerland
370
660
178
265
612
231
Spain
252
176
70
204
257
126
Sweden .
227
612
269
219
379
173
Denmark
206
528
256
171
163
95
Portugal
96
114
1 20
38
57
'SO
Finland .
96
164
171
78
44
56
Bulgaria
36
55
153
18
33
183
Greece .
34
293
862
23
136
590
EXTRA-EUROPEAN
U.S.A. .
1,757
3-733
212
2,448
7,751
317
India . .
733
935
127
809
1,237
'53
Canada .
659
906
"37
436
1,195
274
Argentina China .
479 416
60 1 900
125
216
501 294
948 878
189 298
Australia
380
364
96
365
576
158
Japan .
362
1,120
310
313
1,072
343
Brazil .
326
357
109
318
584
183
South Africa
195
205
105
132
209
158
New Zealand
104
130
125
1 02
229
224
Peru
30
53
177
44
H7
267
The Conference recognized that time would be needed for financial reconstruction, and some countries could not resume economic activity without foreign assistance; but a warning was given generally that external credits should not be accorded directly by foreign Governments. It was suggested that an international organization should be formed for arranging cred- its for states which needed the means of paying for essential imports, and such states would have to notify what assets they were prepared to pledge as security; bonds issued against such a state guarantee might be used as collateral for credits intended to cover the cost of commodities (the Ter Meulen plan: see EXCHANGES, FOREIGN). Meanwhile, international commerce should, as soon as possible, be freed from artificial impediments.
Finally, the Conference drew the attention of the League of Nations to the advisability of providing various miscellaneous reforms, unification of laws relating to bills of exchange and bills of lading, reciprocal treatment of branches of foreign banks in different countries, publication of financial information in a clear comparative form, an international clearing-house, and other such matters; and an international understanding was also advocated under which, while effective systems of taxation
