9^^' ECONOMICS OF THE WAR. 



London — were calling in their loans on the Stock Exchange. 

 This had a similar effect as though they were selling securities. 

 Germany adopted this course in order to increase the rapidity 

 at W'hich she had been accumulating gold in recent years. She 

 had been importing very heavily, and consecj^uently the selling 

 of investments was the only means of adjusting her exchange; 

 otherwise the payment of her imports would have necessitated 

 parting with gold. 



Germany's action naturally had a depressing effect on the 

 market, and, when war actually did break out in August, it was 

 necessary for each belligerent and neutral power to carefully 

 examine its national balance-sheet. 



I specially mention Germany, as that nation, from the point 

 of view of armaments and the temper of its military caste, was 

 the most important factor in the situation. 



The assets of a nation — in times of peace, developing on 

 ordinary lines and becoming wealthier each year — are valued in 

 accordance with the means they give of steady growth in wealth 

 and importance. In face of war, however, when a country 

 has to defend itself against the aggression of its neighbours, 

 the value of its assets alters considerably. This will be illus- 

 trated if we view the position of some of the countries before 

 the war broke out, and later review the position after some 

 months of war. 



Germany. 



At the outbreak of war Germany had a population of 

 66,000,000. 



Her national debt, including state debts as well as the 

 imperial debts, was £1,030,000,000. 



Her imports were £535,000,000, and her exports 

 £500,000.000, the balance being settled by interest on invest- 

 ments and services rendered. 



The holding of gold by the Reichsbank had been steadily 

 increasing of late years, and had reached £60,000,000. In food- 

 stuffs she was very nearly self-supporting. Taxation Avas 

 heavy, but there w^as no direct taxation in the form of income- 

 tax. ' 



She was spending at the rate of £70.000,000 a year on her 

 army and navy. Estimates of expenditure, 1914. were 

 £175.000,000. Credit was good. 



Austria-Hungary. 



Austria-Hungary's population was 57,000.000. Her 

 national debt was £794,000.000. 



Her imports Avere £140,000,000, and her exports 

 £114.000.000. The holding of gold was £51.000,000. 



In the necessities of life she was more or less self-sup- 

 porting. 



Her annual budget ha<l shewn repeated deficits, her finan- 



