LAND AND WATER February 6, 1915, 
If the number of transactions in a community The presence of a current medium, even fictitious, 
increases much more rapidly than its stock of gold let alone genuine, is not necessary to the continuance 
there would be a difficulty in effecting them (inci- of a war or the national life as a whole within the 
dentally prices would fluctuate wildly and tend to boundaries of the nation, but it is necessary for its 
fall in the most disturbing fashion) were not more foreign transactions unless the government of the 
and more of the work done, as production and con- other countries whose citizens aie trading across the 
sequent exchanges expand in volume by instru- frontier will consent to be at the pains of organising 
merits of credit, that is, by promises to pay, to international exchange, and that no neutral country 
which " credit " or the belief that they certainly at peace will be at the expense and trouble of doing 
will be redeemed when presented generally to oblige a customer who happens to be at war. 
attaches. By this contrivance one ounce of gold We may sum up, then, and say that Germany will 
does the work in exchange of ten or a hundred or a never firom failure of gold be exhausted in her material 
thousand ; for to one instrument of credit presented power to make war with goods produced within her 
for payment in a given time there are always many own boundaries. But may she not be exhausted if 
in circulation. gold or its equivalent fails her in her power to make 
So far, so good. In normal times if you with- war with materials that have to be imported from 
draw gpld from the public or make individuals fear outside ? 
that instruments of credit will not be met there is To see how far that is likely, let us see how the 
a sudden break put on all exchange and therefore citizens of a sovereign power trade with foreigners. 
on all production. Take a concrete case. Let us say that there 
But if the Government — the sovereign power are in Lombardy (as there are for a fact) large 
— steps in to compel production and to direct its stocks of india-rubber ; the German armies are 
goods to the consumer, or by an artificial currency, in bad need of india-rubber. The German manu- 
successfully imposed, supplies the place of true cur- facturers export to Italy electrical instruments 
rency, there may be inconvenience, but need cer- made in Germany. In time of peace the normal 
tainly be no famine in anything the nation can process of commercial exchange is this : the German 
make. manufacturer sells to an Italian importer a number of 
For instance, take all the gold away from a electrical instruments for the sum of s*y 1,000 ounces 
country and the man who makes hats can still of gold (the said 1,000 ounces being called by 
exchange those hats with the man who makes boots, difierent names in the difierent European countries, 
and the man who makes boots exchange those boots but the ultimate medium of exchange being gold 
with the man who grows wheat, and the man who measured by weight). The Itahan merchant does 
grows wheat exchange that wheat for hats with the not send the 1,000 ounces of gold in a bag to the 
man who makes hats, and so forth, there passing in German manufacturer, but sends_ him a piece of 
each transaction neither metal nor the promise to paper on which he writes a promise to pay to the 
pay metal but any symbol such as a bit of paper on German 1,000 ounces of gold ; and this piece of 
which is printed the name of a familiar coin. If this paper he sends (or in the origins of the systena sent) 
enforced currency be increased beyond the sum to the German manufacturer who supplied it. A 
which would have been used in actual gold, supposing firm making motor-cars for the German armies pur- 
gold had been present, prices rise, and an attempt chases india-rubber _ from an Italian manufacturer, 
to regulate currency of this sort, based as it is upon and tends him a piece of paper promising to pay 
a guess as to what would have taken place if gold had 1,000 ounces of gold. The sum total of these trans- 
been present (a guess that can never be accurate), actions, so far as international commerce is con- 
always leads sooner or later to a vast disturbance in cerned, is that Germany has lost a certain amount 
prices and an according suflering and strain in the of electrical instruments, and has gained an 
commonwealth, but stiS this strain does not kill a equivalent amount of rubber ; while there lies in 
nation, it does not prevent the producer from pro- Germany a paper promise to pay so much gold, and 
Cueing or ultimately two producers from exchanging, in Italy a paper promise to pay the same amount 
If the citizens come to doubt the value of the of gold. Those who deal with biUs and other 
paper altogether* that is if a man taking a XI note instruments of credit compare the two situations ; 
suspects that nobody will take it back fi:'om him, it is they find that the sums cancel out and no gold 
of course exceedingly difilcult to force the fictitious passes. 
Qurrency, and m the old days one of the greatest The real process is of course a million times 
difficulties a Government had in getting such more complicated than that. The foreign exchanges 
fictitious currency to work was the coercing of its ramify through all commercial countries, and concern 
subjects into taking that currency ; but we have not two foreign merchants, but thousands upon 
changed all that. The pohce to-day are everywhere, thousands who are continually exchanging and re- 
A modern government is the absolute master of its exchanging. The acceptors of bills do not work for 
Bubjects ; not only from its vastly increased organisa- nothing, and their profits further comjDlicate the 
tion but from the nature of modern lethal v.^eapons, affair, while, of course, the deals that cancel out one 
^nd we may be quite certain that the modern against the other are not deals known to a small 
government, particularly such a government as that circle, but moving as currency does, at large over 
of Germany, can force a fictitious currency upon its the whole surface of commercial life with its millions 
subjects for a very long period. of individual purchases and sales ; but the principle 
But even if it had not this power, even if the is that which appears in this purposely simple 
fictitious currency breaks down, there still remains example, and it will be apparent from that example 
in the last resource the power of the government to that although no Italian actually gets German gold 
organise national industry under its own inspection in that particular set of transactions, and no German 
and to have the stocks of raw rnaterial registered actually gets Italian gold, yet husiness would not 
and taken over by its officials, the workmen set to have been done unless the Italian merchant had 
work upon them, and the finished products dehvered believed that the German could jpay him gold tihen 
where their consumption is necessary. the time came. 
