d private banks were freed from the
obligation to give out gold for notes. At once all notes went to a
discount in the shops as compared with gold. Thereupon, in summary
fashion, the Military Governor of Berlin declared the notes to be a full
legal tender and announced that any shop refusing to take them at par
would be punished by confiscation of goods.

In Germany, as is well known, the main currency is supplied by the
Reichsbank, covered by at least 33-1/3 per cent. in gold or silver, and
the remaining two-thirds by commercial paper. Immediately after the
outbreak of war there was a prodigious increase of loans at the
Reichsbank, in consequence of which borrowers received notes or deposit
accounts. Usually transactions are carried through by use of notes, and
not by checks, as with us. On July 23, 1914, the notes stood at
$472,500,000; deposits at $236,000,000; discounted bills and advances at
$200,000,000. On Aug. 31 notes had increased to $1,058,500,000; deposits
to $610,000,000; discounts and advances to $1,113,500,000, (by October
this amount was lowered to about $750,000,000.) On the latter date the
specie reserve stood at $409,500,000, or more than the legal one-third.
Loans had been increased 556 per cent.; notes 223 per cent., and
deposits 258 per cent. In short, $586,000,000 of notes had been issued
beyond the amount required in normal times, (July 23.) Clearly this
additional amount was not required by an increased exchange of goods,
but by those persons whose resources were tied up and who needed a means
of payment. The same was true of the large increase of deposits which
resulted from the larger loans. A liberal policy of discounting was
followed by which loans were given on the basis of securities or stocks
of goods on hand. That is, non-negotiable assets were converted into a
means of payment either in the form of notes or deposit credits.

At this juncture there was created a currency something after
the fashion of the Aldrich-Vreeland emergency notes in this
country. War credit banks were established by law to issue notes
(Darlehnskassenscheine) in denominations of 10, 15, 20, and 50 marks as
loans on stocks in trade and securities of all kinds, and were charged
6-1/2 per cent. interest. The goods on which these notes could be issued
were not removed, but stamped with a Government seal. While not a legal
tender, the notes were receivable at all imperial agencies. On
securities classed at the Reichsb