¹ Cited in British Foreign Office, The Economic Situation in Germany and Austria-Hungary: Aug. 1914–Sept. 1918 (London: H. M. Stationary Office 1914–1918), January 1915Google Scholar. Max-Müller and others gathered information for monthly reports on Germany's economic, financial, and social conditions during the war from the German press, the press of neutral continental countries, and neutral businessmen who had traveled to Germany. These confidential reports were then circulated to the British Parliament. Reports, August–December 1914, prepared by Sir Valentine Chirol, assisted by W. G. Max-Müller; reports for January 1915–September 1918 prepared by W. G. Max-Müller, assisted by D. Ward, M. T. H. Sadler, and Mr. Guillebaud.

² Ibid., August 1915.

³ Ibid., July 1917.

⁴ Ibid., November 1914.

⁵ Karl Helfferich (1872–1924), former director of the Deutsche Bank, was appointed in spring 1915 as Secretary of Finance where he remained until summer 1916 when he became Secretary of the Interior. Rudolf von Havenstein (1857–1953), member of the Prussian Finance Ministry before the war, was president of the Reichsbank from 1908 to 1923. Williamson, John G., Karl Helfferich, 1872–1924: Economist, Financier, Politician (Princeton, NJ: Princeton University Press, 1971)Google Scholar.

⁶ Ferguson, Niall, Paper and Iron: Hamburg Business and German Politics in the Era of Inflation, 1897–1927 (Cambridge: Cambridge University Press, 1995), 117CrossRefGoogle Scholar.

⁷ Charles Kindleberger argues that “German war finance was handicapped,” comparing the Reich's policies with the “disastrous” ones pursued by the French Director General of Finance, Jacques Necker, during the American War of Independence. Kindleberger, Charles, A Financial History of Western Europe (New York: Oxford University Press, 1993), 292–3Google Scholar; Feldman, Gerald D., The Great Disorder: Politics, Economics, and Society in the German Inflation, 1914–1924 (New York: Oxford University Press, 1993), 36Google Scholar; Berghahn, Volker, Modern Germany: Society, Economy, and Politics in the Twentieth Century (New York: Cambridge University Press, 1987), 48–9CrossRefGoogle Scholar.

⁸ In Germany's case, the gold ratio was fixed at one to three—for every gold or gold-equivalent mark the Reichsbank held, it could circulate three marks of paper currency.

⁹ Bordo, Michael D., “Gold as a Commitment Mechanism: Past, Present, and Future,” in Gold and the Modern World Economy, ed. Tcha, Moonjoong (New York: Routledge, 2003), 20Google Scholar. See also Bordo, Michael D. and Kydland, Finn E., “The Gold Standard as a Rule: An Essay in Exploration,” Explorations in Economic History 32 (1995): 423–64CrossRefGoogle Scholar; and Eichengreen, Barry, Golden Fetters: The Gold Standard and the Great Depression 1919–1939 (New York: Oxford University Press, 1992)Google Scholar.

¹⁰ Bordo, “Commitment Mechanism,” 21.

¹¹ See Ritschl, Albrecht, “Germany's Economy at War, 1914–1918,” in Economics of World War I, ed. Broadberry, Stephen and Harrison, Mark (New York: Cambridge University Press, 2005)Google Scholar.

¹² In 1930 Bresciani-Turroni argued that Germany's budget deficit and banking policies caused the hyperinflation. Despite the exhaustive study of the inflation since then, “the kernel of Bresciani's explanation of the inflation remains more or less intact, even in studies which identify more profound ‘structural’ factors as the causes of fiscal and monetary expansion.” Ferguson, Paper and Iron, 4–5; Bresciani-Turroni, Costantino, The Economics of Inflation: A Study of Currency Depreciation in Post-War Germany (London: G. Allen & Unwin Ltd., 1953)Google Scholar. At the extreme, Albrecht Mendelssohn-Bartholdy argues that the prewar plans for financial mobilization, coupled with the anticipation of a short war, were the “primary causes” that set Germany on the track toward hyperinflation. Mendelssohn-Bartholdy, Albrecht, The War and German Society: The Testament of a Liberal (New York: H. Fertig, 1937/1971)Google Scholar.

¹³ In their edited collection of essays on the German inflation, as well as in their individual studies, Gerald Feldman and Carl-Ludwig Holtfrerich examine the decade from 1914 to 1924 as a single period. Feldman, Gerald D. et al. , eds., The German Inflation Reconsidered: A Preliminary Balance (New York: De Gruyter, 1982)CrossRefGoogle Scholar; Feldman, Great Disorder; Holtfrerich, Carl-Ludwig, The German Inflation, 1914–1923: Causes and Effects in International Perspective, trans. Balderston, Theo (New York: De Gruyter, 1986)CrossRefGoogle Scholar. While Ferguson sees the entire thirty-year span from 1897 to 1927 as one of inflation, he argues against those that say war-time financial policies necessarily led to hyperinflation. Rather, after the war, “alternative, less inflationary policies could conceivably have been pursued, with less disastrous consequences.” “A stabilisation of monetary and fiscal policy could in theory have been achieved in 1920 without a British-style recession; indeed, without a recession as severe as that which did occur in Germany 1923/4.” Ferguson, Paper and Iron, xi, 19–20. For a detailed discussion of the historiography of Germany's hyperinflation, see Ferguson's Paper and Iron.

¹⁴ Ritschl, “Germany's Economy,” 63.

¹⁵ Feldman, Great Disorder, 39–42. For a description of this pessimistic view of Germany's war finance, see Ferguson, Niall, “How (Not) to Pay for the War: Traditional Finance and ‘Total’ War,” in Great War, Total War: Combat and Mobilization on the Western Front, 1914–1918, ed. Chickering, Roger and Foerster, Stig (Cambridge: German Historical Institute and Cambridge University Press, 2000), 418–9Google Scholar.

¹⁶ Ferguson, Niall, The Pity of War: Explaining World War I (New York: Basic Books, 1999), 326Google Scholar.

¹⁷ France financed 83.5 percent of its government expenditure with loans, Germany between 81.3 and 83.3 when the states are included. Strachan, Hew, The First World War, Volume I: To Arms (Oxford: Oxford University Press, 2001), 909, 923Google Scholar; Ferguson, The Pity of War; Theo Balderston, “War Finance and Inflation in Britain and Germany, 1914–1918,” The Economic History Review, Economic History Society (May 1989); Broadberry and Harrison, eds., Economics of World War I. For an in-depth comparative discussion of finance in World War I, see Strachan, World War.

¹⁸ Lloyd George in British Parliamentary Debates, November 27, 1914, vol. LXVIII, 1532.

¹⁹ Hardach, Gerd, The First World War, 1914–1918 (Berkeley, CA: University of California Press, 1977)Google Scholar.

²⁰ Gold comprised fifty-two to sixty-five percent of money in circulation before 1914. The Reichsbank leadership feared this large percentage would hinder its ability to satisfy Germany's liquidity needs in case of war. Beginning in 1906, smaller notes were gradually introduced into circulation to replace gold. The Bank Act of 1909 declared Reichsbank notes legal tender, and in 1913, the Reich added 120 million marks of silver to its war bullion reserves and placed an equal amount of small paper notes into circulation. Holtfrerich, German Inflation, 114; Feldman, Great Disorder, 28; Bendix, Ludwig, “Krieg und Geldmarkt,” Krieg und Volkswirtschaft, Heft 6 (Berlin: Leonhard Simion NF, 1915)Google Scholar; Strachan, World War, 836.

²¹ Mendelssohn-Bartholdy, German Society, 63–74.

²² Reichsarchiv, , Der Weltkrieg, 1914 bis 1918, bearbeitet im Reichsarchiv. Kriegsrüstung und Kriegswirtschaft (Berlin: E. S. Mittler & Sohn, 1930), 458–61Google Scholar. Niall Ferguson points out that Germany's lower bond prices in the years preceding 1914 reflected the widespread feeling among investors that Germany's financial situation was weaker than Britain's, France's, and even Belgium's. Ferguson, “Traditional Finance,” 415–6.

²³ German banks had extended loans to industry backed only by small cash reserves during the late nineteenth century; however, financial crises during the Russo-Japanese war in 1905, the panic of 1907, and the Moroccan crisis of 1911 showed the relative susceptibility of German credit to a decline in liquidity when foreign investors withdrew their credit, as was the case with French creditors in 1911. Clingan, C. Edmund, Finance From Kaiser to Führer: Budget Politics in Germany, 1912–1934 (Westport, CN: Greenwood Press, 2001), 13Google Scholar; Helfferich, Karl, Der Weltkrieg (Berlin: Ullstein & Co., 1919)Google Scholar; Holtfrerich, German Inflation, 114; Feldman, Great Disorder, 30; Knauss, Robert, Die deutsche, englische und französische Kriegsfinanzierung (Berlin: W. de Gruyter & Co., 1923), 150Google Scholar; Mendelssohn-Bartholdy, German Society, 66–70.

²⁴ Feldman, Great Disorder, 32; Holtfrerich, German Inflation, 114.

²⁵ In March 1915, the Reichsbank offered an additional one-percent interest to gold deposits held by the small savings banks in the Reichsbank as a further incentive. British Foreign Office, March 1915. For figures on the circulation of currency in Germany, see Roesler, Konrad, Die Finanzpolitik des Deutschen Reiches im Ersten Weltkrieg (Berlin: Duncker & Humblot, 1967)CrossRefGoogle Scholar, Table 17, 216; Feldman, Great Disorder, 29.

²⁶ This gold had been collected from the French indemnity of 1871. Strachan, World War, 834.

²⁷ By purchasing short-term treasury bills, the Reichsbank placed new paper money into circulation. Treasury bills came due after three months, but the Reich could roll it over for an additional three months and repeat this indefinitely. In this way, the central bank monetized the short-term debt of the Reich. In contrast, when the Reichsbank discounted commercial bills, it did not create new money but rather used existing liquid assets to purchase these bills. For a discussion of the evolution of public debt, see Ferguson, Niall, The Cash Nexus: Money and Power in the Modern World, 1700–2000 (New York: Basic Books, 2001)Google Scholar.

²⁸ To avoid a moratorium, the Bundesrat extended the maturity of bills of exchange by thirty days and gave debtors in German border zones further protection. For owners of foreign bills of exchange, the Reichsbank extended their maturity to six months and offered to rediscount these foreign bills at a rate of six percent. After the immediate financial crisis had passed, the Reichsbank concerned itself almost exclusively with discounting federal treasury bills, leaving Darlehnskassen to discount bills for the states and municipalities. Loveday, A., “German War Finance in 1914,” The Economic Journal, Royal Economic Society (March 1916): 48Google Scholar; Feldman, Great Disorder, 34–5.

²⁹ War bonds could be mortgaged at the Darlehnskassen for seventy-five percent of their face value; this was later raised to eighty-five percent. For a detailed discussion of the Darlehnskassen, see Loveday, “German War Finance,” 48–51.

³⁰ Flink, Salomon J., The German Reichsbank and Economic Germany (New York: Harper & Brothers, 1930), 42Google Scholar. The effect of the August Laws was to “transform the system radically while pretending that it was basically unchanged.” Feldman, Great Disorder, 32. Mendelssohn-Bartholdy condemns these laws: they were “in perfect accord with the idea of a war which would be won, through the Schlieffen plan, in a few months or could not be won at all.” Mendelssohn-Bartholdy, German Society, 58. Roesler observes that these laws made a “farce” out of the one-third coverage limit, which eliminated the “last obstacle for the expansion of the money supply.” Roesler, Finanzpolitik, 43.

³¹ Roesler, Finanzpolitik, 43. Before 1914 the English journalist Norman Angell and Polish banker Ivan Bloch helped to popularize this incredulity in the possibility of a long war. Angell, Norman, The Great Illusion: A Study of the Relation of Military Power to National Advantage (New York: G. P. Putnam's Sons, 1913)Google Scholar; Bloch, Ivan, The Future of War in its Technical, Economic, and Political Relations: Is War Now Impossible? (New York: Doubleday & McClure Co., 1899)Google Scholar.

³² Reichsarchiv, Weltkrieg, 471.

³³ Eulenburg, Franz, Das Geld im Kriege und Deutschlands Finanzielle Rüstung (Leipzig: Koehler, 1915), 25Google Scholar. Dr. Weber similarly concluded “That Germany is doing better financially than other countries is due to the Reichsbank's management.” Dr.Weber, August, “Krieg und Banken,” Krieg und Volkswirtschaft, Heft 7 (Berlin: Leonhard Simion NF, 1915)Google Scholar. See also Bendix, “Krieg und Geldmarkt.”

³⁴ In 1917 the Berliner Tageblatt celebrated Havenstein's sixtieth birthday by praising his farsighted plans to ensure liquidity to the economy, “thereby equipping [the Reichsbank] well for serious times.” Berliner Tageblatt, March 10, 1917. The Reichsbank director came to be “affectionately known” as “Generalgeldmarschall Havenstein”; Feldman, Great Disorder, 32.

³⁵ Bendixen, Friedrich, Währungspolitik und Geldtheorie im Lichte des Weltkrieges (Munich: 1915/1919)Google Scholar. For more on Bendixen, see Feldman, Great Disorder, 36–7.

³⁶ Bendixen, Währungspolitik, 22–23.

³⁷ Bendix, “Krieg und Geldmarkt”; Weber “Krieg und Banken”; Eulenburg, Das Geld im Kriege. For a discussion of the expectations of a short war among the financial community, see Mendelssohn-Bartholdy, German Society, 63–72; Knauss, Kriegsfinanzierung, 188; and Feldman, Great Disorder, 35.

³⁸ The Economist, August 15, 1914. E. F. Davies and Max-Müller held this general opinion as well in the first year of the war. Davies, E. F., The Finances of Great Britain and Germany (London: T. F. Unwin, Ltd., 1916)Google Scholar; British Foreign Office, August 1915.

³⁹ This line of thought began with Robert Knauss's study in 1923. Knauss, Kriegsfinanzierung. See also Holtfrerich, German Inflation, 105–18; and Kindleberger, Western Europe, 292.

⁴⁰ Balderston, “War Finance,” 225. Eichengreen and Ferguson echo the basic point that all “major belligerents financed less than a third of current expenditure out of taxes.” Eichengreen, Golden Fetters, 75; Ferguson, Pity of War, 323.

⁴¹ On Roedern, see British Foreign Office, February 1918. See also Helfferich's Reichstag speech on March 10, 1915, in Helfferich, Karl, “Kriegsfinanzen,” in Der Deutsche Krieg, Politische Flugschriften (Stuttgart and Berlin: Deutsche Verlags-Anstalt, 1915)Google Scholar; Wolf, Julius, Die Steuerreserven in England und Deutschland. Ein Beitrag zur Frage der “Rüstungsgrenzen” beider Staaten (Stuttgart: F. Enke, 1914), 13–15Google Scholar. In 1916 M. J. Bonn, a professor at the University of Munich and a scholar in America who later served as a reparations expert for Germany at the Paris Peace talks, calculated that Britain financed fourteen percent of its war effort by taxation and remarked that The Economist estimated it at only ten percent. Bonn, Moritz Julius, German War Finance (New York: German University League, 1916), 6Google Scholar. Julius Wolf, professor of political economy and publisher of the Zeitschrift für Sozialwirtschaft, remarked on the eve of war that Germany's higher population, when combined with lower military expenditures, meant that the German taxpayer shouldered a lower burden than the British taxpayer. He estimated that the overall tax burden per person in Germany was 62.75 marks compared with 106.07 marks in England. Wolf argued then, as Ferguson does today, that these statistics indicate Germany could have carried a higher tax than it did during the war, barring political difficulties, which in fact existed in abundance. The tax policy impasse stemming from the debate over direct vs. indirect taxes was not addressed until after the war. Ferguson, Pity of War, 141, 323.

⁴² The Reich issued its first war loan in September 1914 at five percent, priced at 97.5, to pay off the floating debt that had accrued at the Reichsbank since the war's outbreak. These war bonds offered higher returns and a lower price relative to prewar bond issues. After the fourth loan the issue price rose to 98.5 and remained there until the end of the war. See the British Foreign Office reports; Roesler, Finanzpolitik, 77.

⁴³ Holtfrerich, German Inflation, 67.

⁴⁴ Hardach, First World War, 160.

⁴⁵ For a thorough discussion of the financial and monetary implications of the Hindenburg Program, see Roesler, Finanzpolitik.

⁴⁶ The second and third columns depict the amount of floating short-term debt held by the Reichsbank and commercial banks respectively; Balderston, “War Finance,” 238.

⁴⁷ Balderston, “War Finance,” 227. The story sketched here on the basis of Holtfrerich, Balderston, and Roesler's studies explains inflation as a result of the monetization of the Reich's debt. Recent work by Ritschl questions this conclusion, arguing that the debt was not monetized to the degree previously thought. According to him, debt monetization was no more than fifteen percent during the war, and other mechanisms driving inflation were to blame. Ritschl, “Germany's Economy,” 61–63.

⁴⁸ Ferguson, Pity of War, 330.

⁴⁹ Hardach, First World War, 172. Ferguson, Pity of War, 330–1.

⁵⁰ These figures Helferrich presents are questionable. He most likely included the Darlehnskassenscheine in his calculation of gold reserves and excluded them from his calculation of total paper money in circulation. Helfferich further criticized British weakness by insinuating that it was largely dependent on its colonies, India and Egypt in particular, and allies for gold. Helfferich, “Kriegsfinanzen”; Helfferich, Der Weltkrieg.

⁵¹ Helfferich, “Kriegsfinanzen”; Helfferich, Der Weltkrieg. Helfferich, Karl, Reden und Aufsätze aus dem Kriege (Berlin: G. Stilke, 1917)Google Scholar.

⁵² A sample poster reads, “Gold for the Fatherland! I gave gold for our defense and received iron as honorable recompense. Increase our gold stock! Bring your gold jewelry to the gold purchasing bureaus. Full gold value will be given in return!,” cited in Feldman, Great Disorder, 33–4.

⁵³ Bendix, “Krieg und Geldmarkt,” 9–14.

⁵⁴ See Table 2 in this article, column 1. To meet the dilemma of allocating gold between its reserves and foreign currency, the Reich centralized control over the export of gold and the foreign exchange market during the war. In November 1914, the sale of gold above the government's set price was made a punishable offense, and laws in January 1916 and February 1917 centralized control and surveillance of foreign exchange operations under the Reichsbank and twenty-eight other banks in Berlin, Hamburg, and Frankfurt. Loveday, “German War Finance,” 55; Feldman, Great Disorder, 44.

⁵⁵ British commentary approached Germany's finances from a different perspective: “they had been brought up in the doctrine that in a run one must pay out one's gold reserve to the last bean.” In other words, preserving gold convertibility was their highest priority. Keynes, John Maynard, The Collected Writings of John Maynard Keynes, Volume XI, Activities 1914–1919, Economic Articles and Correspondence, ed. Moggridge, D. (London: Macmillan, 1971), 211Google Scholar. See also Max-Müller's, reports for the British Foreign Office and E. F. Davies, British and German Finance (London: Thomas Nelson and Sons Publishers, 1915)Google Scholar.

⁵⁶ Keynes, John Maynard, The Collected Writings of John Maynard Keynes, Volume XVI, Activities 1914–1919, the Treasury and Versailles, ed. Johnson, E. (London: Macmillan, 1978), 312–4Google Scholar. Keynes believed that after abandoning convertibility, the Reichsbank's accumulation of gold was the next logical step, the “right policy.” Keynes, , Collected Writings, Vol. XI, ed. Moggridge, D. (London: Macmillan, 1983), 109Google Scholar.

⁵⁷ The financial situation of the Ottoman Empire illustrates the danger stemming from a lack of public confidence in paper currency. On the eve of war, “paper money issued by any authority other than the Imperial Ottoman Bank was unlikely to command confidence.” “By 1916 paper money was exchanged even in Constantinople at 40 per cent below its face value, and in the provinces at 80 to 90 per cent. … Lack of faith in paper currency was therefore a major cause of rising prices.” Military payments in many parts of the empire could be made in specie only, at times the Turkish army was “unable to buy food or horses for lack of gold.” Strachan, World War, 950–1.

⁵⁸ Feldman, Great Disorder, 33.

⁵⁹ Knauss, Mendelssohn-Bartholdy, and Flink, writing before WWII, do not discuss this, nor do more recent analyses of war finance, including Roesler, Balderston, and Ferguson.

⁶⁰ Feldman, Great Disorder, 8; Ellis, Howard S., German Monetary Theory 1905–1933 (Cambridge, MA: Harvard University Press, 1937)Google Scholar; Knapp, Georg Friedrich, The State Theory of Money (London: Macmillan and Co., 1924)Google Scholar.

⁶¹ Bendix, “Krieg und Geldmarkt,” 23–25.

⁶² Weber, “Krieg und Banken,” 11–12. Julius Steinberg, a bank director in Bonn believed the gold ratio was important for reassuring the public that Germany's banking system could withstand a gold run. He, along with Otto Bachrach and Hugo Böttger, thought gold would be better used in bulking up the coffers of the Reichsbank than supporting the foreign exchange rate. Steinberg, Julius, Geld und Kredit im Kriege (Bonn: Webers, 1915), 8–13Google Scholar; Bachrach, Otto, Deutsche Valuta im Kriege (Berlin: Simion, 1917)Google Scholar; Böttger, Hugo, “Das Geld im Kriege,” Der Deutsche Krieg. Politische Flugschriften, Heft 26 (Stuttgart and Berlin: Deutsche Verlags-Anstalt, 1915), 23–29Google Scholar.

⁶³ Eulenburg, Das Geld im Kriege, 25–31.

⁶⁴ Ibid., 26–27.

⁶⁵ Bendix, “Krieg und Geldmarkt.”

⁶⁶ Sombart, Werner, in Berliner Tageblatt, August 27, 1914Google Scholar.

⁶⁷ Sombart, Werner, in Berliner Tageblatt, August 29, 1914Google Scholar.

⁶⁸ Bendixen, Währungspolitik, 22.

⁶⁹ Ibid., 16–22. See also Feldman, Great Disorder, 36–7. Another critic of the ratio believed that gold was the “same in the cellar of the Reichsbank as in a sunken submarine.” Hadenfeldt, Hermann, Die Geldsteuer oder der Gegenzins. Ein Hilferuf gegen den Goldkriegswahn (Berlin: Politik Verlags-Anstalt und Buchdruckerei, 1916), 6Google Scholar.

⁷⁰ Bendixen to Knapp, Feb. 9, 1915. Cited in Feldman, Great Disorder, 36.

⁷¹ Knauss, Kriegsfinanzierung, 57. The Darlehnskassen “made a farce of the one-third coverage requirement.” Feldman, Great Disorder, 34.

⁷² Knauss, Kriegsfinanzierung, 58.

⁷³ Dr.Lotz, Walther, Die Deutsche Staatsfinanzwirtschaft im Kriege. Der Carnegie-Stiftung für Internationalen Frieden (Stuttgart and Berlin: Deutsche Verlags-Anstalt, 1927), 23Google Scholar.

⁷⁴ British Foreign Office, May 1917.

⁷⁵ See Table 2 in this article, columns 2, 3, and 6.

⁷⁶ Roesler, Finanzpolitik, 208, 216.

⁷⁷ Weber, “Krieg und Banken,” 14–17; Deutsche Bank, Forty-Sixth Annual Report of the Deutsche Bank, for the Year 1915 (Berlin: n.p., 1915), 6–8Google Scholar; Bonn, German War Finance, 10–11; Eulenburg, Das Geld im Kriege, 29–31; Böttger, “Geld im Kriege,” 15.

⁷⁸ Eulenburg, Das Geld im Kriege, 29–31; Bendix, “Krieg und Geldmarkt,” 23.

⁷⁹ Böttger, “Geld im Kriege,” 16–18. Report about Havenstein in The Economist, October 17, 1914. Deutsche Bank, Forty-Sixth Annual Report, 4–8.

⁸⁰ Bank, Dresdner, Germany's Economic Forces During the War (Berlin: G. Stilke, 1916), 23–27Google Scholar; Deutsche Bank, Forty-Sixth Annual Report, 4–8.

⁸¹ Bendix, “Krieg und Geldmarkt,” 20; Wolf, Julius, Finanzwirtschaftliche Kriegaufsätze (Stuttgart: Enke, 1916)Google Scholar.

⁸² Roesler, Finanzpolitik, 166.

⁸³ Ibid., 206, Table 11.

⁸⁴ Helfferich, “Kriegsfinanzen”; Dr.Havenstein, Rudolf, Rede des Reichsbankpräsidenten (Berlin: Nachrichtenbüro für die Kriegsanleihen, 1918)Google Scholar; Bonn, German War Finance.

⁸⁵ The number of small and large investors participating in the war loans remained fairly even until the ninth loan, although the monetary weight of larger investors in the war loans gradually increased over the course of the war. Roesler, Finanzpolitik; Feldman, Great Disorder, 42.

⁸⁶ Berliner Tageblatt, March 15, 1917. The Berliner Tageblatt applauded the fact that successive war loans were “true people's loans.” Berliner Tageblatt, April 17, 1916; Sept. 1, 1916; March 21, 1917; Eulenburg, Das Geld im Kriege, 33–36.

⁸⁷ Bonn, German War Finance, 9, 12. See also Deutsche Bank, Forty-Sixth Annual Report; Bendix, “Krieg und Geldmarkt.”

⁸⁸ Otto Mering, another critic, feared that the credit market would be “swimming in money” on account of the operations of the Darlehnskassen. Mering, Otto, Die Liquidität der Deutschen Kreditbanken (Jena and Halle-Wittenberg: Vereinigte Friedrichs Universität, 1916), 73Google Scholar.

⁸⁹ These are two forms of short-term deposit accounts, whereby transactions between parties could be facilitated by crediting and debiting accounts in a clearing system, thereby avoiding the use of paying with currency. Lotz, Staatsfinanzwirtschaft, 91.

⁹⁰ Schippel, Hans, “Bargeldloser Verkehr, unsere Reichsbank und der Krieg,” in Der Deutsche Krieg. Politische Flugschriften (Berlin: Deutsche Verlags-Anstalt, 1917), 25–29Google Scholar; Roesler, Finanzpolitik, 83. Among the main belligerents, only in Great Britain “had cheques begun to replace cash in private transactions.” Strachan, World War, 834.

⁹¹ See Holtfrerich, German Inflation, Table 11.

⁹² Berliner Tageblatt, February 5, 1917.

⁹³ Schippel, “Bargeldlos Verkehr,” 16–18.

⁹⁴ A British cartoon about “German Michel” illustrates the extent to which this manufactured confidence rested on an unstable basis: “I got a receipt for 100 marks, I gave this for a second 100 marks, and I received a second receipt, for the third loan I gave the second receipt. Have I invested 300 marks or have both of us [he and the government] got nothing?” Davies, Finances.

⁹⁵ Mendelssohn-Bartholdy, German Society, 87.

⁹⁶ Vorwärts, March 24, 1915.

⁹⁷ Knauss, Kriegsfinanzierung, 188.

⁹⁸ See Berghahn for the argument on how the public's purchase of war bonds hinged on their belief that reparations would be forthcoming after the war. Berghahn, Volker, Imperial Germany, 1871–1918: Economy, Society, Culture, and Politics (New York: Berghahn Books, 2005), 281Google Scholar.

⁹⁹ British Foreign Office, March 1917.

¹⁰⁰ Berliner Tageblatt, March 21, 1917.

¹⁰¹ Vorwärts reflected the growing worry about financing the interest on the public debt once the war ended, and the subsequent taxation it believed to be the only answer—a subject that became increasingly discussed after 1917. This perspicacity of Vorwärts in looking beyond the immediate questions of war finance to see the problems of reentering the world economy comes as no surprise considering that as a socialist newspaper it was inherently internationally focused. British Foreign Office, August 1915.

¹⁰² Ferguson, Paper and Iron, 148.

¹⁰³ Berghahn pushed this date earlier, arguing that “by 1916 it was obvious to all that the war was not going well and that victory might indeed never come.” Berghahn, Imperial Germany, 281.

¹⁰⁴ Dr.Kuczynski, R., “Reichsfinanzreform,” Berliner Tageblatt, August 31, 1917Google Scholar; Koniezko, R. and Joos, C., Kriegsschulden und volkstümliche Steuerreform (Frankfurt am Main: Vereinsdruckerei, 1917), 6Google Scholar.

¹⁰⁵ Kuczynski, “Reichsfinanzreform.”

¹⁰⁶ Several different estimates of the cost of the war for Germany, by Dr. Kuczynski, Dr. Ammon, and Dr. Ballod, appeared in fall 1917, based on the assumption that no indemnity would be forthcoming. Koniezko and Joos, Kriegsschulden, 4. The banker Salomon Marx, writing in 1918, echoes Kuczynski's dismissal of the prospects of a war indemnity. Marx, Salomon, “Die Deckung unserer Kriegskosten,” Vereins zur Wahrung der Wirtschaftlichen Interessen in Rheinland und Westfallen (Berlin: Büxenstein, 1918)Google Scholar.

¹⁰⁷ British Foreign Office, November 1917, May 1918; Kuczynski, “Reichsfinanzreform.” Roedern's budget of 1918 did incorporate some new indirect taxes; however, these did not meet expectations, and “Roedern felt that direct taxation was incompatible with the government's preferred method of war finance.” Strachan, World War, 894–6.

¹⁰⁸ See Table 1 in this article. Ferguson, Pity of War, 332; Strachan, World War, 913.

¹⁰⁹ Marx, “Kriegskosten,” 14.

¹¹⁰ Bendix, “Krieg und Geldmarkt,” 20.

¹¹¹ British Foreign Office, September 1915.

¹¹² Vorwärts, March 24, 1915.

¹¹³ From a report of the Berlin Chamber of Commerce meeting. Berliner Tageblatt, March 21, 1917.

¹¹⁴ Roesler, Finanzpolitik, 88–9. In his annual report for 1917, president of the Deutsche Bank Arthur von Gewinner remarked that “the placement of deposits in the Treasury bills of the Reich, the federal states, and the large cities now offers the easiest opportunity to invest every available sum in a short-term and secure manner at acceptable interest rates.” Cited in Strachan, World War, 907.

¹¹⁵ Chickering, Roger, Imperial Germany and the Great War, 1914–1918 (Cambridge: Cambridge University Press, 2004), 150, 156–7, 163–4Google Scholar.

¹¹⁶ Ferguson, Pity of War, 333.

¹¹⁷ For a discussion of the benefits and limitations of using capital markets to interpret historical events, see Frey, Bruno and Kucher, Marcel, “History as Reflected in Capital Markets: The Case of World War II,” The Journal of Economic History 60, no. 2 (June 2000)CrossRefGoogle Scholar.

¹¹⁸ Roesler, Finanzpolitik, 77; Zeidler, Manfred, “Die Deutsche Kriegsfinanzen 1914 bis 1918 und ihre Folgen,” in Der Erste Weltkrieg. Wirkung, Wahrnehung, Analyse, ed. Michalka, Wolfgang (Munich: Piper Press, 1994)Google Scholar. For a discussion of Germany's stock exchanges during the war, see the annual summaries of the Volkswirtschaftliche Chronik (Jena: Fischer, 1898–1927). Thursday, July 30, was the last day that the price of government bonds was listed in Berlin. Berliner Tageblatt, July 30, July 31, and August 3, 1914.

¹¹⁹ Volkswirtschaftliche Zeitung, 1916, 992–93, and 1917, 931–2. A few quotations appear sporadically in The New York Times for the price of German war bonds in Berlin, which paint a similar but less precise picture. In January 1915 war bonds traded at par: 2-½ percent above their issue price of 97-½, and in June 1915 they traded at 99–3/8. The New York Times, Jan. 16 and June 6, 1915.

¹²⁰ Volkswirtschaftliche Chronik, 1918, 919; Ferguson, Pity of War, 126–35.

¹²¹ “Although in theory the path to the floating of a loan in the United States was now as open to Germany as it was to Britain, in practice Berlin had to deal with [J. P.] Morgan's dominance of the market.” Strachan, World War, 943–4. Karl Erich Born places the total amount borrowed by the central powers in New York at $35 million. Born, Karl Erich, Geld und Banken im 19. und 20. Jahrhundert (Stuttgart: Kroener Verlag, 1977)Google Scholar. Ten million dollars of this came from the efforts of Chandler & Co., a relatively unknown New York firm, to purchase German nine-month notes in March 1915. This subscription was widely accepted in New York, Philadelphia, and the German-populated regions around Cincinnati and Chicago. The Wall Street Journal, March 19, 1915; The New York Times, June 6, 1915.

¹²² Victor Laepple estimates that 150 to 180 million francs' worth of foreign war loans were floated in Switzerland during the war, the largest single subscription of 100 million coming from the first French loan of November 1915. Victor Laepple, “Die Beanspruchung des Schweizerischen Kapitalmarktes durch die kriegsführenden Staaten,” Schweizerische Handelswissenschaftliche Zeitschrift. Organ der Schweizerischen Gesellschaft für Kaufmännisches Bildungswesen, 16. Jahrgang 1922, 60–68. For a detailed discussion of the Swiss financial market during World War I that corroborates Laepple's figures, see Kellenberger, Eduard, Theorie und Praxis des schweizerischen Geld-, Bank- und Börsenwesens seit Ausbruch des Weltkrieges (1914–1939), 2. Heft. Kapital Export und Zahlungsbilanz (Bern: A. Francke AG, 1939), 45–6Google Scholar. Werner Stauffacher has a higher estimate: 200 million francs in the first two years of war; however, he also holds that the bulk of this went to France. Stauffacher, Werner, “Der Schweizerische Kapitalexport unter besonderer Berücksichtigung der Kriegs- und Nachkriegsperiode,” Glarner Beiträge zur Geschichte, Rechtswissenschaft, Sozialpolitik und Wirtschaftskunde, Heft 9 (Glarus: Rud. Tschudy, 1929), 117–8Google Scholar. See also Landemann, Julius, “Der Schweizerische Kapitalexport,” Zeitschrift für Schweizer Statistik, einundfünfziger Jahrgang (Bern: Stämpfli, 1915)Google Scholar.

¹²³ Beginning in 1916, the Swiss National Bank and the Vereinigung von Vertretern des schweizerischen Bankgewerbes tried to hinder foreign banks of any nationality from advertising for foreign war loans, resulting in a strong decline in the subscription to such loans. Kellenberger, Theorie und Praxis, 45–6, 49–50, 56–64; Laepple, “Die Beanspruchung des Schweizerischen Kapitalmarktes,” 61; Stauffacher, “Der Schweizerische Kapitalexport,” 118. Neither the Neue Zürcher Zeitung und schweizerische Handelsblatt nor the Basler Nachrichten reported German bond prices, and the Monatsbericht of the Swiss National Bank did not begin to do so until 1926.

¹²⁴ Strachan, World War; Ferguson, Pity of War; Broadberry and Harrison, Economics of World War I; Balderston, “War Finance.”

¹²⁵ Frankfurter Zeitung in July, 1916. Quoted in British Foreign Office, July 1916.

¹²⁶ According to Reichstag deputy Peter Hanssen, investors refused to buy war bonds in October 1918. Hanssen, Peter, Diary of a Dying Empire, ed. Lutz, Ralph H., Schofield, Mary, and Winther, O. O., trans. Winther, Oscar Osburn (Bloomington, IN: Indiana University Press, 1955), 310–11Google Scholar.

¹²⁷ Zeidler, “Deutsche Kriegsfinanzen,” 430–1.

¹²⁸ Böttger, “Geld im Kriege,” 23–29.

¹²⁹ In the words of David Lloyd George, Chancellor of the Exchequer until 1915, gold in Germany had become a “gold calf … there it remains as an idol, not for use in currency, but purely in order to worship and to give that sort of strength which comes from an implicit belief in your idol.” British Parliamentary Debates, February 23, 1915, vol. LXX, 197.