Bremen Cotton Exchange, 1872/1922

by Andreas Wilhelm Cramer

FINANCIAL ITEMS.

In those days, when the world spoke of the five "Great Powers", money was called the sixth "Great Power" and that with full right. It is a fact, that money means power, and that in a wider sense of the word than is generally accepted. The power of a state is limited, the power of money is unlimited, it is international. It seems ever to rejuvenate and augment itself, and it constantly draws bigger multitudes under its sway. A man who is a power in financial circles, plays his role in the world. England owes its enormous influence in politics and national economy to money. There have been other countries possessing great riches, but the working, creating and ruling capital, was English.

Previous to the English, German tribes were known on the sea. Daring mariners left our shores, and did a thriving business in all parts of the adjoining seas, where they founded settlements in the northern waters, and on the Baltic. How is it, that Germany has not gained riches, and why has it not participated in the treasures of the world, which, up to a few hundred years ago, were lying open to everybody? For the most part the unfavorable geographical position is to blame. On all sides, hemmed in by foreign countries, it had to suffer wars upon wars. A hundred years ago, Germany might still have had a chance to gain for itself a position in the world, but, at that time, it was lying in the dust, bleeding from a thousand wounds. The wars, which Napoleon waged against the German states, had reduced it to a poverty stricken country. All stamina seemed to have disappeared through the Napoleonic reign, the wars themselves and the contributions to the same, which the enemy mercilessly exacted, brought about a condition, which stifled all enterprise, and reduced the people to misery. Deep thought, poetry and music had to take the place of bodily welfare.

In their poverty, the inhabitants could not grasp the advantages offered to other nations. Under these conditions, England gained the mastery over half of the globe, politically, and in an economic sense. The colonies provided vast supplies, which were cleverly exploited, riches increased, business relations with the European Continent were opened and enlarged, and one fine day, England was the general provider to the Continent for nearly everything required. The extension of Trade was closely followed by the development of the Banking system, which, after all, may be called a branch of the trade. In the colonies, English banks were established, and every ton of rice or grain, every pound of cotton or spice, had to be paid through the intermediary of the banker, who, of course, derived a profit from the transactions.

When 50 years ago, Germany awakened from its long impotence, her citizens were received, without prejudice, all over the world, and no obstacles were placed in the way of their diligence. This fact, we wish gladly and thankfully to record. Many Germans were successful in gaining a firm footing in the English Colonies, as well as in America, and to attain there important positions. They formed a link between their home country and the centres of trade and finance. Valuable services were rendered by them to the German trade, but London remained the Banker of the world, and when an industry began to grow in Germany, it was, in many cases, the English, who furnished the first capital. When the cotton market started to develop in Bremen, most of the financing was done by English bankers, anyhow at first. Later on, German Banks participated, and it is greatly to their credit, that they showed such great interest and understanding for the requirements of that trade. In the year 1871, the first German Bank of importance opened its doors in Bremen, and others followed, as the trade expanded.

The cotton trade remained, in a certain measure, true to the English banks, while the other branches of commerce worked mostly through German banks, and a great incentive was given to this, by the fact, that American bankers considered German money equal to the American and English values.

How do we pay for the cotton, which we import?

The planter receives the purchase price from the shipper, through any one of the numerous banks in the South. Of course, we cannot give the actual dollars to the shipper, consequently, he or his banker has to advance them for a short period. Before the war, we opened a credit with English or German banks, in favor of the shipper, a so-called reimbursement credit, by which he could recover his advanced purchase price. When opening this credit, we took care, however, to have proof that the goods, for which we intended to pay, were certain to reach us eventually. We made the condition, that, against the reimbursement credit, the shipping documents were to be delivered. Against delivery of these documents, the shipper drew a draft upon our bankers, discounted the same, and the matter was settled. Now the bank was in possession of the documents, and by accepting the draft, had guaranteed to pay the purchase price. The position between the bank and ourselves, was cleared in various ways, which depended upon private arrangements. We, as cotton importers, had to receive the purchase price from the consumer in the interior, before we could satisfy our bank. As the sale of the goods could not always be effected promptly, we remained debtors to the bankers for the purchase price, while they were in possession of the goods or the documents. The settlement of transactions of this kind, requires a certain amount of trust and confidence, which the bankers have to grant to the merchants, on the other hand, they have their security in the value of the goods in their keep. The banks have always given a full measure of trust to the Bremen cotton trade, while the commerce has made every arrangement to safeguard the interests of the bankers. In this connection, we mention the establishment of the "Bremer Lagerhaus-Gesellschaft" which was founded in 1877, through their Agency the bank obtained, in a simple form, the security of the cotton itself. The hypothecation of goods against an overdraft on the bank, was new in those days, but later, it became common practice, and the old established forwarding houses made similar arrangements to those of the Bremer Lagerhaus-Gesellschaft. It became the custom to issue warrants against the cotton stored. The warehouse owners were, thereby, obliged to keep the cotton, until the holder of the warrant gave it free.

With growing trade, the co-operation of the banks increased considerably, and for a long period, business was satisfactorily settled, but the war caused here, like everywhere else, a certain amount of confusion. The settlement with the German banks was easy, but it was impossible, during the long period of the war, to let that cotton remain untouched, which was hypothecated in favor of foreign banks. Thus, a peculiar position in law was created, between the warrant holder and the previous owners of the cotton. The settlement of these questions lies with the respective committees of the peace commission.