But, in the words of Lord Headley, “When Germany wobbles we must hit as hard as possible in the right place and in the right way. But let us make sure of our own set purpose and fixed resolve, that now that we have made up our minds, there shall be no indications of wobbling on our part.” That, I think, expresses the judgment of the nation as a whole. We do not want to sit down in the hope that the “war of attrition” will do our business for us. It is “the long push, the strong push, and the push all together” of Britain and her Allies which alone will bring us to a triumphant success. The “war of attrition” is helping to bring nearer the day when the great push will be possible, but of itself alone it will never compel victory over an enemy who—it would be foolish to think otherwise—will fight to the last gasp.
Chapter Seven.
Germany’s Bankrupt Future.
I have no hesitation in saying that from our point of view one of the most encouraging features of the whole situation is the extraordinary collapse of German credit—extraordinary, I mean, in comparison with her apparent successes in the campaign on land. The heavy decline in the value of German and Austrian money in neutral countries is an absolutely unmistakable sign that the finances of our enemies are, after eighteen months of War, reaching a condition which before long must prove a source of the gravest embarrassment to the Central Powers.
As I write, the exchange value of the sovereign in the United States is about two per cent, below normal, and the same condition exists in Holland and Scandinavia. Considering how much we have been buying abroad, such a trifling depreciation in our credit is a wonderful testimony to the stability of British institutions. But if we turn to German and Austrian currency we find that it has declined in value from twenty to thirty per cent. In other words, neutral countries are beginning to show themselves unwilling to take German money; and as Germany can now buy only from neutral countries, it is quite obvious that she not only has a difficulty in paying for her purchases, but that she has also to pay an exceedingly inflated price for them.
My readers will remember the sensation that was caused when, owing to our heavy purchases of food and war material from America, the value of the sovereign dropped something like six per cent. That meant that for every hundred pounds we paid to America for goods bought we were losing six pounds owing to the fall in the exchange; and when it is recalled that our purchases were on a scale which involved hundreds of millions, it will be seen that the decline was a very serious matter for us. But so good was our credit that there was no difficulty in floating a huge loan in America, and the result was that the value of the sovereign at once appreciated, and it has never seriously dropped since; in fact, it has steadily risen. The process was helped by selling American securities, of which we hold huge sums. We can repeat both processes as often as we like in reason, because our credit is good, and our holdings of American securities are still enormous. Germany can do neither—firstly, because her credit is utterly impoverished, and, secondly, because, whatever she may sell, she and those with whom she would like to deal have no security that the goods would have more than a very slender chance of getting through the British blockade. Here, again, we see how our overwhelming sea power is helping the cause of the Allies. In spite of the huge sums we are spending, Germany is infinitely worse off than we are, and there is every reason to believe that the tremendous fall which her money is now experiencing means that her credit abroad is rapidly nearing the exhaustion point.
The fall in the value of German money tends to show that our blockade is operating with increasing stringency and success. It seems probable enough that Germany can still manage to obtain through the neutral countries many of the things of which she has most pressing need. But apparently her export trade has been much more severely hit. She depends for this trade upon the import of raw materials, most of which are extremely bulky and quite unlikely to escape the unremitting vigilance of the British Navy. Consequently Germany finds herself unable to pay for her imports by the ordinary channels of international trade, and the difficulty of paying at all has become serious. Nearly all modern business is done on a paper basis; that is to say, on promises to pay—in other words, on credit—and credit obviously depends upon the financial stability of the concern or the nation which seeks thus to obtain goods. That is why the continued decline in the value of the paper mark shows the declining confidence of the neutral nations in Germany’s power to redeem her pledges when the time for payment comes. Germany’s ultimate solvency depends upon her ultimate victory, and we can see by the reluctance of the neutral nations to give credit to Germany that they are very far from satisfied with Germany’s prospect of coming out “on top.” And when neutral financiers come to the conclusion that the War will end in Germany’s absolute bankruptcy—that is, in her inability to pay more than a few shillings in the pound of her debts—the value of her paper promises will sink almost to vanishing point, and there will be such a financial crash as this world has never seen. The faith of the neutral in German stability is wavering already, while the Allies still hold the confidence of the world. That is a factor of supreme importance. The day will come when not a single neutral will trade with Germany except on a gold basis, and when that day dawns the utter collapse of the Central Powers will assuredly be close at hand.
We have just seen a very striking evidence of Germany’s impoverishment in regard to the supply of wheat which Germany desired to purchase from Rumania. If there is one commodity which Germany needs more than any other to-day it is wheat. Rumania demanded that the wheat should be paid for in gold in Bucharest. The German and Austrian Governments offered anything and everything else except gold. They offered first ammunition, then paper, then Rumanian Treasury bonds, ammunition, and paper. The Rumanians, however, insisted upon gold, and the deal fell through for the simple reason that Germany had no gold to spare. Few instances have been more eloquent of the state to which Germany is reduced. And what Rumania says to-day the rest of the neutrals are likely enough to say to-morrow—“Either gold or no goods.” We can be quite sure that if Germany meets with a single great defeat in the operations which are assuredly near at hand, there will be a revulsion of feeling in the neutral countries which will render the demand for gold insistent. And if Germany cannot find gold to pay for the wheat she so sorely needs from Rumania, what are her prospects of finding it for other countries?