WOLF VON SCHLERBRAND, Professor of German Language and Literature.
The modern German monetary system origi nated with the foundation of the German Em pire. In 1871, gold was declared the standard of value. The unit of value is the mark which is divided in 100 pfennig. In gold 4 marks are equal to $0.95284, or 1 mark is equal to 23.82 cents United States gold. For statistical purposes $1.00 is generally regarded as four marks. Gold has been coined and not melted down again until 1915, to the amount of 5,120,000,000 marks (710,000,000 marks in 10 mark pieces). Of these 5,000, 000,000 marks a large quantity has been ex ported or used up in industries, probably about one-half. During the war, of course, no gold is in circulation in Germany, but it is hoarded either in the federal bank or privately. More than 2,500,000,000 marks gold —German coins, foreign coins and bars— have been concen trated in the federal hank. Silver has been coined to the amount of 1,160,000,000 marks.
Federal Treasury Notes —Reichskassen scheine.— In withdrawing existing paper money of the different states, united in 1871, 120,000, 000 marks ($30,000,000) Federal Treasury notes were issued. By a law of 1913, the amount of Treasury notes was to be doubled and a cor responding amount of gold was to be with drawn from circulation and deposited as a special War Reierve Fund. When war broke out the law had not been carried out to its full extent. The Treasury notes are now circulating in denominations of 5 and 10 marks.
Federal Loan Bank Certificates — Dar lehenskassenscheinee— The issue of these cer tificates is a war measure to meet the demand of quick money by the citizens on their loanable property. The conditions being not very favor able the amount of these certificates has not become very large. By the end of 1914 $329, 000,000 worth of these certificates had been issued, but being replaced constantly by bank notes, only one-third of that amount was actu ally: in circulation.
Bank-Notes.--There are five banks of issue, the Federal Bank (Reichsbank), the Bayerische Notenbank, the Sichsische Bank, the Wiirttembergische Bank and the Badische Bank.
The notes of the Federal Bank are in, circulation all over Germany, while the circulation of the notes of the other banks is more or less re stricted to their state territories. More over, the issue of the notes of the Federal Bank may be regarded as unlimited for practi cal purposes. So the Federal Bank holds a pre dominant position, while the four other banks are only of local importance and their special and differing regulations may be disregarded. The Federal Bank is a private joint-stock com s- ny with a fully paid capital stock of $45,000, 111, and reserves of $20,000,000, but regulated in its scope of business by law and controlled by the government, the director being nominated by the Imperial Chancellor. Bank notes are issued in the denominations of $250, $125, $25.00, $12.50 and $5.00.
Above the amount of lawful money in the possession of the banks of issue, notes can be issued not subject to any tax, to the amount of $155,000,000 generally, and $205,000,000 during one week at the end of each quarter of the year (of this $137,000,000 generally and $187, 000,000 at the end of the quarter are issued by the Federal Bank). Above that amount the Federal Bank is entitled to issue notes but against payment of a 5 per cent tax involving an effectively restrictive discount rate of at least 5 per cent on first-class commercial paper, and the total amount of notes outstanding is not allowed to exceed three times the amount of cash in the hands of the bank. The cir culation of bank-notes is the elastic varying ele ment in the German monetary system. The principle of an elastic but gradually restrictive note issue as stipulated by the Bank Law of 1875, has since been introduced in most modern monetary systems, last of all in the monetary system, of the United States by the Federals Re serve Act.