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two other serious impediments to Danish shipping,
viz.: England's restrictions on foodstuffs destined for
Denmark, and the embargo of the United States on
exports of corn and foodstuffs to Denmark just at the
season when they were most needed.



Courage and industry might have overcome the dif-
ficulties which interfered with Denmark's exports to
the western countries, but it was quite impossible to
make good the failing imports. By the stoppage of
raw materials for margarine and other fats, the popu-
lation is forced to employ butter to a larger degree.
By the stoppage of supplies of foodstuffs for cattle,
especially when enhanced by failure of the harvests,
the amount of live stock is reduced and the produc-
tion of milk and butter is curtailed in a corresponding
proportion. Without food a cow cannot produce milk,
and without milk butter cannot be made, either for
export or for home consumption, and as, for the rea-
sons indicated, the home consumption tends to increase,
it is evident that next to nothing is left for export.

So far as butter is concerned — and the same ap-
plies for corresponding reasons to many other agri-
cultural products — rather a long time must pass
before any change will be felt, as the lack of food-
stuffs has resulted in extraordinary killings of stock
during 1917, and the raising of the reduced stock
requires several years. It is even to be feared that
the supplies which the United States conceded in the
last weeks of 1917 will be too late to be a real remedy.
At the end of May 1918, they had not yet appeared.

That the western powers, and especially England,
may have harassed the Central Powers, and Germany
in particular, by the restraints on shipping and com-
merce cannot be denied, but it is equally probable
that the Allied Powers, and first of all England, might
have attained the same and even greater results by
a more moderate attitude based on better information
about Denmark's, and especially the farmer's, needs.


Even if Germany has at times suffered some diffl- Slaugh-
culty on account of England's several measures, it tering Of
is certain that at other times it has profited by them. Cattle Of
In this connection it may be mentioned that the ship- Benefit To
ping policies above described have during 1917 cau- Germany,
sed an extensive but totally undesired slaughter of
live-stock, with the result that either cattle or meat
had to be sold in the home market or in Germany
at extremely low prices. This again has the effect of
causing a considerable decline in exports to England;
and even if Denmark, before the war and likewise
during the war, provided to a certain extent for Ger-
many, Denmark has at the same time been, and has
always desired to be, a much more important purveyor
to the wants of the British people.

As already stated, the Government at the opening Increase In
of the war adopted various measures. Amongst these Stock Of
was the suspension of the obligation of the National Gold Of
Bank to redeem its notes in gold, and the prohibition National
of the export of gold. The result of these measures Bank,
was, as might be anticipated, that all gold in the vaults
of the National Bank remained there, and that all
gold in circulation or arriving in the country was
bound to end in these vaults. These results were de-
sired here exactly as in other countries, and no doubt
on account of the existing uncertainty the Govern-
ment was fully justified in adopting such regulations.
The continuance of this policy has also been justified,
for it will not be possible, until after the end of the


war, whenever that may be, to see clearly the lines
of future financial policy.

On March 2, 1916, however, the National Bank
resumed the redemption of its notes in gold, although
it reserved the right of ceasing to make payments in
gold whenever desirable. The embargo on the export
of gold is still in force.

Besides the original intention, the withdrawal of
gold from circulation had the additional effect of cau-
sing automatically an immense expansion of the note
issue of the Bank. The Bank charter of 1907, which
was in effect at the opening of the war, provided
that, in addition to other securities, the notes in cir-
culation had to be covered by a coin and bullion stock
of half their denomination — this stock to consist of
actual coin or bullion or by an amount, not exceed-
ing two-fifths, of deposits with the note-issuing
banks of neighbouring countries, not bearing interest
and consequently convertible into gold at sight. The
National Bank, which always has plenty of collateral
securities, might then for each Kr. 1,000 in actual
gold, or in deposits immediately convertible into
gold, give out notes for Kr. 2,000.

In the last balance before the war, the balance per
ult. of July 1914, the coin and bullion stock amounted
to Kr. 78,300,000, and the notes issued were Kr.
156,400,000, or nearly twice the amount of the gold
stock, and notes might consequently then be increased
to double the amount of the inflowing gold. But though
a great influx of gold was a certain consequence of
the measures just mentioned, it became evident after
two months that, if the Bank was to supply a circu-
lating medium in sufficient quantity for the ordinary


requirements of the Government, for the heavy ex-
pense of maintaining neutrality, and for meeting the
demand of rising prices and greater activity of trade,
it would be necessary to change the rules of peace-
time and to make others which, while giving ample
security, would leave the Bank with greater facilities
for the issue of notes.

According to an earlier promise of the Government,
a Royal Order in Council of September 30, 1914,
later on succeeded by an Act of Parliament, required
the National Bank to keep of coin and bullion only
forty per cent (instead of fifty per cent, as formerly)
of the amount of notes. It was also provided that
one-fourth of the coin and bullion stock need not
consist of gold, but might be represented by deposits
with foreign correspondents of the Bank, if approved
by the Royal Commissary, or by bonds of foreign
governments taken at their official quotation. In this
way the Bank obtained a much freer hand, as, even
if the actual gold in its possession should still cover
thirty per cent of the circulation the remaining
seventy per cent of the notes might be covered by
other securities, with which the Bank was always
amply provided.

Further, the Bank was authorized to issue notes
against its holdings of Danish Governmental bonds
taken at par value; but such notes were not to ex-
ceed ten per cent of the whole circulating amount.
The Bank might then, by proper handling of its as-
sets, issue Kr. 3,666 2 / 3 for each Kr. 1,000 held in
actual gold. As will be seen, this is a radical change,
likely to shake all theories which consider actual gold
the only proper covering for bank notes, but a mea-


sure that, in consideration of the quality of the secu-
rities which, together with the coin and bullion stock,
serve to protect the notes, was quite justifiable, as the
results have proved.

Through the aid of these new rules and the ever-
increasing influx of gold, the Bank managed to meet
the likewise ever-increasing public and private de-
mands for circulating mediums, without in any way
encroaching on the security of the protection of the
notes. The following table gives the stock of gold and
the amount of notes in circulation at the dates indi-



Stock of Gold






Kr. 78,300,000 Kr

. 156,400,000








































, 1915
















































, 1917












, 1918




March 30





In this connection it may be of interest to mention
that on October 31, 1914, when the proportion of


gold to notes in circulation was at its lowest, the
Bank possessed, as security for notes amounting to
Kr. 224,000,000, gold to the amount of Kr. 69,000,000
and other securities for Kr. 206,000,000; and that on
July 31, 1917, when the proportion was at its highest,
the security for notes amounting to Kr. 289,000,000
consisted of Kr. 195,000,000 in gold and of Kr.
253,000,000 in other securities. We are consequently
justified in saying that the protection of the notes was
in every way safe and sound.

As has been stated previously, the turn-over of trade The Wants
increased very heavily during the first years of the Of Ger-
war, not only in quantity but also in value. The first many And
step forward was an enormous demand for horses Austria.
from Germany. During former years, there had been
regularly a moderate export of horses to Germany;
but now it increased suddenly to an extraordinary
height, and almost incredible prices were paid. The
German buyers no longer were interested in the qua-
lity of the horses, but only in the number. They might
be said to adhere to the maxim, „A horse is a horse,
no matter what it looks 'ike or what it costs." On
September 5, 1914, however, the Government placed
an embargo on the export of horses useful for military
purposes, and on November 23, 1914, all export of
horses was prohibited.

The German and Austrian buyers also displayed a
strong demand for canned food for soldiers and wor-
kers, which was sold as ¥ goulasch", and for which
large numbers of old cows and dubious pigs had to


give their lives. At the same time the usual buying
of cattle and pigs assumed larger dimensions than
ever before. All that farmers could spare was sold at
fancy prices. But in justice it must be said that the
Danish farmers, provident as ever, were careful not
to force their sales so as to encroach on actual or
future production of butter and bacon. As mentioned
above, it was the action of England and the United
States, by their embargo on supplies for Denmark,
to enforce the sales and the slaughter of cattle and

In 1909 the stock of full-grown cattle was 1,413,232
head. At the count on July 15, 1914, the figure had
increased to 1,474,308. On May 15, 1915, it had again
decreased to 1,437,720. The difference between these
two last figures is due to the extraordinary conditions
during the first year of the war. The next count, on
July 15, 1917, when the figure was 1,336,314 head,
shows the first step toward the decline caused by the
embargo of England and the United States on all sup-
plies of foodstuffs. The latest count was made on
February 5, 1918, and the figure had then gone down
to 1,196,825 head.

The stock of pigs was counted in July 1917, and
amounted to about 1,650,000 head; in December
1917, the stock numbered about 789,000 head, or
less than half the former amount. A later count
of pigs was made on February 5, 1918, and showed
a further decline of 276,000, the stock at that date
being 513,000 head, and at the end of March 1918,
the stock was further reduced to about 430,000 head,
which is about one-sixth of the figure before the war.
The reduction originates from last year's bad harvest


and the lack of supplies by which the Danish farmer
should have made up for the deficit.

Another field in which the turn-over increased heav- Imports
ily during the first period of the war was the import From The
trade from the west, above all from the United States. West.
During the first months of the war it was possible to
get from the United States nearly all goods which were
in demand. The United States were more than willing
to sell, and at that time England placed no obstacles
in the way of imports to neutral countries of goods
which at the beginning of the war were not considered
contraband according to the Hague convention and
the old international laws, notwithstanding the well-
known fact that large consignments were re-exported
to the Central Powers. The shipping had then no
other obstacles to conquer than the danger of mines,
which no doubt prevailed for a time, thus causing Dan-
ish vessels to be laid up when returned to Danish
ports. This was, however, eventually overcome and
the ships took up their trade again. With the full
knowledge of England large shipments of foodstuffs,
and most of them of American origin, were re-ex-
ported to the Central Powers during this period from
all neighbouring countries, Denmark not excepted.

Soon after, England began to intervene, first by Interven-
taking the ships to Kirkwall for examination, thus tion Of
delaying them for a long time, and in many cases for England,
total discharge. Later on, England extended her in-
terpretation of contraband in such a way that even


quite ordinary provisions in neutral ships were stop-
ped whenever England believed that the goods in
question were intended for an enemy destination. Fin-
ally, England took even more drastic steps by put-
ting the neutral countries on rations.

Results Of This conduct on the part of England was based on
Interven- the following reasoning: When a country like Den-
tion Of mark during the war imports much larger quantities
England, of some goods from the west than it did before, this
is absolute and sufficient proof that the surplus is de-
stined for Germany. It was quite forgotten, however,
that the industries of Denmark, which were greatly en-
larged during the first years of the war, needed much
greater quantities of all kinds of goods for the home
consumption, and especially that the war had closed
previous channels of supply for the home consump-
tion. Formerly — that is, before the war — large
quantities of many kinds of goods and raw materials
were imported not directly from the transatlantic
countries, but via Bremen and Hamburg to Denmark.
However, this way now being closed, the goods had
to be shipped direct to Danish ports. To the east the
connection between Denmark and Russia was now
discontinued; and Denmark, which was previously
supplied with enormous quantities of foodstuffs, grain,
oil-seed and oil-cakes, flax, hemp, and many other
things from Russia, was therefore obliged to obtain
these goods elsewhere, i. e. from America. This is
the reason why Denmark's import from America of
many kinds of goods for her own consumption had
been enormously increased.
Effort It is evident that all these restrictions were of great

To Reach harm to Danish trade and shipping. Consequently an


endeavour was immediately made to reach an under- Agreement
standing with England, in order to obtain the minimum Between
of imports which were absolutely necessary for the Denmark
prosperity of the country. And

At first, private firms, companies and individuals England,
tried to get permission to import goods through un-
official negotiations with the English authorities. The
matter was generally arranged in such a way that the
importer in question gave a solemn declaration to the
English authorities to the effect that the goods under
consideration would not be exported from Denmark
to any country at war with Great Britain. In order
to facilitate these matters, it was provided in the
beginning, when the condition of affairs and the trust-
worthiness of the firms in question justified such a
manner of proceeding, that the importers should ob-
tain certificates of trustworthiness from the Merchants'
Guild of Copenhagen to lay before the English au-
thorities. This system might no doubt have worked
satisfactorily if the war had soon ended. As it was
evident, however, that the war would probably be
long, this arrangement with individual firms and per-
sons under the quite arbitrary control of the foreign
countries could not possibly fulfil its purpose.

As the Danish Government could not enter into Terms Of
any official agreement with the British Government Unofficial
relative to these matters, Danish commercial and in- Danish-
dustrial organizations took up the matter and made English
an arrangement with the British Government. The Agreement,
agreement in question was signed on November 19,

The main points were that the Merchants' Guild
of Copenhagen, on behalf of the merchants, and the


Danish Industrial Committee, on behalf of Danish
industrial interests, should undertake to guarantee
the fulfilment of the obligations with reference to non-
exportation which were imposed upon goods coming
from the west. The responsibility of the various im-
porters, and of those to whom the importers sold the
goods, was arranged in such a way that the importers,
and every person to whom the goods were transferred,
had to give a declaration to the Merchants' Guild in
which the fulfilment of the obligations (the so-called
clauses) was guaranteed. Cases of infringement were
made punishable by large penalties. In order to se-
cure the maintenance of the declaration, the persons
in question were subject at any time to examination
of their books, business papers, etc. In case of infrin-
gement, penalties of up to Kr. 10,000 in each single
case had to be paid, and in addition the offender was
required to pay a sum of money equal to double the
value of the goods in the European market where
the highest price was ruling.

At the signing of this agreement it was further stipu-
lated by a special additional agreement that certain
goods (19 different categories in all) could only be
imported to Denmark to a limited extent, the average
import of the last years before the war being taken
as a basis for the import.

In Denmark the opinion was that the limita-
tions of importations into the country were now de-
finitely fixed. England, however, held quite a different
opinion, and from September 1916, and onward
Denmark was compelled to accept a series of addi-
tional agreements, with the result that on Febru-


ary 1, 1917, the import of about ninety different kinds
of goods was restricted.

Later on, the arrangement with England was
extended through corresponding agreements with
France, on March 17, 1916, with Italy, on December
21, 1916, and with Russia, on February 26, 1917.
Similar arrangements were also necessary with regard
to imports from the south.

In order to maintain this arrangement in the best
possible way great care was exercised by the Mer-
chants' Guild. The former system of certificates of
trustworthiness was so restricted that only such mer-
chants and manufacturers obtained permission to im-
port the goods in question as could be relied upon to
fulfil conscientiously the obligations undertaken. This
system worked satisfactorily, on the whole, and it
probably would have been quite sufficient if somewhat
greater liberality had been shown in cases where
additional agreements proved to be necessary. It was,
of course, impossible entirely to avoid breaches of
clauses, too many people often being implicated. It
must be borne in mind that, while the Merchants'
Guild and the Industrial Committee could show great
severity in investigating the concerns which might get
permission to import, an investigation was much
more difficult when the goods were distributed in
smaller lots, although against declarations from the
new buyers, whose number was of course very large,
and who in many cases were not known to the Mer-
chants' Guild and the Industrial Committee. On the
other hand, when denying the sale of goods to new
Danish buyers too rigorously, the said associations


would run the risk of totally paralyzing the home
Punish- The cases of clause-offences which were known —
ment Of and it is probable that most cases became known, sooner
Clause- or later — were treated with the greatest severity,
Offenders, and the penalties and damages (in all between two
and three million kroner) which the offenders were
fined by the courts of arbitration of the Merchants'
Guild and the Industrial Committee were so large
that in several cases they resulted in the official bank-
ruptcy of the offenders, or at least in the paralyzing
of their whole economic activity. At any rate, a vivid
warning was given to like-minded persons.

Besides, it was decided not to reserve these cases
for private treatment and private prosecution, but an
act was passed, taking effect April 5, 1916, which
stipulated that clause-offences should be subject to
public prosecution by the police authorities and be-
fore the courts, and the offenders were now also sub-
ject to penalty of imprisonment. Several offenders
have been sentenced to imprisonment, some of them
to penal servitude.
Acknow- It was therefore with good reason that the English
ledgement Government in Parliament, in the spring of 1917,
Of Den- officially acknowledged that Denmark had fulfilled
mark's her trade obligations to England in an absolutely
Loyalty By loyal manner.

England. However, while the obstacles to trade and import
which were caused by the measures taken by the
Allies, were thus fairly conquered, at any rate for a
long time, a new period of renewed and highly in-
creased difficulties to Denmark's trade set in when the
German submarine war was declared, and still more


when the so-called unrestricted submarine war was de-
clared on February 1, 1917. We are unable to judge the
benefits which Germany has derived from this way
of conducting war; but one thing is certain, that many
Danes have been killed by this war, and it has im-
paired our mercantile marine and disturbed our trade
westward and Denmark's import of all kinds of goods
from the west in the highest degree.

As will be seen from the above figures on mercan- Condition
tile tonnage, page 25, Denmark possessed at the Of Danish
beginning of the war a well-manned and important Merchant
merchant marine, in proportion to the size and con- Marine
ditions of the country, and was therefore ready to take Before
up the service of marine transport which the war and War.
its need of tonnage involved. This work has, however,
from the beginning and ever since met with many
and great difficulties.

In the first place must be mentioned the danger Effect Of
incurred on account of the mines of both belligerents. Mine War-
In the very first days of the war, when the nervousness Fare On
had no doubt reached its climax, two large Danish Navigation,
steamers were sunk by English mines in the Channel,
in spite of the captains having followed the route in-
dicated by the British Admiralty as the absolutely
safe way to avoid English mines. Of course these two
accidents created a natural fear that similar ones might
follow. The direct consequence was that the Danish
shipowners in some instances laid up their ships when
they returned to Danish ports, and in other cases



ordered the ships at sea to go to neutral ports and
remain there until further orders, without regard to
their cargos. Perhaps on account of the opinion pre-
vailing at that time all over the world that the war
would soon end, the shipowners were also stimulated
to do so by the fact that, the war did not at all in-
crease the demand for tonnage, the freight rates on
the contrary being reduced during the first months.
The same phenomenon of ships laid up and filling
the ports in long rows might therefore have been seen
in Copenhagen, as all over the world.

Resump- However, as the war proved to be of longer dura-
tion Of tion than at first expected, and all Russian ports (the

Shipping Baltic ports, as well as the ports of the Black Sea)
Trade, were closed, Archangel only excepted, all articles
had to be brought from transatlantic places, especially
from the United States. Consequently all ships which
were fit for these voyages were employed in the

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Online LibraryT. Mikkelsen & CoFinancial Denmark and the war → online text (page 3 of 5)