T. Mikkelsen & Co.

Financial Denmark and the war online

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loyalty and to do her best to put all the cards on
the table. Of course there is the danger that for-
eigners may use the Danish colors to cover their
nationality, but the Danish authorities have done all
that was possible to keep such impostors away.
Denmark According to a law of 1857, it is permitted only
Acts to natives, or to foreigners having resided in Den-
Openly, mark more than five years, to carry on business as
individuals or members of unlimited partnerships;
and now an act of 1917 has ruled definitely on the
admission of foreigners to limited companies. This
act provides that only Danes by birth or naturaliza-
tion, or foreigners having resided in Denmark more
than five years, may take part in the foundation of
Danish limited companies.

The majority of the members of the board must
consist of natives or residents for more than five
years, and all members of the board must comply
with this condition if the name of the company is to
imply a Danish place or Danish nationality. Managers
of limited companies must reside in Denmark and be
natives or have resided here for more than two

Foreign joint-stock companies may have branches
in this country, when Danish joint-stock companies
enjoy a corresponding right in the respective foreign
countries, with the proviso, however, that the branch
in this country shall have the words „ foreign joint-
stock company" added to its name, besides indicating
the native country of the company.

It will be seen that within this important domain,
which comprises, so to speak, the banking and ship-
ping trade of all Denmark and a great part of her

commerce and industry, very serious plans have al-
ready been laid to prevent Denmark from being made
an intermediary for business connections in foreign
interests, or to prevent, at least, the use of Denmark
secretly in this capacity. Corresponding arrangements
will be made within many other provinces as occasion
arises, for nothing will be done in this country which
cannot be laid open to everybody who has a right to

We feel confident that this clear and open policy
will be appreciated, and that it will be understood
that, when our banking, import, production, and ex-
port after the war will prosper even more than be-
fore and rise to very considerable figures, this will
be no sign of any concealed activity exercised by
others or in the interest of others, but solely the result
of the altered and stronger position which Den-
mark will enjoy in the Allied countries on account
of their aversion to a connection with the countries of
the Central Powers — and probably also in the latter
countries, as their populations, supported by their
Governments, will try by all means to take retaliatory
steps by avoiding as far as possible any connection
with the Allied countries.

The second great question which will have to be Gold Or
solved after the war is the question of gold. Will the Paper,
gold standard be revived, or will it be abolished for-

It is an old maxim that scarcity of money will
always result in inactivity, cheap prices, and stagna-


tion of commerce and production, while abundance
of money will have just the opposite effects. During
this world war, money has been abundant in all coun-
tries without exception. The heavier the expenses
were, the greater the consumption and destruction of
values were, the more money abounded and prices
rose in all countries. Why? Simply because money
was wanted for the purpose of war, and as it was not
possible to create a sufficient circulation based on
gold, circulation was created without any relation to
the stocks of gold, and though all countries pretend
to have a gold standard and propose to maintain it,
they have nearly all practically abolished it and re-
placed it with paper; i. e. credit.

For many years the gold standard was the panacea
of the financial world. The convertibility of bank-notes
was the key-stone on which their credit hung. Ship-
ments of gold from one country to another, combined
with tightening rates of discount, first in the import-
ing country and afterwards in the market whose
vaults might fear depletion, were certain to control and
smooth out all differences in the balance of trade.
The system had worked well for decades of peace
and quiet — not much to its credit, for of course it
was bound to prove adequate under such circum-
stances, but giving it such credit that it was presumed
that even in the greatest emergencies it would be
equal to the task.

But one of the first war measures of neutral na-
tions, as well as of all belligerents, was to deprive
the gold of its usual functions. The convertibility of
notes was suspended everywhere, in so many words
or by circumventing practices, and shipments of


gold from country to country were more or less
strictly prohibited, lest gold should be drawn away
and lost and even come to the rescue of the other
party. And so it has remained up till the present.
Nowhere is the free convertibility of notes practiced,
everywhere the government lays its hand on the coun-
try's stock of gold.

What have been the results? Everywhere the
printing press has worked to supply the increased
quantities of circulation which the war and the needs
of nations have required. Everywhere the govern-
ments have tried their utmost even to collect the gold
from the people's pockets, and nowhere has the
break come. The notes of all nations — Russia, of
course, excepted — have the same credit in internal
use as before the war. And still not only have these
notes lost their convertibility, but the outstanding
notes — bank or state-notes - have increased to an
extent which before the war was quite outside the
bounds of fancy. Just to give a figure it may be menti-
oned that an English statistical report comprising the
countries of Europe — Austria, Belgium, Portugal,
Roumania, Serbia, and Turkey excepted — gives the
amount of outstanding notes in June 1914 at £
754,000,000, and in October 1917 at £3,771,000,000,
the corresponding stock of gold only increasing from
£ 529,000,000 to £ 743,000,000. This is the equi-
valent of saying that the amount of unsecured notes
in October 1917 had increased to twelve times the
amount in June 1914. Nevertheless the notes have
retained their face value and credit.

How will the question of the gold standard be ar-
ranged after the war? One thing is certain, that it will


be impossible to return to the former policy at once.
Neither the states which have issued notes nor the
banks of issue can at once make their notes conver-
tible at will. Such a step would compel not only a
severe restriction of credit, but a complete arrest of
it, and even so it would be impossible to redeem all
the notes that would be presented, as it would be
impossible both for banks and governments to collect
the money required. If no credit was granted, exist-
ing debts could not be met and taxes could not be paid.
Further, it must be remembered that the expenses of
the governments will be very heavy after the war.
Demobilization will require large amounts, pensions
for invalids and widows and children will be a heavy
burden, interest on war loans will be enormous,
indemnities and the work of reconstruction will press
for liberal appropriations, and all the money is to
come from the industry of the taxpayer, which conse-
quently must be conserved by all means.

On the other hand it must be admitted that for
international trade the gold might still be of use in
so far as it might stabilize the foreign exchanges. It
is, of course, to the benefit of neither nation when
the English pound sells for 15 Danish kroner, or
thereabout, instead of 18 kroner. But even here the
root of the evil might be eradicated if exports of
goods were free. With unrestrained trade it should
prove impossible to maintain for any considerable
length of time a real inequality in the exchanges be-
cause either England would export enough to wipe
out the difference, or, if Denmark could not buy all
she wished, she would have to lend her free balance
to England in order to get better remuneration.


The great question will be how the governments Will The
are to meet their internal obligations, and the solutions Govern-
are three-fold. They may repudiate them, they may ments Pay
keep them, or they may pay them off at once. The Their
last course is at once seen to be impossible, for where Debts?
are the means for paying off such enormous amounts?
The first is no more likely. The great aim of states,
which must have taxes to exist, must be to conserve
credit, by which alone the production which is to
procure the taxes may thrive. But how would it be
with the credit when the government would repudiate
their obligations? And the House of Commons,
which two hundred years ago so high-mindedly re-
solved that those who confided in the House should
never be losers? Would the House go back on its
signature? In whom, then, could confidence be pla-
ced. Who might expect to enjoy any credit? Not in
England alone, but in every single country, Parlia-
ment and government have called upon the people to
confide to them their money — their savings or the
money that they might raise on their personal credit.
Everywhere it has been pointed out that it was a
patriotic duty to assist the country with all available
money, but nowhere have the exhortations kept with-
in the limits of patriotism. Everywhere it has been
said that the loans to the country were at the same
time the most safe investment, as the credit of the
country was far and above all other credit. And the
call has been responded to, not only by the small
class of wealthy people, but even by those with small
purses, and those in the humblest stations, the many,
have contributed and are now creditors of the state.
It would not only be highly immoral, but political


suicide for any responsible statesman to propose that
the state should not meet its obligations, that those
who had assisted the country in time of need should
be robbed of their money. Only Bolscheviki might
provisionally try such a course.

There remains only one solution. Every country
must fulfil its obligations. Most of the debts of war
must be put in the same shape. Governments will
then only have to meet interest and to provide for
a modest sinking fund, and this will not be impossible.
During the war, the value of money has decreased
all over the world. A shilling, a dollar, or a Danish
krone does not buy so much to-day as three or four
years ago. Of course this might be reversed, as it
is impossible to endow any commodity with an intrin-
sic value or to predict its value in time to come. Values
will always be fixed by the human mind and by de-
mand. But just because of this nature of values it
may be safe to say one thing. Wages must be calcul-
ated in such a way as to give the earner a modest
living. Wages have risen during the war and certainly
will not be permitted to go back. All labour parties
will look to that. But the wages of unskilled labourers
will never pay for more than the necessities of life,
and at the same time as higher wages command hig-
her prices, the said higher wages permit higher pri-
ces, and it may then safely be said that with the stan-
dard of wages the standard of prices has risen perma-
nently, and that money has depreciated to the same
Taxation But this will make it possible to collect taxes to a
After The far greater amount than before the war. Before the
War. war a tax of one pound might perhaps mean the equi-


valent of a pair of shoes. Now the taxpayer will have
to pay 30 sh. or even two pounds before he is de-
prived of the value of a pair of shoes. With the higher
prices — and certainly they will continue if not regu-
lated by the states — commerce and production will
prosper and increase and also permit the government
to tax more heavily. Without any under-estimation of
future claims to the states, it may be supposed that
the credit and industry of the people will be able to
bear the burdens of taxation. With higher prices,
gross profits will increase. Of course expenses will
also increase, but even if they increase proportionately
to the turnover, the net profits will be larger, and it
may be supposed that the increase of expenses will
proportionately be below the increase of the turn-over.
If the products of a farm were sold at £ 1000 a year
before the war, they will now perhaps be worth £
3000. If the expenses were £ 800 before the war the
net profit would be £ 200. If expenses were four-
fifths now, the farmer's net revenue would still have
to be increased to £ 600, but it may be expected that
expenses will only increase to £ 1800 or £ 2000, thus
leaving in the farmer's pocket £ 1000 or five times
the pre-war earnings and thus enabling him to pay
many doubled taxes much more easily than he could
pay his taxes before the war.

The history of finance has made a great step for-
ward, but even the ordinary events we witness in
this the greatest war of all ages will not bring forth
a revolution; the progress will no doubt continue.

From what has been stated above it may be gath-
ered that the question of gold — always barring un-
forseen accidents — does not touch Denmark directly,


as she is fairly well prepared to reintroduce the stan-
dard of gold for her own bank-notes and foreign cre-
dits. But, of course, the situation in other countries
will reflect upon her, and the hopes for the future to
which her present position gives credit can only be
fulfilled if prosperity is universal or at least prevails
in most countries. But if this should be so, and the
trend of events seems to point that way, Denmark
will be well equipped and prepared to take her fair
share of economic progress, and even her geographi-
cal position, which has so often proved dangerous,
will give her substantial advantages in commerce after
the war.
Russia. Russia is the great enigma of our times, — nobody
can fortell her fate. But it is certain that her popula-
tion is enormous and that her industrial capacity is
as yet undeveloped. It is equally certain that some day
her people will call for internal peace in order to foster
economic and material progress and it is further
certain that for this progress all available assistance
from other nations will be needed. The Germans,
being near at hand, will, of course, seize upon the
commerce of Russia to the utmost of their power, but
the Western Powers and the United States of Ame-
rica will make similar efforts to secure at least a fair
share of the trade. For these last mentioned nations
Denmark will offer a first rate base for distribution.
Its capital Copenhagen, and especially its Free-Port
will be the natural clearing-house for this trade.
Situated where the great waterways end and are re-
placed by more shallow waters, easily accessible at
all hours of the day or night because without tide
water, well fitted for loading and unloading, Copen-


hagen with her industrious and intelligent population
will be of the greatest value to all oversea trade with
Russia. Competing with the enterprises of foreigners,
Danish industry will have great chances of getting
access to the Russian markets. Danes are well liked
in Russia; their modest, inoffensive conduct makes
them more congenial to the Russians than the Ger-
mans, and Danish produce has a good standing in
Russia. Denmark's geographical position will give her
a leading place in the trade with Russia and her
fertile soil, her moderate climate, her high sanitary
standing and her orderly administration, based on
one of the most democratic constitutions in the world,
with franchise for everybody, men and women, over
25 years of age, will make her an attractive place of
residence and a convenient place for business to all
persons of American, English or French nationality
who wish to have a part of the trade with Russia.

Denmark has at present a Free-Port in Copen- The Future
hagen, and taking into consideration the geographi- Denmark,
cal position of the country and the disposition of the
people, there is every reason to believe that the cha-
racter of free-port after this war will be extended to
the whole country in a personal as well as in a com-
mercial respect to the common advantage of all con-

A/S Industrl-Trykkeriet, K0benhavn.


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