have but a very limited market for their exports. This means a huge financial loss. On the one side, there is a diminishing revenue and a greatly reduced production, and on the other, the vast and ever-growing expenditure. Chiefly because Germany has been secretly preparing for years, and had vast stores of war material ready for use, her expenditure so far has not been as great as that of the Entente Powers; but, in the words of Mercutio, " 'tis enough, 'twill serve." Four war credits of 10,000,000,000 marks each have been voted by the Reichstag; there is a war debt, funded and floating, of over 40,000,000,000 marks, the interest and redemption of which requires at least 2,000,000,000 marks yearly. Such liabilities can be met only by heavily taxing a people already harassed by diminishing incomes and the higher cost of living. A decrease of thirty-three per cent. in production, which is admitted (it is probably much greater), cannot have taken place without leaving its traces upon the middle classes, and a rise of eighty-three per cent. in food prices has made conditions intolerable for the poor. Nor are the war expenditure and the necessity for loans by any means at an end. The Berliner Post should be an impartial authority on this subject. It says: "Without war damages, we shall have to reckon upon our increase in yearly taxation of at least 4,000,000,000 marks," and goes on to describe the prospect as "something terrifying." Germany, threatened with commercial ruin, and already discussing the necessity of abandoning her system of import duties after the war, in order to cheapen raw materials and give her industries a chance, will thus have to raise an enormous revenue from an exhausted people. And this is altogether apart from the compensation which, if the Allies. are victorious, she will have to pay to France and Belgium.

The fall in German exports, the absolute idleness of the German mercantile marine, and the rumors of bank failures, are all indications of organic trouble. The loss of by far the greater part of an export trade that had grown to about 10,000,000,000 marks a year cannot be dismissed as of little consequence. It is, of course, open to anyone to say that as the imports have been so greatly diminished, there is less need of exports to pay for them. But the loss of imports, which, owing to the active assistance of neutral countries, has probably been less in volume than was supposed, is more serious in quality because it is largely concerned with raw

materials essential to German production. Bearing in mind this deprivation of raw materials, also the fact that Germany has to pay some thirty per cent. more for what imports she gets, owing to the depreciations of her currency (or else part with her gold), any false consolation that might have been sought in the disappearance of her export trade vanishes into thin air.

Further, one has only to look at the mercantile shipping question in order to get another measure of Germany's sorry plight. Two years ago her fleet of merchantmen ranked second in the world in tonnage. To-day it is useless, unable to come out of its own docks or the neutral harbors in which it is interned. Not so long ago a great German steamship company obtained State permission for the suppression of its balance sheet for 1915. It needs no supernatural penetration to discern the cause of this, particularly as the permission was said to be given "in the interests of German shipping and public order." This can only mean that the complete cessation of goods and passenger traffic since August, 1914 (officially acknowledged by the company itself nearly a year ago) has resulted in its virtual bankruptcy. Both this company and another company were lavishly subsidized by the Government in their bold bid for ocean supremacy, and in these favorable conditions they achieved financial results that filled the shareholders with confidence and hope. For the past two years the fleets have been unable to earn a pfennig, and their maintenance in port has been a heavy drain upon their owners. Nothing shows the disastrous state of Germany's sea transport business in a more vivid light than this hiding from its own shareholders of the bookkeeping secrets of one of her greatest companies. The balance sheet, if published, would be a damning advertisement of the absolute ineffectiveness of the German Navy to protect its own transoceanic business.

A sidelight is thrown upon the manufacturing conditions in Germany by the official statistics of the coal output. Notwithstanding the employment of prisoners of war as miners, the output is steadily diminishing. The production in the mines of one syndicate fell from 205,000 tons daily last summer to 180,000 tons daily the following December.

There is a strong probability-it need not be put higher than that-that Germany has already disposed of most of

her negotiable foreign securities. Dr. Helfferich has challenged a statement to this effect, and although he is a banker and a man whose word in ordinary circumstances would be taken, yet his denial, being intended for neutral consumption, is under some suspicion. It is well known that for some weeks before the war was declared, very heavy selling took place on the London Stock Exchange of foreign securities on behalf of German holders. There was a double significance in this: it showed that the fatal decision had already been arrived at in Berlin, and it also indicated a scampering anxiety to realize in view of eventualities. Since then, there has been further and persistent selling through neutral countries. The total amount of securities thus disposed of is a subject of conjecture, but whatever it may be, they are no longer available for the purpose of raising fresh war funds. Apart from her holding of foreign negotiable instruments, Germany had large commercial investments in Austria, Turkey and Italy. Those in the last-named country must be considered dormant until the close of the war, and with regard to those in the other two, it looks as if they would eventually be hardly worth the documents in which they are registered. The financial position of Austro-Hungary is even worse-much worse than that of Germany; and Turkey, having exhausted her own resources, has to depend on Germany for the means wherewith to carry on her catspaw work. Both the Dual Kingdom and the Ottoman Empire are hopelessly bankrupt, and the £100,000,000 lent to the latter, nominally by a syndicate of German banks, does not appear to be a very promising asset. One result of the Balkan Wars was to reduce greatly Turkey's European territory, together with the revenues derivable therefrom; and no settlement has ever been arrived at for distributing the liability for interest on the foreign debt. Everything, in fact, is in confusion, and the only thing that stands out clearly is that after the war, Turkey will be without resources upon which to establish a commercial recovery, Germany will be standing on Turkey's doorstep demanding payment in cash or concessions, and the Western Powers, after the ingratitude with which Turkey has repaid their repeated help, are not likely to lend their aid for the sake of bolstering up any longer an effete and rotten barbarism.

Germany, in any case, has come appreciably nearer to the end of her realizable assets outside her own Empire. She

has, in addition, lost all her colonies but East Africa, just when one or two of them were becoming profitable and were remitting trade balances to Europe. She is thrown back on her internal wealth for the prolongation of the war. Paper, as has already been said, can be made to fulfill all the duties of a cash currency, but it cannot create a wealth that does not exist, or multiply that which does. The national income of Germany before the war has been estimated at about 42,000,000,000 marks by Dr. Helfferich, and at 30,000,000,000 marks by M. Risser. Suppose we take it at the mean figure of 36,000,000,000 marks. How has this been affected by the war? Production, it is admitted, is at least a third less, hundreds of factories are shut up, the export trade is virtually dead, interest on foreign securities is greatly diminished, all kinds of property are depreciating, home securities are depressed and in many cases pay no dividends, and the muchvaunted commercial banks have most of their capital locked up in home and foreign ventures, many of which are, at any rate, temporarily at a standstill. When the time arrives for another big German War Loan, the wizards of finance will in these conditions be at their wits' ends to known what incantations to use, what magic spells to weave, in order to squeeze real money out of the German people. The game of bluff cannot go on forever. Even Dr. Helfferich, past master though he is in the art of making the worse appear the better cause, will find his task becoming more and more difficult, and his own countrymen less and less credulous and accommodating. No one can bring into judicial and dispassionate review the financial conditions of Germany without being forced to apply to that misguided country the Hebrew sentence which Dr. Helfferich, in an outburst of rhetoric, recently applied to Great Britain: Mene, mene, tekel upharsin."

H. J. JENNINGS.

THE FORCES BEHIND THE RUSSIAN

OFFENSIVE

BY CHARLES JOHNSTON

Two events drew the eyes of the whole world toward Russia in the early days of June: the tragic death of Lord Kitchener on his way thither, at the instance, we are told, of the Russian Emperor; and the brilliant victories of General Alexei Brusiloff, heralded as the beginning of the great Russian offensive.

To England's great warrior one may adapt the words of Southey concerning an earlier hero: "If the chariot and horses of fire had been vouchsafed for his translation, he could scarcely have departed in a brighter blaze of glory." Alone in England Kitchener foresaw the length and the severity of the war; he alone had the courage to ask for enormous sacrifices; he alone could have completed the great work of preparation.

As for General Brusiloff's victory, his daily average in captures, for the first weeks of June, was 7,000 Teutons with 120 officers, 20 guns, 30 machine guns and a dozen trench mortars; he had carried the forts of Dubno and Lutsk by storm, and driven the Teutons back some twenty or thirty miles. If we contrast this with the results of the German offensive before the not dissimilar fortress of Verdun, not in seven days, but in seven weeks, we shall have a fair measure of the magnitude and brilliance of General Brusiloff's achievement. And it must not be forgotten that 120,000 in two weeks is the measure, not of the Teuton losses, but of loss in prisoners alone. Adding killed and wounded, the total must be three times as great; practically the equivalent of eight army corps. But the deeper significance lies in the material taken: guns, bomb-throwers, machine-guns, trenchmortars, searchlights, gas-generators, telephones-the who'