September 1919

SKPTKMBKJI 1, 1919. FEDERAL RESERVE BULLETIN. 847

In order to regulate the exchanges the Gov- respective governments, the Italian Govern- ernment established a National Institute for ment pursued the same course, and the institute's Foreign Exchanges, which was given a complete monopoly was discontinued, though it still monopoly of foreign exchange operations. The exercises supervision over all exchange opera- institute was established with the cooperation tions of Italian banks. of a financial syndicate, including the three banks of issue, the four leading commercial banks, and a number of other banking institu- CHANGES IN THE GERMAN EEICMSBANK'S tions. The institute's central administration RESERVE. is in Rome under the supervision of the secre- tary of the , and the director general A table is presented below showing the of the Bank of is its director. Branches amount of gold in the German Ileichsbank on of the institute were established in all the allied April 30 and May 31, 1917, when the maximum countries. The institute was granted, for the was reached, and at the end of each month duration of the war and for six months after the subsequent to that date. For the same dates cessation of hostilities, a complete monopoly of are shown the notes in circulation; of the the exchange business. It had the exclusive lieichsbank and of the loan banks also deposits, right to purchase exchange and to sell abroad and the ratio of gold to notes and to notes securities issued in foreign countries and to cash and deposits combined. The Darlehnskassen- foreign coupons; to sell exchange in payment for scheine included do not represent the total of authorized exports; to discharge unavoidable ob- these notes issued, but only those in actual circu- ligations incurred abroad before the institute's lation, large amounts being held by the Ileiehs- organization, and to provide for the necessary bank as cover for its own notes, in addition to needs of persons with property in Italy but re- 120 million marks to secure an equal amount of siding abroad. All purchases and sales of for- Treasury notes (out of a total of 360 million eign exchange were "to be made at rates fixed marks issued). The Darlehnskassenscheine are by the institute on March 11, 1918. not a direct liability of the lieichsbank, but The institute's capital of 10 million lire was are issued by special loan banks working supplied by the financial syndicate, 3.4 millions under the general direction and supervision of being the share of the . The the lieichsbank and are supported by Govern- treasury turned over to the institute all the ment war securities or by industrial obliga- foreign' exchange in its possession as a result tions, also by stocks of goods, so that the gold of sales of Italian goods or of credits established in the vaults of the Ileichsbank is the only with foreign governments, and all Italian hold- in existence against the aggregate ers of foreign exchange were directed to turn circulation of both lieichsbank notes and loan their holdings over to the institute. All the bank notes. banks entering into the consortium and their Gold reserves of the lieichsbank declined branches act as agencies of the institute, their from May 31, 1917, at first as the result of ex- foreign exchange transactions being kept en- ports of gold to the for the purpose tirely separate"from their other business and of improving the exchange position of the mark. directly under the control of the institute. Out A temporary increase is noted in September of the earnings of the institute a 5 per cent divi- and October, 1918, when some of the gold paid dend is paid to the contributors of its capital, over by under the treaty ^ of Brest while the remainder constitutes a reserve Litovsk reached Berlin. From the time of the against losses. When the affairs of the insti- signing of the armistice gold has been with- tute are liquidated, the reserve is to be divided drawn from the Iloichsbank in large amounts, equally between the treasury and the members partly in payment of immediate allied claims, of the consortium. In case the entire reserve but mostly in payment for food supplies. From is wiped out by losses and inroads are made into 2,308 millions on November 30, 1918, the stock the capital, the Government is to make good of gold declined to 1,116 millions on June 30, the deficiency. 1918, and to 1,112 millions on July 23, 1919, During the institute's monopoly of exchanges representing a loss of 1,196 million marks, the rates were fixed as follows: 116.25 for or at par nearly §300,000,000. Paris, 130 for , 30.375 for London, At the same time note circulation increased and 6.345 for New York. on a large scale,, the combined total of 42 bil- When in March, 1919, the support of English lions on June 30 being three and one-half times as and French exchanges was withdrawn by the great as the corresponding figure 26 months

Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis September 1919

848 FEDERAL. RESERVE BULLETIN. SEPTEMBER 1,1919.

earlier (12 billions). The increase in note cir- The ratio of gold reserve to note circulation culation during the 18 months previous to the declined from 20.74 per cent on April 30, 1917, signing of the armistice was about 14 billions to 9.77 per cent on October 31,1918, and to 2.65 and during the 8 months following the cessa- per cent on June 30, 1919, while the ratio of tion of hostilities about 16 billions. Deposits gold to notes and deposits combined, which was also increased greatly during the period, reach- 15.64 per cent on April 30, 1917, was only 6.92 ing their highest point on September 30, 1918. per cent on October 31, 1918, and fell to but Since then they have fluctuated without ex- 2 per cent on June 30, 1919. ceeding the amount shown for that date.

Gold held by German Reichsbarik, compared with note circulation and deposits.

[In millions of marks.]

Eeichsbank notes and Darlehns- kassenseheine Ratio of gold to—

Date. Gold. Deposits. Ileicns- Darlehns- Notes and Combined. bank kassen- Notes. deposits notes. scheine. combined.

1917. Apni 30 . . 2,532.6 12,213.4 8,315.4 3,898 3,981.0 20.74 15.64 May 31 2,567.1 12,395.2 8,285.2 4,110 4,538. 2 20.70 15.16 June 30.. .. 2,457.3 13,220.7 8,698.7 4,522 5,692.7 18.59 12.99 July 31 2,402.2 13,576.7 8,852.7 4,724 5,848.0 17.69 12.37 Aug. 31 2,403.0 14,421.1 9,337.1 5,084 5,890.6 16.66 11.83 Sept 29 2,404.0 15,634.9 10,204.9 5,430 9,540.9 15.38 9.55 Oct. 23 2,404.5 15,744. 7 10,138. 7 5,606 5,735.4 15.27 11.19 Nov. 30 2,405.3 16,482.3 10,622.3 5,860 6,045.3 14.59 7.39 Dec. 31 . 2,405.6 17,733.7 11,467.7 6,266 8,050.3 13.56 9.33 1918. Jan.31.. 2,406.1 17,426.9 11,138.9 6,288 6,676. 2 13.81 9.98 Feb 28 2.407.8 17,8-12. 8 11,310.8 6,532 6,490.1 13.49 9.90 Mar. 30. .. . 2,408.5 18,6-47.8 11,977.8 6,670 9,029.6 12.92 8.70 .Apr 30 2,344.0 18,758.8 11,820.8 6.938 8,831.6 12.50 8.50 Mav 31 2,315.7 19,172.7 12,002. 7 7,170 7,634.7 12.23 8.75 June 29 ... . 2,346.2 20,092.4 12,510.4 7,582 9.181.2 11.68 8.01 Julv 31 . 2,347. 3 20,440.5 12,704.5 7,736 S, 504. 8 11.48 8.11 2 348.1 21,875.1 13,639.1 8,236 9,432.0 10.73 7 50 Sept. 30 2,447. 4 24,080.4 15.334.4 8,746 14,538.0 10.16 6.34 Oct. 3! ...... 2,550.0 26,091.6 16,661.6 9,430 10,738.7 9.77 6.92 Nor 30 2,308. 4 28,5S9.9 18,609.9 9,990 10,682.9 8.07 5.88 Deo. 31.. - . . . 2,262.0 32,296.0 22,188.0 10,108 13,280.0 7.00 4.96 1919. Jan. 31 2,253.7 33,817.6 23,647,6 10,170 12,522.7 6.66 4. 86 Feb. 28 2,245.7 34,778.8 24,102.8 10.676 11,830.6 6. 46 4.82 Mar. 31 1,015.9 36,638.4 25,490.4 11,148 14,503.0 5. 23 ! 3.75 Apr. 30 1,755.8 37,918.1 26.628.1 11,290 14,537.3 4.63 i 3.35 Mav 31 . 1,516.1 39,331.9 28,244.9 11,087 1 9,987.9 3. 85 i 3.07 June 30 1,116.4 42,115. 4 29.968.4 12,147 13,729.6 2.65 2.0C Julv 31.. !

COMPARATIVE STATEMENT OF LEADING gold and silver holdings show increases in each BANKS OF ISSUE, of the allied and neutral countries, except and Italy, while the central European There is presented below for leading banks countries lost large portions of their metallic of issue a comparative statement of note and reserves. Ratios of gold and silver to note deposit liabilities, of metallic reserves, and of and deposit liabilities combined were lower the ratio of the latter to the former, at the this year than at the outbreak of the war for outbreak of the war and about midsummer ail of the belligerent countries and for all the of 1919. neutrals, except Netherlands and . For Note circulation increased greatly during the all the allied powers combined, exclusive of the period in all of the countries included in the , the ratio declined from 49 to table, the aggregate outstanding note circula- 14.6 per cent; for central Europe, i. e., tion in the allied countries, exclusive of the and - combined, from 45.4 to United States, being about 11 billions in 1919 1.5 per cent, and for the neutral countries from. as against 2.3 billions in 1914. Combined 63.1 to 55.1 per cent.

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