Part 15

Did Djemal Pasha intend to try to break through our position under cover of demonstrations along a front over ninety miles in length with a total force, perhaps, of 25,000 men, or was he attempting a reconnoissance in force? If the former is the case, he must have had a low idea of British leadership or an amazing belief in the readiness and ability of sympathizers in Egypt to support the Turk. Certainly he was misinformed as to our positions, and on the 4th we buried on the eastern bank the bodies of two men, apparently Syrians or Egyptians, who were found with their hands tied and their eyes bandaged. Probably they were guides who had been summarily killed, having unwittingly led the enemy astray. If, on the other hand, Djemal Pasha was attempting a reconnoissance, it was a costly business and gave General Wilson a very handsome victory.

Till the last week of January there had been some doubt as to the road by which the Ottoman Commander in Chief in Syria intended to advance on the canal. Before the end of the month it was quite clear that what was then believed to be the Turkish advanced guard, having marched with admirable rapidity from Beersheba via El Auja, Djebel Libni, and Djifjaffa, was concentrating in the valleys just east of Kataib-el-Kheil, a group of hills lying about ten miles east of the canal, where it enters Lake Timsah. A smaller column detached from this force was sighted in the hills east of Ismailia Ferry. Smaller bodies had appeared in the neighborhood of El Kantara and between Suez and the Bitter Lakes.

The attacks on our advanced posts at El Kantara on the night of Jan. 26 and 27, and at Kubri, near Suez, on the following night, were beaten off. Hostile guns fired occasional shells, while our warships returned the compliment at any hostile column that seemed to offer a good target, and our aeroplanes dropped bombs when they had the chance; but in general the enemy kept a long distance off and was tantalizing. Our launches and boats, which were constantly patrolling the canal, could see him methodically intrenching just out of range of the naval guns.

By the night of Feb. 1 the enemy had prepared his plan of attack. To judge both from his movements during the next two days and the documents found on prisoners and slain, it was proposed to attack El Kantara while making a demonstration at El Ferdan, further south, and prevent reinforcements at the first-named post. The demonstration at Ismailia Ferry by the right wing of the Kataib-el-Kheil force which had been partly refused till then in order to prevent a counter-attack from the ferry, was designed to occupy the attention of the Ismailia garrison, while the main attack was delivered between the Tussum post, eight miles south of Ismailia, and the Serapeum post, some three miles further south. Eshref Bey's highly irregular force in the meantime was to demonstrate near Suez.

The selection of the Tussum and Serapeum section as the principal objective was dictated both by the consideration that success here would bring the Turks a few miles from Ismailia, and by the information received from patrols that the west bank of the canal between the posts, both of which may be described as bridgeheads, were unoccupied by our troops. The west bank between the posts is steep and marked by a long, narrow belt of trees. The east bank also falls steeply to the canal, but behind it are numerous hollows, full of brushwood, which give good cover. Here the enemy's advanced parties established themselves and intrenched before the main attack was delivered.

A Full-Fledged Socialist State

While Germany's Trade and Credit Are Holding Their Breath

By J. Laurence Laughlin

[From THE NEW YORK TIMES, March 9, 1915.]

Professor Laughlin, who makes the following remarkable study of the German financial emergency, was lecturer on political economy in Berlin on the invitation of the Prussian Cultur Ministerium in 1906, and since 1892 has been head of the Department of Political Economy in the University of Chicago. He is acknowledged to be one of the foremost American economists and the views here expressed are based on wide information.

In a great financial emergency conditions are immediately registered in the monetary and credit mechanism. Although the German Government and the Reichsbank had obviously been preparing for war long before, as soon as mobilization was ordered there was a currency panic. The private banks stopped payment in gold. Crowds then besieged the Reichsbank in order to get its notes converted into gold. Then the Banking act was suspended, so that the Reichsbank and private banks were freed from the obligation to give out gold for notes. At once all notes went to a discount in the shops as compared with gold. Thereupon, in summary fashion, the Military Governor of Berlin declared the notes to be a full legal tender and announced that any shop refusing to take them at par would be punished by confiscation of goods.

In Germany, as is well known, the main currency is supplied by the Reichsbank, covered by at least 33-1/3 per cent. in gold or silver, and the remaining two-thirds by commercial paper. Immediately after the outbreak of war there was a prodigious increase of loans at the Reichsbank, in consequence of which borrowers received notes or deposit accounts. Usually transactions are carried through by use of notes, and not by checks, as with us. On July 23, 1914, the notes stood at $472,500,000; deposits at $236,000,000; discounted bills and advances at $200,000,000. On Aug. 31 notes had increased to $1,058,500,000; deposits to $610,000,000; discounts and advances to $1,113,500,000, (by October this amount was lowered to about $750,000,000.) On the latter date the specie reserve stood at $409,500,000, or more than the legal one-third. Loans had been increased 556 per cent.; notes 223 per cent., and deposits 258 per cent. In short, $586,000,000 of notes had been issued beyond the amount required in normal times, (July 23.) Clearly this additional amount was not required by an increased exchange of goods, but by those persons whose resources were tied up and who needed a means of payment. The same was true of the large increase of deposits which resulted from the larger loans. A liberal policy of discounting was followed by which loans were given on the basis of securities or stocks of goods on hand. That is, non-negotiable assets were converted into a means of payment either in the form of notes or deposit credits.

At this juncture there was created a currency something after the fashion of the Aldrich-Vreeland emergency notes in this country. War credit banks were established by law to issue notes (Darlehnskassenscheine) in denominations of 10, 15, 20, and 50 marks as loans on stocks in trade and securities of all kinds, and were charged 6-1/2 per cent. interest. The goods on which these notes could be issued were not removed, but stamped with a Government seal. While not a legal tender, the notes were receivable at all imperial agencies. On securities classed at the Reichsbank as Class I. loans could be made up to 60 per cent. of their value as of July 31; as Class II., 40 per cent.; on the other German securities bearing a fixed rate of return, 50 per cent.; on other German securities bearing a varying rate of return, 40 per cent.; on Russian securities, a lower percentage. These institutions, therefore, took up some of the burden that would otherwise have fallen on the loan item of the Reichsbank. Hence the Reichsbank account does not show the whole situation.

To this point the methods followed were much the same as in London. Then came unusual happenings. In London for a few days the banks had wavered as to maintaining gold payments, but only temporarily. In Berlin drastic measures were undertaken to accumulate gold in the Reichsbank. Vienna reports it to be well known that Germany had been for eighteen months before straining every nerve to obtain gold. Whatever sums of gold were included in the so-called "war chest" in Spandau (said to be $30,000,000) were also deposited with the Reichsbank. Gold was even smuggled across the borders of Holland on the persons of spies. Urgent demands were made upon the people to turn in gold from patriotic motives. In this way over $400,000,000 of gold was gathered by July, 1914; and by the end of the year, after five months of war, it had risen to $523,000,000. Was Germany to maintain gold payments as well as Great Britain?

Evidently not. Gold was not given for notes on presentation. For purposes of exchanging goods the notes were in excess. Inconvertible, they must go to a discount with gold or with the money of outside countries using gold. But in order to get imports from other nations, like Holland, Scandinavia, and Denmark, Germany must either send goods, or gold, or securities. German industries, except those making war supplies, were not producing over 25 per cent. of capacity, and many were closed. The Siemens-Schuckert Works, even before the Landsturm was called out, lost 40 per cent. of their men on mobilization. The Humboldt Steel Works, near Cologne, employing 4,000 men, were closed early in August, as were nearly all the great iron works in the district between Düsseldorf and Duisburg. Probably 50 to 75 per cent. of the workers were called to the colors. The skilled artisans were in the army or in munition factories; the railways were in the hands of the military; and the merchant marine was shut up in home or foreign ports. There were said to be 1,500 idle ships in Hamburg alone. Few goods could be exported. Gold was refused for export, of course. A serious liquidation in foreign securities had been going on long before the war. Some foreign securities must have still remained. However that may be, a claim to funds in Germany (i.e., a bill drawn on Germany) was not redeemable in gold, and it fell in price. In normal times a bill could not fall below the shipping point in gold, (par with us for 4 marks is 95-1/4 cents in gold;) but, since gold could not be sent, exchange on Germany could fall to any figure, set only by a declining demand. Already bills on Germany have been quoted in New York at 82, showing a depreciation of German money in the international field of about 13 per cent. Likewise, as early as the first week of September, the Reichsbank notes were reported at a discount of 20 per cent., and as practically non-negotiable in a neighboring country like Holland.

The inevitable consequence of a depreciated currency must be a rise of prices, usually greater than the actual percentage of depreciation. To meet this situation there came a device possible in no other commercial country. The Government fixed prices at which goods could be sold. This mediaeval device could be enforced only in a land where such State interference had been habitual, and, of course, could give to the notes the fictitious purchasing power only inside the country. After the Christian Science fashion, one had only to believe the notes were of value to make them so; but in the cold world outside German jurisdiction their value would be gauged by the chances of getting gold for them. Here, then, we find Germany in all the mazes of our ancient "greenbackism," but still in possession of a large stock of gold. As soon as the war ends she may be able to return to gold payments at an early date--very much as did France after the ordeal of the Franco-Prussian war of 1870-1871.

In the present war conditions, however, largely cut off from other countries, (except some small trade with Switzerland, Holland, Denmark, and the like,) all ordinary relations which would influence German credit and industry must be counted out. There is no comparison of her prices and money with those of other countries in a free market, or with even a limited transportation of exports and imports. All commercial measurements are suspended for the time. Trade and credit are holding their breath. How long can they do it? Germany may have food enough; but how long can the stoppage of industry go on?

Moreover, attention must be called to one momentous thing. We are seeing today, under military law, the greatest experiment in socialism ever witnessed. All wealth, income, industry, capital, and labor are in the direct control and use of a military State. Food, everything, may be taken and distributed in common. I think never before in history have we had such a gigantic, full-fledged illustration of socialism in actual operation.

In the meanwhile, even though food may be provided, the reduction of industry in general has cut incomes right and left. That is, fewer goods are produced and exchanged. But goods are the basis of all credit. The less the goods exchanged, the less the credit operations. Nevertheless, the extraordinary issues of banknotes, the increase of deposits, as a result of quintupling the loans, means that former commitments in goods and securities cannot be liquidated. That is, the enormous increase of bank liabilities, to a considerable and unknown percentage, is not supported by liquid assets. These assets are "canned." Will they keep sweet? There is no new business, no foreign trade, sufficient to take up old obligations and renew those which are unpayable. Lessened incomes mean lessened consumption and lessened demand for goods. Hence the credit system is based on an uncertain and insecure foundation, dependent wholly upon contingencies far in the future which may, or may not, take the non-liquid assets out of cold storage and give them their original value.

Moreover, apart from definite destruction of wealth and capital in the war--which must be enormous, as represented by the national loans--the losses from not doing business in all main industries during the whole period of the war (except in making war supplies) must be very great. As it affects the income and expenditure of the working classes, it may be roughly measured by the great numbers of unemployed. If they are used on public works, their income is made up from taxes on the wealth of others. Luxuries will disappear, and not be produced or imported. Incomes expressed in goods, or material satisfactions, have been diminished--which is of no serious consequence, if they cover the minimum of actual subsistence. The prolongation of the war will, then, depend on the ability to provide the supplies for war.

The need for a medium of exchange is oversupplied. The lack is in the goods to be exchanged. The enormous extension of German note issues does not, and can not, diminish. In this country the expansion of credit and money immediately after the war (manifested by the issue of Clearing House certificates and emergency banknotes) has been cleared away by liquidation. In Germany the "canned" assets behind the depreciated currency cannot be liquidated until the end of the war. And their worth at that time will depend much on the future course of the war and the terms of peace. If German territory should be overrun and the tangible forms of capital in factories and fixed capital be destroyed, much of the liquidation might be indefinitely prolonged. Whatever of foreign trade is permanently lost would also increase the difficulties.

In a great financial emergency nearly every country has, at one time or another, been tempted to confuse the monetary with the fiscal functions of the Treasury. To borrow by the issue of money seems to have a seductive charm hard to resist. Lloyd George established a new precedent for Great Britain by issuing nearly $200,000,000 of Government currency notes, but this was done to provide notes for the public instead of coin (£1 and 10s.) and made unnecessary any emergency issues by the Bank of England, and a large gold fund has been accumulated behind them so that they are convertible. In Germany it does not seem likely that the Treasury notes will be largely used (having increased from $16,500,000 to about $200,000,000) as a means of borrowing, since the new loans are being issued in terms of longer maturities.

J. LAURENCE LAUGHLIN.

LETTERS FROM WIVES

[By Cable to The New York Tribune.]

London, March 8.--Edward Page Gaston, an American business man long resident in London, has just returned from Belgium, and brought with him many sad and touching relics of the battlefields in that distressful country, chiefly from the neighborhood of Mons. These pathetic memorials include letters from wives, sweethearts, and friends at home and letters written by soldiers now dead and never posted.

Turning these letters over, one comes across such an expression as this: "I congratulate you on your promotion. It seems too good to be true. Good-bye and God bless you, dear. God keep you in health and bring you safely back."

Alas! the soldier who got that letter came back no way at all to his sweetheart or his friends.

"If you don't come back, what shall I do?" is the cry that comes from another woman's heart, and he did not come back.

Mr. Gaston is going to put himself into communication with the War Office with regard to the fate of the relics, and as far as possible, they will be sent to the rightful owners.

"WAR CHILDREN."

[Special Cable to THE NEW YORK TIMES.]

Paris, Feb. 24.--Professor Pinard of the Academy of Medicine contributes an article to the Matin showing that "war children" are stronger and healthier than their predecessors, and that France is rapidly repairing her battle losses.

An analysis of the Paris statistics for the last six months reveals a diminution of the death rate among mothers and children and a decrease in the number of children born dead.

Dr. Pinard further asserts that an extensive comparison of living children with those born earlier shows that the average weight of "war babies" is considerably higher than it used to be. This he considers due to the giving of natural instead of artificial nourishment by the mothers in consequence of the more serious attitude they take to their duty to the State.

This, says the professor, is one more instance of the spirit of regeneration animating France.

No Premature Peace For Russia

Proceedings at Opening of the Duma, Petrograd, Feb. 9, 1915

[From The London Times.]

PETROGRAD, Feb. 9.

The main impression left upon all who attended today's proceedings in the Duma may be summed up in a few words. The war has not shaken the determination of the Russian people to carry through the struggle to a victorious end.

Practically the whole House had assembled--the few vacant seats were due to death, chiefly on the field of battle--and the patriotic spirit permeating the proceedings was just as deeply emphasized as it was six months ago. The debates were several times interrupted by the singing of the National anthem, thunders of applause greeted the speeches of the President, the Premier, and the Foreign Minister, and the ovation to the British and French Ambassadors was, if anything, warmer and more enthusiastic than on the previous occasion.

I noticed that members applauded with special emphasis the words in which the President expressed his firm conviction that all efforts to disunite the Allies would prove fruitless.

In the course of his address the President eloquently and eulogistically referred to the rôle of Russia's allies in the present war. Speaking of England, he said:

Noble and mighty England, with all her strength, has come forward to defend the right. Her services to the common cause are great, their value inestimable. We believe in her and admire her steadfastness and valor.

The enemies of Russia have already frequently attempted to sow discord in these good and sincere relations, but such efforts are vain. The Russian truth-loving national soul, sensitive of any display of mendacity or insincerity, was able to sift the chaff from the wheat, and faith in our friends is unshaken. There is not a single cloud on the clear horizon of our lasting allied harmony. Heartfelt greetings to you, true friends, rulers of the waves and our companions in arms. May victory and glory go with you everywhere!

These remarks were constantly interrupted by outbursts of tremendous applause and by an ovation in honor of Sir George Buchanan, who bowed his acknowledgments.

Alluding to temperance reform, the orator fervently exclaimed:

Accept, great monarch, the lowly reverence of thy people. Thy people firmly believe that an end has been put for all eternity to this ancient curse.

The terrible war can not and must not end otherwise than victoriously for us and our allies. We will fight till our foes submit to the conditions and demands which the victors dictate to them. We are weary of the incessant brandishing of the sword, the menaces to Slavdom, and the obstacles to its natural growth. We will fight till the end, till we win a lasting peace worthy of the great sacrifices we have offered to our fatherland. In the name of our electorate, we here declare, "So wishes all Russia."

And you, brave warrior knights in the cold trenches, proudly bearing the standard of Russian imperialism, hearken to this national outburst. Your task is difficult. You are surrounded with trials and privations, but then you are Russian, for whom no obstacles exist.

A scene of indescribable enthusiasm ensued, the House rising and singing the national hymn.

The President's peroration was in part as follows:

The Premier, in the opening sentences of the speech which followed, said: "Our heroic army, the flower and the pride of Russia, strong as never before in its might, notwithstanding all its losses, grows and strengthens." He did not fail to remind his hearers that the war is yet far from ended, but he added that the Government, from the first, had soberly looked the danger in the face and frankly warned the country of the forthcoming sacrifices for the common cause and also for the strengthening of the mutual gravitation of the Slavonic races. He briefly referred to the Turkish defeat in the Caucasus as opening before the Russians a bright historical future on the shores of the Black Sea.

The Premier alluded to the tremendous change wrought in the national life by the abolition of the liquor traffic, which he designated a second serfdom vanishing at the behest of the Czar. After a few years of sober, persistent labor, we would no longer recognize Russia. The war had further raised the question of the creation in the world's markets of favorable conditions to the export of our agricultural products, and a general revision of conditions calculated hereafter to guarantee to Russia a healthy development on the principle of entire independence of Germany in all branches of the national life. In this direction the Government had already drafted and was preparing a series of elaborate measures. He concluded with the expression of his conviction that, if all fulfilled their duty in the spirit of profound devotion to the Emperor and of deep faith in the triumph of the country, the near future would open before us perhaps the best pages in Russian history.

The speeches of a peasant Deputy and a Polish representative were particularly impressive and well received. The Socialist leader's demand for peace called forth a smart rejoinder from a member of his own party.

M. SAZANOF'S SPEECH.

This afternoon the session of the Duma was opened in the presence of the whole Cabinet, the members of the Council of the Empire, the Diplomatic Corps, and the Senators. The public galleries were filled.