In those days, when the world spoke of the five "Great Powers", money
was called the sixth "Great Power" and that with full right. It is a
fact, that money means power, and that in a wider sense of the word
than is generally accepted. The power of a state is limited, the power
of money is unlimited, it is international. It seems ever to rejuvenate
and augment itself, and it constantly draws bigger multitudes under its
sway. A man who is a power in financial circles, plays his role in the
world. England owes its enormous influence in politics and national
economy to money. There have been other countries possessing great
riches, but the working, creating and ruling capital, was English.
Previous to the English, German tribes were known on the sea. Daring
mariners left our shores, and did a thriving business in all parts of
the adjoining seas, where they founded settlements in the northern
waters, and on the Baltic. How is it, that Germany has not gained
riches, and why has it not participated in the treasures of the world,
which, up to a few hundred years ago, were lying open to everybody? For
the most part the unfavorable geographical position is to blame. On all
sides, hemmed in by foreign countries, it had to suffer wars upon wars.
A hundred years ago, Germany might still have had a chance to gain for
itself a position in the world, but, at that time, it was lying in the
dust, bleeding from a thousand wounds. The wars, which Napoleon waged
against the German states, had reduced it to a poverty stricken
country. All stamina seemed to have disappeared through the Napoleonic
reign, the wars themselves and the contributions to the same, which the
enemy mercilessly exacted, brought about a condition, which stifled all
enterprise, and reduced the people to misery. Deep thought, poetry and
music had to take the place of bodily welfare.
In their poverty, the inhabitants could not grasp the advantages
offered to other nations. Under these conditions, England gained the
mastery over half of the globe, politically, and in an economic sense.
The colonies provided vast supplies, which were cleverly exploited,
riches increased, business relations with the European Continent were
opened and enlarged, and one fine day, England was the general provider
to the Continent for nearly everything required. The extension of Trade
was closely followed by the development of the Banking system, which,
after all, may be called a branch of the trade. In the colonies,
English banks were established, and every ton of rice or grain, every
pound of cotton or spice, had to be paid through the intermediary of
the banker, who, of course, derived a profit from the transactions.
When 50 years ago, Germany awakened from its long impotence, her
citizens were received, without prejudice, all over the world, and no
obstacles were placed in the way of their diligence. This fact, we wish
gladly and thankfully to record. Many Germans were successful in
gaining a firm footing in the English Colonies, as well as in America,
and to attain there important positions. They formed a link between
their home country and the centres of trade and finance. Valuable
services were rendered by them to the German trade, but London remained
the Banker of the world, and when an industry began to grow in Germany,
it was, in many cases, the English, who furnished the first capital.
When the cotton market started to develop in Bremen, most of the
financing was done by English bankers, anyhow at first. Later on,
German Banks participated, and it is greatly to their credit, that they
showed such great interest and understanding for the requirements of
that trade. In the year 1871, the first German Bank of importance
opened its doors in Bremen, and others followed, as the trade expanded.
The cotton trade remained, in a certain measure, true to the English
banks, while the other branches of commerce worked mostly through
German banks, and a great incentive was given to this, by the fact,
that American bankers considered German money equal to the American and
English values.
How do we pay for the cotton, which we import?
The planter receives the purchase price from the shipper, through any
one of the numerous banks in the South. Of course, we cannot give the
actual dollars to the shipper, consequently, he or his banker has to
advance them for a short period. Before the war, we opened a credit
with English or German banks, in favor of the shipper, a so-called
reimbursement credit, by which he could recover his advanced purchase
price. When opening this credit, we took care, however, to have proof
that the goods, for which we intended to pay, were certain to reach us
eventually. We made the condition, that, against the reimbursement
credit, the shipping documents were to be delivered. Against delivery
of these documents, the shipper drew a draft upon our bankers,
discounted the same, and the matter was settled. Now the bank was in
possession of the documents, and by accepting the draft, had guaranteed
to pay the purchase price. The position between the bank and ourselves,
was cleared in various ways, which depended upon private arrangements.
We, as cotton importers, had to receive the purchase price from the
consumer in the interior, before we could satisfy our bank. As the sale
of the goods could not always be effected promptly, we remained debtors
to the bankers for the purchase price, while they were in possession of
the goods or the documents. The settlement of transactions of this
kind, requires a certain amount of trust and confidence, which the
bankers have to grant to the merchants, on the other hand, they have
their security in the value of the goods in their keep. The banks have
always given a full measure of trust to the Bremen cotton trade, while
the commerce has made every arrangement to safeguard the interests of
the bankers. In this connection, we mention the establishment of the
"Bremer Lagerhaus-Gesellschaft" which was founded in 1877, through
their Agency the bank obtained, in a simple form, the security of the
cotton itself. The hypothecation of goods against an overdraft on the
bank, was new in those days, but later, it became common practice, and
the old established forwarding houses made similar arrangements to
those of the Bremer Lagerhaus-Gesellschaft. It became the custom to
issue warrants against the cotton stored. The warehouse owners were,
thereby, obliged to keep the cotton, until the holder of the warrant
gave it free.
With growing trade, the co-operation of the banks increased
considerably, and for a long period, business was satisfactorily
settled, but the war caused here, like everywhere else, a certain
amount of confusion. The settlement with the German banks was easy, but
it was impossible, during the long period of the war, to let that
cotton remain untouched, which was hypothecated in favor of foreign
banks. Thus, a peculiar position in law was created, between the
warrant holder and the previous owners of the cotton. The settlement of
these questions lies with the respective committees of the peace
commission.
The financial treatment of the import business after the war, is vastly
different from previous methods. The American bankers play a far more
prominent part, as the German importer pays in dollars on arrival of
the goods in port, and he has to buy the dollars at a rate of exchange,
which is subject to the vagaries of the Stock Exchange.--Recently a
moderate credit has been given to the importer, but the further
development of affairs is uncertain.