Part 5

We note with pleasure the suggestions, which we received from you verbally, and by letter, and are convinced that the reasons which you advance for a union with your market, are perfectly correct. Many of our spinners are a little out of the world, and it would be of advantage to them, to come into closer touch with the foreign and oversea trade. We shall gladly come to Bremen, after the necessary arrangements have been made in Augsburg. We do not wish to be merely affiliated, but desire to become active workers; for this purpose, we should require full membership, with voting power. We shall take care that Bremen--as a German Sea Port--attains the position in the cotton World, which it deserves.

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In July 1886, the entry of the German Spinners into the "Bremen Cotton Exchange" became an accomplished fact. The arrangements, which the trade had made, for dealing with the cotton business in a just and fitting manner, were pronounced excellent. It was resolved with great enthusiasm, to unite forces for the fostering and regulating of the cotton Import Trade, thereby, creating for Bremen, a great Cotton market, and for the spinners, an easier way of obtaining their raw material.

Six spinners joined the Board of Directors of the "Bremen Cotton Exchange".

The German Spinners Unions were now united with the Bremen Cotton Exchange, but, in the course of time, Swiss and Austria-Hungarian spinners followed suit. Through this fusion, "The Bremen Cotton Exchange" gained greatly in importance, influence and business activity, so that it stood on equal terms with the great foreign Exchanges.

At many meetings, spinners and merchants have peacefully sat at the same Board table, although the interests of both groups are frequently opposed to each other. Now and then, this has been apparent, but on the principle that good reasons must give way to better ones, differences of opinions were settled after proper discussion. Mutual understanding and a determination to pay due respect to the interests of the other party, have always been the leading spirit of the meetings. To-day, it stands beyond any doubt that through this fusion, great benefits have accrued to both parties, and to the far sighted men, who brought this about, great honor, praise and veneration are due.

In the following we give a few figures concerning the number of Members and the activity of the Bremen Cotton Exchange:

Year Members Arbitrations Appeals

1887 184 300 446 bales 29 642 bales 1892 253 653 567 " 70 340 " 1897 356 1 089 956 " 67 048 " 1902 449 1 295 441 " 63 692 " 1907 673 2 396 128 " 208 402 " 1912 717 2 554 284 " 315 597 " 1913 719 2 165 657 " 245 576 " 1920 610 405 058 " 80 698 " 1921 663 1 041 608 " 215 066 "

We cannot possibly conclude this chapter, without drawing attention to the fact, that if the commerce has reached its present greatness by its own endeavours, the industry is fully entitled to an equal share of praise.

The German cotton industry had to pass through many a hard fight. There was a time, when German goods were deemed inferior, mainly for the reason that they were not known. The German Export Trade owes something like an apology to the Industry, for the poor support it gave at first to the exertions of the Manufacturers, to create a market for their goods in foreign countries. It took a long time before German goods were appreciated in foreign markets, but, eventually, they gained for themselves a high class reputation. The "Bremen Cotton Exchange", views with pride, the success of their fellow members of the Industry.

FINANCIAL ITEMS.

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.

BUSINESS IN FUTURES.

Cotton is sold to a large extent for distant delivery, but "future" transactions are only those which are concluded on a specified "future" exchange, under the rules and regulations of that particular exchange. Here be it mentioned, that the Bremen Cotton Exchange is no exchange within the meaning of the law. It has no regular hours of attendance, nor has it special rules regulating the business in "futures". The important "future" exchanges are Liverpool and New-York, and in a lesser degree, Havre, Alexandria and New Orleans. Within the specified hours of the "future" markets, large quantities of cotton contracts change hands. There, buyers and sellers are constantly in attendance, and it requires only a nod of the head to conclude a contract for thousands of bales. The Rules, referring to "futures", do not differ essentially from those governing the general trade, for it must be borne in mind, that all "future" contracts demand the delivery of actual cotton. Nobody can escape this duty, if he has sold futures, he must deliver, unless he buys the contract back before it falls due, or vice versa, which, of course, refers also to any ordinary delivery contract. In fact, all transactions for delivery are settled either by previous transfer or by fulfilment. It is noticeable how the stocks in New-York increase or decline, in accordance with the tenders, against "futures". No doubt, the great majority of the dealers intend to close their contracts before they fall due, and the opportunity to do this, presents itself every minute. In this, the "future" markets offer a great advantage, or, if you like, a great temptation. In former days, the dealing in "futures" had no legal protection in Germany, and nowadays only under certain assumptions. Dealing in futures came within the gaming act, and claims arising therefrom, were not actionable. The Bremen Cotton Exchange has never accepted this view, but has constantly fought against it, for very good reasons. The following explanation will make it clear, that, as far as cotton is concerned, the trading in futures is of great economic importance, and not practised for snatching easily earned profits.

HEDGES.

A great market has the duty to adapt itself to all the requirements of the Trade, and these are ever changing. For instance, new districts are opened for commercial enterprise, new methods of doing business develop, bringing increased activity in their train, and all this, has to be regulated or arranged for.

Many things did not bother us in the past, as the following few questions will show:

How can we, without risk of the market, sell cotton in Spring, which will only be grown in Autumn?

How can a planter sell the cotton which he has picked, when there are no buyers at the moment?