Part 8

The gold currency of the first three countries amounts to about 7,000,000,000 rubles, ($3,500,000,000,) while the gold currency of the other three is only $1,500,000,000.

The food supply of Russia is inexhaustible. Her industries are working chiefly for the home market. They can only win by the campaign. The curtailing of food and raw material exports may benefit her home industries by cheapening production.

In case of a shortage of war supplies Russia will be able to get them from neutral countries--for example, from the United States. But where will Germany get them? What shall she do when her stock of saltpetre runs out? For the time being saltpetre is obtained by all countries from Chile only.

France is an agricultural country which has large supplies of food. Her manufactures are poorly developed, and they are working for a foreign market which will not be closed. Her resources are so large that she will be able to stand the campaign with comparative ease.

Owing to her insular position, England will lose but very little through this war, provided she is able to maintain the supremacy of her navy over the German fleet. The British merchant marine and her manufactures will gain quite considerably.

The public credit of France and Great Britain is inexhaustible, and it will not be restricted to Russia, while she is an ally of these countries.

Proposed Internal Loans of Russia

Prof. Migoulin has submitted to the Russian Minister of Finance a scheme for new internal loans to meet the extraordinary expenditures caused by the present war.

It is proposed to enlist the support of various groups of capitalists and of small property holders and to obtain from them about 2,500,000,000 rubles, ($1,500,000,000.)

Four different loans are contemplated. Persons desiring to invest their savings at a small but sure interest rate will be able to buy the certificates at a 5 per cent. loan. These certificates will have a face value of 100 rubles, and they will sell at $90. The interest rate will not be changed within the next fifteen or twenty years. Therefore, the actual interest rate will be 5.56 per cent. on the original investment.

A 6 per cent. loan will cater to those investors who like to place their loans at shorter terms. The certificates of this loan will be sold at premiums. Five-year certificates will be sold at ninety-six for a hundred rubles face value, four-year certificates at ninety-seven, three-year certificates at ninety-eight, two-year certificates at ninety-nine, and one-year certificates at par. This loan will be free from the interest (coupon) tax, but not from the income and inheritance taxes. In case of success one billion worth of these certificates will be issued.

For persons interested in the changes of values upon Stock Exchange different loans will be issued. In the first place, no interest-bearing ten-ruble certificates with a large number of winners will be issued. A considerable number of these certificates will be redeemed each year. It is proposed to have one winner of 200,000 rubles, one of 100,000, two of 50,000, one of 25,000, about fifty of 10,000 rubles each, some 3,950 "chances" of from 100 to 500 rubles each. The whole loan may amount to 100,000,000 rubles. It is to be redeemed within fifty years.

Should this loan prove a success it will be followed by another of equal amount.

Finally, Prof. Migoulin proposes to obtain about 200,000,000 rubles by selling 4 per cent. Government bonds in fifty-ruble denominations. This loan, too, will be equipped with the winners at the annual draw for the redemption.

The first of the proposed loans will be realized soon. The Government has decided to obtain 500,000,000 rubles at 5 per cent. This new loan will increase the present debt of the Russian Government of 8,838,000,000 rubles ($4,500,000,000) to 9,338,000,000 rubles. Russia has to pay 370,000,000 rubles annually for the interest on her debts. About one-half of her indebtedness is due to railroad building and to other more or less productive expenditures. But the other half of her indebtedness has been spent on armaments, wars, and other unproductive items.

Russia's new budget is about 3,500,000,000 rubles ($1,800,000,000.) The interest on the new loan will increase this budget only 6 per cent. But this new loan increases again her unproductive debt and places a heavy burden upon the taxpayer for whom the Government has prepared many "surprises" this year.

The possibilities of internal loans are not very great. During the first month of the war about 380,000,000 rubles of savings were withdrawn from the banks. Of this sum only 76,000,000 were redeposited later when the first excitement had passed. The rest of the money evidently was either used up for production, for consumption, or for private storing of ready cash. How much of this money will come forth to buy the various short-time loans no one is able to tell beforehand. But the big manufacturing interests are craving for foreign gold loans, not for internal paper money loans.

How Russian Manufacturers Feel

The manufacturers of war supplies are making large profits through the war. All they need is Government advances to buy their raw material. The Government permits them to borrow from the State bank upon Government orders for war supplies. The only difficulty lies in the extent of the credit. The Government would not permit borrowing more than one-third of the amount of its orders, while the manufacturers are asking for two-fifths.

The manufacturers who are using imported raw material and are working for the private consumer are suffering heavily from the war. The lack of coal, of hides, of wool and of cotton is threatening Russian industry with a crisis. There is a great want of hydroscopic (absorbent) cotton, since the only factory for this product was in Poland (City of Zgerzc) and has been destroyed. Lack of dyestuffs and other chemicals is hampering many other industries. The importation of tea and coffee has been curtailed considerably.

Russian cotton mills used to get 45 per cent. of their raw material from the United States, since only 55 per cent. of their demand can be supplied by Central Asia.

Furthermore, this Asiatic cotton can be used for the coarser grades of manufacturing only.

The war has cut off the American supply altogether.

Moreover, the manufacturers need cash to buy the cotton available. But they have none. They have already applied for some hundred million rubles gold loan from the Treasury, but the Government has promised them only about eight million from the new loan.

The wool manufacturers are faring no better than the cotton interests. The only way to get raw wool seems to be to ship it from Australia via Vladivostok. But the lack of foreign exchange prevents them from using this source.

The tea trade of Russia will be paralyzed soon for the same reason.

The big manufacturers see only three possibilities of remedying this situation. The first would be to export gold, the other to export Russian commodities on a large scale, and the third--to get a gold loan from Great Britain.

The first proposition is impossible, since the Government will not permit any exportation of gold at this moment. The second proposition won't work owing to the demoralized transportation. Thus the only escape from a serious national crisis seems to lie in a large foreign gold loan.