It was shortly after the Port Arthur naval catastrophe that I sought out a bank director, with whom I had become acquainted, to talk with him upon the financial effects of the war, that had had such noteworthy results on the floors of European exchanges. To my astonishment, I found the comfortable bank director very calm.

"The system will still help us out," said he, evasively, to my question whether Russia would have to face a financial crisis after the war.

"What system?" said I.

The bank director adjusted his eye-glasses and, with round eyes, gazed at me for a while. Then, with that burst of candor which so often surprises us in the Russians, he began:

"We are not children, after all, and neither you nor I is dancing to the government music to which others are keeping time. We may, therefore, talk it over calmly. Well, we have a great drum, with which there can be no marching out of line. It drums. We have never as yet stopped our payments, like France, Austria, or Turkey. We are,[Pg 124] therefore, punctual payers, hence we shall again secure money."

"Is this a serious argument?" I asked.

"God forbid!" was the answer. "We have paid to secure future credit. But it seems that this policy of honest debtor is wiser than the occasional discontinuance of payment, which allows some advance but involves the loss of credit. We can always repeat to the public that wishes to buy our bonds, \'Russia is honest; Russia pays; you need have no fear here of shrinkage.\' And so the public buys."

"But the banker must know that the liberality is not real," I rejoined.

"And if he does know it? Is it the banker\'s business to initiate the public into the secret sciences? Do not forget that no government pays to the world such commissions for loans as we do. Prussia pays one-half per cent., Austria one and a half per cent., we pay three per cent.; and, confidentially, it does not end with that, but the issuing banks also get their six per cent., especially when they appear reluctant at first. For what reason should a commission of three to six per cent. be paid where the business is as bad as it is? It was Offenheim who said, \'You don\'t build railroads by moral maxims.\' And high finance says that dividends and bonuses are not paid with moral maxims."

"According to my perhaps unbusiness-like opinion, this is not much better than stealing."

[Pg 125]

"Very unbusiness-like, indeed, my friend. The banking world needs no Nietzsche to stand on the other side of good and evil. Ethics, like religion, is only for the masses. Just calculate what a commission of three to six per cent. means on a loan of five hundred to a thousand million rubles that we shall surely need in this war. Let us say only three per cent., officially. That means thirty millions—more than sixty million marks. Do you then think that the banks belong to the Salvation Army, to imagine that they should renounce such a transaction?"

"Slowly, slowly. You said at first that Russia will need in this war about a milliard rubles. That would be contrary to what I have heard from other very reliable sources—namely, that the cash reserve is supposedly equal to about a milliard rubles."

"I will bet you that in three months we shall not have left a single kopek of this milliard, assuming that it exists. In agreement with military experts, who, between ourselves, are not at all optimistic, I estimate the duration of this war at twelve to eighteen months at least. With our management, every month costs us at least a hundred million rubles. Thus you see that a milliard will not be sufficient."

"Well, let us say that the banks cannot reject the business, still they must, in the first place, dispose of the securities, which will not be so easy, since the French are thoroughly satiated with the bonds,[Pg 126] and, as the fall in the rate of exchange has recently shown, confidence in these bonds is no longer any too great."

"They may drop still further," said the banker, smiling. "The fall in the rate of exchange would have been still worse had not our banks received a strict order not to turn over the deposited bonds to their owners during these days of convulsion."

"How? I do not understand this. The issue of the deposited securities to their owners is delayed?"

"Yes, my friend, that is being done. You again do me the honor to forget in my office that we are in Russia. Even worse things are done here. At the order of the minister of finance, the owners of the bonds who wish to withdraw their deposits are given only a few hundreds or thousands of rubles for the most pressing needs, but they do not get their bonds. This is in order to prevent, by all means, the bonds being thrown on the market and thus increasing the panic."

"But that can be done only here. You have no such power abroad."

"Well, the first alarm did cost a respectable sum. Then the foreign bondholders came to the rescue and intervened for their own interest. The price of the bonds was maintained, especially in Germany."

"Why particularly in Germany?"

"Because it fluctuates less in France. There it is in the hands of small investors who do not run to the treasury at the first opportunity. It is not as[Pg 127] strongly intrenched in Germany, and must be supported there."

"Very well, then, you support my reasoning, and you say that the bond values are maintained artificially alone. How can you say, then, that they may be augmented at will by new issues?"

"I say that, because the buyers are an amorphous mass that crystallizes just as little as a combination of producers is met by a combination of consumers. The masses may be frightened for a while, but in the long run they are irresistibly led to spoliation by the great combinations of capital, and the act of creating current opinion is well known in high financial circles."

"You forget the independent press."

The banker made a very peculiar grimace. Then he said: "That is not nice of you. I am speaking to you as if to a member of the profession—like one augur to another. And when we come to speak of your own profession, you turn out to be a simpleton. How can you speak of an independent press, when under the pressure of the high finance of the Russian and German governments?"

"You will pardon me. I honor your uprightness equally with that of the greatest of my profession. But I must stop at that. Newspapers are still guided by morality. And I am willing to bet anything that among our German papers only a vanishing fraction is susceptible to the arguments of Witte and his associates."

[Pg 128]

"And what becomes, then, of the millions that our ministry of finance is spending to secure good will in the papers towards our finances?"............