The second great factor affecting exchange, on the other hand, is based on present realities which are susceptible of being accurately determined. Germany, since she has been blockaded by sea, exports infinitely less than formerly; consequently, her ability to settle her accounts in foreign countries is limited. When she was able to sell the United States a million marks’ worth of merchandise, she then had at her disposal a million marks with which to pay cash for such imports as she needed. Now that her exports have been so reduced, she has little money to spare for spending abroad. If she wishes to increase these foreign purchases, she must export her gold and consequently reduce the security behind her banknotes. This results in a lowering of the basis of German credit, with a resulting drop in exchange. We shall now see that this falling exchange, whatever its importance, does not take into account all the elements of the general financial situation. If the blockade of Germany seriously complicates her food problems, on the other hand it is in a way advantageous from a financial point of view. In a word, when Germany found herself blockaded she was obliged to evolve means of existing on her own resources or those of her allies. Our enemies had great difficulties of organization to overcome, but they turned them to good account: for if Germany’s exports are small, her imports have been correspondingly reduced. Hence she needs to send very little money abroad—a fact which is financially in her favor. Now, the case of France is radically different. The French government, feeling assured of the liberty of the seas and believing that the war would be a short one, found it more expedient to place enormous orders abroad than to rely on domestic resources to supply the nation’s need. As a result, French imports, according to published statistics, exceed exports by one billion of francs a month. This means that, as things stand now, France must pay to foreign countries the staggering sum of twelve billion francs a year, with no corresponding compensation, since her purchases consist of products which are destroyed in use. For this reason France is undergoing serious impoverishment while Germany gets off comparatively easily. It is therefore plain that the fluctuations of exchange bear little relation to those conditions which must be taken into consideration in making an appraisal of the general situation; they reflect, in fact, only a special and limited aspect of the financial situation as a whole. Popular conclusions drawn from the fall in the value of the mark are false when attempts are made to give them an absolute or general significance. _Why people are still ignorant of the vast advantages gained by Germany from the war_