of the German experience with the French indemnity suggests the question whether in every case an enormous discount on the nominal value of a large money indemnity must not be allowed owing to the practical financial difficulties of its payment and receipt, difficulties unavoidable in any circumstances which we need consider.
These difficulties were clearly foreseen by Sir Robert Giffen, though his warnings, and the important reservations that he made on this point, are generally overlooked by those who wish to make use of his conclusions.
These warnings he summarized as follows:
As regards Germany, a doubt is expressed whether the Germans will gain so much as France loses, the capital of the indemnity being transferred from individuals to the German Government, who cannot use it so profitably as individuals. It is doubted whether the practice of lending out large sums, though a preferable course to locking them up, will not in the end be injurious. The financial operations incidental to these great losses and expenses seriously affect the money market. They have been a fruitful cause, in the first place, of spasmodic disturbance. The outbreak of war caused a monetary panic in July, 1870, by the anxiety of people who had money engagements to meet to provide against the chances of war, and there was another monetary crash in September, 1871, owing to the sudden withdrawal by the German Government of the money it had to receive. The war thus illustrates the tendency of wars in general to cause spasmodic disturbance in a market so delicately organized as that of London now is.
And it is to be noted in this connection that the difficulties of 1872 were trifling compared to what