This is the first, and the plainest way in which the German Government could take, and did take, money from this country; and in which it might have broken the Bank of England if it had liked.  The German Government had money here and took it away, which is very easy to understand.  But the Government also possessed a far greater power, of a somewhat more complex kind.  It was the owner of many debts from England.  A large part of the ‘indemnity’ was paid by France to Germany in bills on England, and the German Government, as those bills became due, acquired an unprecedented command over the market.  As each bill arrived at maturity, the German Government could, if it chose, take the proceeds abroad; and it could do so in bullion, as for coinage purposes it wanted bullion.  This would at first naturally cause a reduction in the bankers’ balances; at least that would be its tendency.  Supposing the German Government to hold bill A, a good bill, the banker at whose bank bill A was payable would have to pay it; and that would reduce his balance; and as the sum so paid would go to Germany, it would not appear to the credit of any other banker:  the aggregate of the bankers’ balances would thus be reduced.  But this reduction would not be permanent.  A banker who has to pay 100,000 L. cannot afford to reduce his balance at the Bank of England 100,000 L.; suppose that his liabilities are 2,000,000 L., and that as a rule he finds it necessary to keep at the Bank one-tenth of these liabilities, or 200,000 L., the payment of 100,000 L. would reduce his reserve to 100,000 L.; but his liabilities would be still 1,900,000 L. and therefore to keep up his tenth he would have 90,000 L. to find.  His process for finding it is this:  he calls in, say, a loan to the bill-brokers; and if no equal additional money is contemporaneously carried to these brokers (which in the case of a large withdrawal of foreign money is not probable), they must reduce their business and discount less.  But the effect of this is to throw additional business on the Bank of England.  They hold the ultimate reserve of the country, and they must discount out of it if no one else will:  if they declined to do so there would be panic and collapse.  As soon, therefore, as the withdrawal of the German money reduces the bankers’ balances, there is a new demand on the Bank for fresh discounts to make up those balances.  The drain on the Bank is twofold:  first, the banking reserve is reduced by exportation of the German money, which reduces the means of the Bank of England; and then out of those reduced means the Bank of England has to make greater advances.