The New York herald., 1921-05-23
GRAVE PROBLEMS REMAIN IN PREPARATIONS TANGLE


per cent, which represents approximately
S65oO, 900, 900; Britain % per cent, or
s2.750, 100000; Italy and Belgium each 10
per cent. or $1,250000 apiece; the small
balance will be distributed among several
other nations, whose shares will be insis-
nificant- But the French have already eX-
pended over $1,000 000 900 on actual recon
struction work in the devastated area, and
must spend at least as much more to rebmd
the houses, the reconstruction work having
hitherto been limited TO restoring roads,
canals railways and clearing the fields and
putting them to work. one may say, quite
accurately. that the actual payment de
manded of Germany would in no instance
meet the costs Of making good what German
arms on land, on the seas and in the ar
actually destroyed
But will the s12,500,000,0o0 bond issue
actually net the sum which is represented
by the face value? The bonds carry an IN
terest rate of per cent, but the present
current rate of interest is far higher, and
good American railway securities, for eX-
ample, are disposed of with difficulty at a
per cent. rate of interest. Judging by eN-
listing conditions then, the German bonds
must be issued much below par. Thus. the
actual yield to the creditors VIII not be
$l2, 500, 900, but a much lower sum,
which will be the price which can be OBJ
tanned in the open market for these bonds
Moreover, France, Italy and Belgium must
sell these bonds in the open market Thus,
you may say without exaggeration that the
sum total demanded of Germany will not be
sufficient to discharge the debts owed by
the European Allies TO the United States
even if not a dollar were retained in Europe
to pay for reconstructions.
But can the bonds be sold on the markets
of the world? This. after all, is the really
grave problem. Europe believes, Paris
trusts. London hopes that the United States
will absorb the larger portion of this Ger
man issue. In reality, the American market
is the only market in which, even conceiva-
bly,, these bonds can be sold, always provid-
ing that Germany, sooner later, accepts
the conditions laid down in London. But is
there any reasonable chance that the people
of the United States will consent to invest
another $12, SOC, 900 in European securi-
ties, in addition to S12,0O0,0o 900 in Gov
ernment loans and at least $4,000, 00O, 900
ir private credits already invested?
Is there even any real basis for believing
that the Government of the United States
would accept the $12,500,000,000 of bonds
oi any considerable part thereof in return
for the notes of the allied countries already
held and thus become completely e1ltangled
in the political as well as the economic prob
lens of Europe? Actually, if we did this, we
pelling German payments and would not
impossibly find ourselves presently obliged
tc cancel the German bonds or resort to
force to compel payment
But II the United States does not officially
or through private channels consent to ac-
cept the German bonds, to absorb them. if
the American investors will not consent to
purchase many billions or take these billions
as an offset for American loans then the
european situation will not be much i'm
proved, even if Germany willingly or unwill-
lngly submits to the London decision. The
new book of Andre Tardieu, describing the
whole Paris conference should be carefully
examined by all Americans at this time to
get clear notion Of what Europe then ex-
pected--and beyond doubt still expects of
the United States-in the matter of finan-
cling world rehabilitation.
AL the Paris conference the Continental
european nations believed that the United
States would do two things: namely. cancel
8 war loans to the Allies and purchase the
German reparations bond issues. The ex
pectation was not limited to the Continent
Tor IL is the main thesis of Mr. KEYNES in his
hotorlous book. although he suggests further
loahs rather than American absorption OF
German issues. Tardieu SAYS. and Mr. Ia
mont denies, that the American financial
experts agreed to the cancellation and dis
cussea IaVorably the subject of fresh credits
Read the latest dispatches from Paris ana
~ VIII be appreciated that the same general
idea OBTAINS now that even in a limited de-
gree we have returned to the councils of tba
allied nations
America Was Expected
To Cancel Allied Debt
Ana having noted these difficulties there
teinaihS the supreme problem of whether
Germany will actually pay when she has
accepted the London agreement provided
she does accept it without conditions If
81" refuses to meet new obligations az she
Has eVaded all past engagements then we
are back at the old problem of ooIIactio, ~,
Iofce. Moreover, this problem does NOT con
Germ the immediate present but holds cooa
ior future almost indeterminate for ~
lo"est calculation decision binds her IL r,oro
thah thlrty years of uninterrupted navnents
In the last analysis there are NOT loo,
'hah Ihree feparations problems. each n .
measure quite distinct You have arst -
persuade or compel Germany to accent the
terms of the Allies. which reouiro bor -
provide and agree to bear tIe coets ~
Sl@'9oo'oooooO in bonds which NAV undar
'eItaih circumstances be increased
You have next to market those bopds ie
tney arc to serve the single burmese ~,
Whieh they are obtained. namely. n saw