The New York herald., 1922-05-12

higher than the ruling rate of exchaug'
when the system OF redemption begin
TO operate. Then the ultimate valr
may be reached at the end of a perio'
during which small increments OF tn
value to be provided for in advanc'
would be given every year TO the re
demption of outstanding notes. Even
tually these should be taken up by in
ternal taxation, while new notes. baset
on gold and commodities gradual,
would lead the country back to th'
sound system which we have largely
copied in our Federal Reserve opera
tions.
Whether Germany can make a show
ing OF foreign and internal conditions
good enough to warrant foreigners
sending in money for the resumption
specie payments remains to be seen.
The Preparations Commission and the
general state Of Gerrnany's international
trade must be consulted.
Lean Talk Called Speculation.
Meanwhile loose talk OF a great loan
is only tanning the flames of specuia-
ton. On many sides in Germany, even
in Frank A. Vanderlip's articles. one
hears ii said that Germany has an
unfavorable balance of trade. She must
therefore have a loan" In other words,
If q belt is too short for the emaciated
body of foreign trade it must be made
to go around that body when stuffed out
by the interest on an external 'oan.
But how?
One resource remains available.
namely, the amount of nioney-thought
to be very large-which the Germans
have been able to hide in foreign bankc
Like other people. they try to escape
taxation. And there 10 another power
full motive-to put their wealth into
more stable communities than their
own. If their Government would try
an internal loan free Of the enormous
burdens now laid upon internal possess
sions. it is probable that considerable
sum might thus be obtained.
Tax redemption is bad enough. but
there are in this situation othe- things
worse. 1t does not seem to me that any
settlement that leaves a shortage of de-
ferred claims in the hands of tie Repa-
rations Commission can sc acsa ptable
to prospective lenders, as consist"a, with
the safety of their loan, rnlesS s-ch a
claim should be distinctly -elegs,ej to a
date la.er than that of the ma:u,:ty Of
the loan.
A recent proposal emanating from
English sources in Genoa outlines a plan
Dy WHICH IL Is 1uDSlCtlly tnOusnt W
diminish Gemany's payments to France,
provided the United States cancel our
claims against the Allies. We may.
indeed, recognize the inability of our
found that the external claims upon
Germany cannot be met, But the first
step is to see European debtors and
creditors agree as to what Germany can
and shall pay.
In this connection, nope the United
States, Government, at an early date.
will give our Allied Debt Commission
much larger liberty of negotiation than
it now enjoys. The statutory time for
payment, recently fixed by Congress, is
too short the interest rate. for the car
iier years at least, too high. \
] see that11r. Frank Vanderlip places
great hopes on the results of the confer
ence of the heads OF note issuing banks
soon to be held in London. 1t is under
stood that Mr.. Benjamin Strong will
also attend. His selection is an excel
lent one. But what can be done there?
The uniformity of discount, or any
fixed ratio between the discount rates
in different countries, is absurd. Any form
of mutual economic balance except such
as is based upon the commodities entering
into International trade and which
therefore are now commonly involved
in the current acceptance of business.
is equally out OF the question. Until
the reparations question between Ger
many and France Is settled each
country must keep its own affairs in
ffo our,, hands for heffer mr. for wOrsa