Evening star., 1922-09-04

ten years only one-twentieth. or per-
haps one-hundredth. of the sum neces-
sary to buy new machines. The profits
which he took were taken from re-
placement. He has been living off his
capital.
The peasant sells his produce for
a fair profit and puts aside an amount
for the purchase of a new plow. for
fodder and fertilizers. In few years
his money will not buy a fraction OF
what he needs to keep his farm on a
paying basis. He has been living on
his capital.
And always IL must be remembered
that many of these supplies are pur-
chased abroad at two or three times
the domestic price level.
Effect, Should Prices Drop.
Now, suppose the day comes when
prices suddenly fall. The shopkeeper
must then sell his present stock at an
absolute loss. He cannot pay even
the interest on his borrowings, hence
he cannot get new loan, hence he
cannot replace his stock.
The house owner finds himself with
a rundown house on his hands, capa-
BILE of bringing him, under the best
conditions, only half Of it's normal
rental
The manufacturer cannot buy new
raw materials. perhaps cannot even
pay for those he has already ordered
he cannot replace his worn-out ma
chimes.
The peasant cannot buy that new
plow; he cannot obtain fodder for his
stock or fertilizers for his land.
Empty Shops, rundown buildings
worn-out machinery, half-fed live
be material evidence of how Ger
many in these boom years has been
living off Ter capital. This is, at
least an economic theory. the crash
which threatens Germany. What
would bring it about?
Strangely enough, this result could
not be obviated by removing the I'M :
mediate cause. which is the deprecia-
ton of the mark. On the contrary
(another of these fantastic para
doxesD it is precisely the improve
ment in the international value or the
mark which would most certainly
precipitate the catastrophe. For then
exporters would receive fewer marks
for their sales abroad while having
to pay the same old number of marks
on their debts at home. The increas-
ing cheapness of imported gooos
would force down domestic prices.
Gradual Deaation Necessary.
Then the dance would begin. Di-
minished orders due to world competi'
ton, reduced production insufficient
to nav the overhead. loans called in
no cash to meet them. bankruptcies
unemployment food boarding by the
peasants. riots-thus may the mouse
that Fritz built out of paper money
crash to the ground.
It may be taken as certain that sys-
tematic defiation would produce the
catastrophe here sketched. The SUD,
den stabiiization of the mark wouio
produce it in lesser degree Any
Slowing up of the present printing
,press activity will cause slump, as
detiation caused a slump in England
and America. But 1t is probably pos
sibIe to cease imitation gradually, SC
as to give business chance to ad,
lust itself to world competition and
world prices.
When that time comes Germany VIII
have to depend on her superior a6il-
ity to meet foreign competition. She
will not be able to pick on the bes'
of what is left of the depressed ror'
eign markets.
Rut when that time comes will she
he able. with her deprecated capital
to maintain an excess of exports over
imnorts out Of which to pay repara-
tions?