The Washington herald., 1922-05-22
WOULD STABILIZE
GERMAN CURRENCY
BY FLOATING LOAN
Economist Has Plan to
Pay France and Relieve
Former Empire.

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plan for stabilization of the
German mark by means Of a loan
and for eventual balancing Of the
budget has been worked. out by
Prof. Bonn at the request OF the
German Finance Ministry, at pres
ent in Genoa. The plan SUGGESTS
how France might continue TO re-
ceive reparations while at the
same time Germany might be re.
lieved Of gold payments for q Pc
riod OF one year. The scheme. as
summarized in the Frankfurter
Zettung and translated by the
Economic Review, follows.
Must Renove Dencit Ffrst.
After a detailed historical In
duiry into the possibilities Of cur
rency stabilization. Prof. Bonn as
serts that the first necessity for
the consolidation of the German
currency d. tn removal Of the
deficit in the payment balance He
then makes the following pro-
posais:
II the liabilities arising from the
adjustment procedure and the other
liabilities TO foreign countries un-
der the peace treaty are taken
into ACCOUNT. Germany's annual
payments under the peace treaty.
even after a reduction Of three
milliards OF gold marks, are little
changed. In these circumstances
ii is impossible to adjust the pay
ment balance. That would only be
possible il for the next few years
all Germanys reparations pay
ments. apart from the payments in
kind. e. e.. coal. were abrogated.
This is impossible by means of a
moratorium.
France to BE Paid.
Under the circumstances. England.
Belgium and Italy could tolerate a
postponement OF the payments. but
frances financial existence in de-
pendent on the receipt of large pay
ments IN gold. Since the economic
Mobilization OF Germany cannot and
ought not TO be purchased with the
economic collapse OF France. a way
must be found which will free Ger
many for a certain period from gold
payments to France without France
having to relinquish the receipt OF
these payments Accordingly. II will
be necessary for five or seven years
to advance to France at Germany's
expense the sums which at present
Germany is unable TO pay. II Frances 8
share In SO far as II is to be paid
in gold be taken as one milliard. then
for a period OF from five to seven
years France must be advanced this
sum. amounting in all to FIVE or seven
milliards of gold marks.
The loan must be a long-term loan.
II would not have TO be issued in
one sum. but might. under certain
conditions, be advanced in fixed in
stallments. II the remarks made
above on the position of the German
payment balance are correct. a loan
Of this kind would tighten that pay
ment balance as is required. Upon
the mere announcement that such a
financial operation was to take place
the dollar would fall very consid-
erably II would then not be diff
cult. with the cooperation of the
large central banks Of the world.
to maintain the dollar more or less
at the level arrived at and to pre-
vent its further rise; in other words.
ii would be possible to fix a max
imum exchange ratr for foreign bills
End of Violent Price F1uctuations.
II that were done the German IN
ternal price level would be given a
permanent hxed relationship with
that of foreign countries. The vio-
lent fluctuations of prices due to the
movements of Sold foreign bills would
come to an end. The internal dis
orders Influenced by increases Of
prices and leading to demands for
increased wages would also cease
1t would then be possible to put
forward reliable estimates for the
German budget.
Even were the exchange rate of
the mark regulated il would not.
perhaps, be possible at once TO avoid
a dehcit altogether, but II would be
possible to cover the deficit no
longer as heretofore by selling
Treasury bills to the Reichsbank
and by issuing notes. but by issu-
ing an internal loan with a fixed
rate OF interest, subscribed to by
the public from its reserves of cash
and shared in by foreign countries
1t world also be possible to draw
lalSger revenue from indirect
taxes. since with prices falling in
Germany an additional burden of
that kind would be bearable.
Note Issue to Cease.
The Reichsbank would not be al
lowed to ISSUE any more notes. and
in comparatively short time IL
wsuld be possible to turn the notes
that have been issued into state
paper money. The interest on the
government bills covering the notes
would be saved and might be am-
Jployed as fund for redeeming g
the outstanding notes. The Reichs-
bank would then become really au-
tonomous, and would only issue
notes against bills based on goods
Prof. Bonn concludes by admitting
that stabil'zation would not yet
have been attained. but in this way
foundation would have been pro-
{ l. s.I - L..