The New York herald., 1922-06-13
GERMANY WILL RISK
CRISIS BY DEFLATION
Expects to Impose Higher
Taxes and Stop Printing
Paper Marks.
SHINES TO OPPOSE PLAN
Country Split in Two Factions
!; and Bitter Fight Ahead
in Reichstag.
SHINES TO OPPOSE PLAN

Special Gable to THE NEW YORK HERALD.
Copyright, 1929, by THE New York HERALD.
New York Herald Bureau.
Berlin. June IL.
Germany will risk the most serious
economic crisis ever known in living up
to the reparations memorandum, high
official of the Government told THE
NEW YORK HERALD correspondent to-
day. Though the terms of the men,
orandum are not binding. as the loan
did not materialize, we shall carry out
our promise to balance the budget and
begin deflation," he said.
There is no doubt that such move
VIII split the country into two hostile
factions, the SHINES party backing in
1lation for the sake of immediate profits
and fighting more bitterly than it has
since the armistice.
According to the plans of the present
Government leaders the deflation process
VIII have to begin with higher taxes and
cessation of currency printing. This will
put a powerful weapon into the hands Of
the initiation party when It goes before
the people. On the other hand the de-
ilation party expects to rally sound busi-
ness to its side with the argument that
in spite of serious conditions long time
loan can effect the only sure cure. The
battle probably will open in the Reich
stag next Saturday.
Many Germans, however, are recon-
ciled in anticipation of better terms and
large loan later, according to Ameri-
can bankers in Berlin, one of whom told
THE NEW YORK HERALD correspondent
that international financial paralysis
could not have been settled with single
loan. and will not be settled until the
iC nut INT hav Ie Af 1>av r.
ers and business men representing both
debtor and creditor nations
T. B. Burbridge of the American Bank
and Trust Company of Denver, said that
as long as n political commission at
tempts to settle the problem there would
be no success, for it was the bankers
and business men who ultimately would
have to raise the money in every coun-
try, and these men would demand a
genuine statement of Germany's real
assets.
The Versailles treaty establishes
sums and time limits for payments Of
separations which cannot be maintained
nnder sound financial principles" said
Mr.. Burbridge. II look for the next
step to be the formation of an inter-
national financial committee, all nations
10 probe the matter to the bottom and
fix debts and credits once and for all
GOOD business judgment alone will be
sufficient guaranty for quick payment
and such loans as are authorized will
have the confidence of investors
throughout the world"
German bankers do not regard the
failure of the loan as a national calam-
ity,'' said Leo A. Herzenberger, east
ern European representative of the
Equitable Trust Company of New York.
They haven't expected large loan
and many have hoped for none under
present conditions. At best, 1t was
only breathing spell which all de-
sired. in which time they hoped to see
their way clear of the staggering load
imposed by the Reparations Commits
sion"
Hugo SHINES had hoped a loan would
not succeed, according to his own state
ments, in which he explained that 1t
would cause only sharp rise in the
mark and then a slump and still worse
conditions, after which France, instead
of Germany, would be getting the
money. The bankers are confident that
winter or spring will bring a new and
fruitful loan scheme based upon bust
ness rather than political demands.
Meanwhile they expect the mark win
remain around 300 to the dollar, as there
IS movement toward international
solidarity among the commercial in
terests Of Europe which may accom-
Tlish much