, 1923-06-01
END OF A "STABILIZING"
EXPERIMENT

andths Of a cent or $4,000 marks
to the dollar, has indicated the
breakdown of a singular expert
ment. When that priee was reach.
ed in the mark panic of the clos
ing week of January, following the
French occupation of the Ruhr, the
German Government decided that
something must be done about 1t.
At the beginning of January, the
Frankfurter Zeitung had reckoned
the average of German prices at
2,054 times the average of 1914;
with the marks further collapse,
prices at the end of the month were
7,159 times the present average.
The Government concluded that the
way to stop this intolerable rise in
cost of living was to support the
mark.
This naturally had to be done on
foreign markets, and the only
means of doing it was to use either
the Reichsbankis gold reserv or
such high exchange foreign cur
rencies or exchange bills as were
held in Germany. The Reichsbank
got possession of a great mass of
these foreign c%urrencies, and with
them proceeded to bid for marks
or mark exchange at London and
other foreign centers. Under such
buying the price of the mark rose
from 2-thousandths of a cent to B.
thousandths, and it was then be-
lieved at Berlin that the Govern
ment had stabilized the price
around the higher value and would
keep it there.
"Ef the Reichbank and the Gov
eminent has been buying marks for
the purpose of ~cancelling them, the
operation would have been intel
ligible. Although more tina two
trillion paper marks were in actual
circulation when the experiment be-
gan, it was true, on the other hand,
that, at the January price of 10000
marks to the dollar, 81, 100000 in
gold or American exchange would
purchase 80, o 100000 marks of
the German currency. But the
Government evidently had no such
idea as that in mind. During the
period in which it was bidding up
or sustaining the foreign price of
the mark the Reichsbank trebled
the amount of paper currency.
Standing just below two trillions at
the end of January it had been
raised to six and n half trillions
at the end of April.
"The German Governments ar
gument that such additional output
of paper money was necessary to
meet the public deficit and the ris-
ing cost of doing business is ia
miliar. 1t is at least comprehensi-
BILE. What is not so easy to under
stand, however, is that the govern
ment should have supposed con-
tinued artificial support of any
market to be possible when new
supplies were being poured into it
on a wholly unprecedented scale. It
is probable that German business
men themselves managed to sell
their increased holdings of paper
marks abroad, despite the govern
ment's efforts to prevent it. It is
certain that no foreigner would buy
marks in the face of such transpar-
ent manipulation of the market
The Stabilized price" was main
tanned until the middle of April;
then came the break, and all the
Reichsbank's foreign bills, followed
by the sale of part of its gold re-
serve, could not Withstand 1t. How
much of a loss the futile undertake
ing has imposed on Germany it is
impossible even to guess, without
knowing whether the Reichs5ank
was able to sell again the paper
marks acquired on the artificial ris-
ing market.
Nevertheless, complete as has
been the failure of the ill-conceived
experiment, some such machinery
may in the end be employed for a
rational solution of Germany's cur
rency problem. In the light of all
experience, the only way out of the
present situation is for the Govern
ment either to r~epudiate its paper
currency outright. or else to acquire
and cancel what it can of it and
then fix n price, however nominal,
at which it will undertake to re-
deem the rest of the worthless paper
in currency Of intrinsic value
New York Times.