Evening star., 1931-12-20


4 \ had been made and the pactS
of Locarno were being prepared,
I wrote in my syndicate articles the
reasons for my belief that Germany
would never pay leNaratlonS.
Events Hava row giycn fairly COM
plste confirmation Of that estimate,
violently challenged and criticized when
made
In the present article I shall try to set
forth the reasons why l believe Ger
many similarly, will never pay the COM
mercial credits and private loans which,
at the moment, are suspended by the
"standstill agreement" of last Summer
following the Hoover moratorium.
S2,SOO, 100000 in Credits.
These credits form vast aggregate
Indebtedness, their sum being"much in
excess of the total usually accepted. 1t
has Just been disclosed at Basel that the
short-term credits alone aTount to
Sc 800 900 900.
I should like to make clear in ad-
vance that the German course Goes not
seem to me, 2S is beginning to be al
legged. the evidence o. any clear and
calculated effort to indulge in vast
conspiracy to defraud the world On
the cOntrarE, Germany as a debtor,
like Britain, the United States. Holland
and other lesser lenders, has been the
victim alike of events and of stupiditieS
in political and financial leadership
without parallel in modern history.
What is true is that Germany never
had any intention of paying repara-
tionS that alderman policy has been
dominated by the determination of the
mass of the Country-of the majority
which controls the electorate-never to
pay the vast sums levied as a result of
military defeat and imposed in a treaty
which contained the notorious guilt
clause. BY all Germans this treaty
was identified as the disclosure of the
purpose of the victors to keep Germany
forever helpless and the German peo-
pie for all time tribute paying race.
German Evasion Cited.
Thus the first stage in postwar his
tory was marked by the long continued
German effort through every form of
evasion and device. to escape from
reparations payments This stage lasted
from 1919 to 1923 and eliminated in
the occupation of the Ruhr.
That mOmentOus episode proved two
things; first, that Germany could not
destroy her reparatiOnS obligations by
overt resistance. second that France,
while able to crush Germany by mill
tary power. nevertheless. was unable to
collect reparatiOns by bayOnctS.
The second phase opened with the
appearance of the finanCiers, largely
American and British. who framed the
Dawes plan. The deliberate attempt
was to take the matter out of the hands
of the politicians and vest it in the
financiers. But. after the imitation
crisis of 1923, following the occupation
OF the Ruhr, 1t was necessary to make
large loans to Germany in order to en-
able her to stabilize the mark and start
fresh.
Large Sums Loaned.
Relatively considerable sums were
1r'C- th9 German government, but far
+ Comfortable were the sums lent
t. E2 various states. cities and private
/ -4e~ c5 OF the Reich. There literally
FL CTgT OF l2nding-the Germans
Ere rsed by American bankers to
- 80 m0.ey. There was general
{ s~ccrt2nce of the idea that. now that
t. financial world had intervened, the
RAZOR problems had been solved and
all that was required was to lend money
to a solvent nation, which was in all
respects safe investment.
Now very early in this procedure the
Germans saw that il American and
British banks continued to pile up in
VeStmentS in German securities they
would very soon have large stake in
the German game. They saw equally
clearly that the French who were not
investing in German securities but in
slstng upon recovering reparations,
would be thrown into sharp collision
with the AnglO-SaXon nations the mo-
ment 1t became clear that Germany
could not pay both reparations and
private debts. And the basis of all
German policy since the close of the
war had been to precipitate break
between their old enemies cleavage
between Anglo-SaXon and French in
terests.
Meantime one other factor must be
noted: While the Americans dipped
heavily alike in short and long term
securities, the British limited them
selves largely to short-term loans. But
both the British and the Americans not
merely lent their own money in Ger
many. they also took large amounts OF
French capital paying for it 3 and 4
per cent and re-lending it to Germany
at 7 per cent. The result was that not
only were the Anglo-SaXOn powers
heavily committed in long-term Ger
man loans and investments, but also
they had adventured short-term money
WHICH, lIlby NUulG IOIllptlltO W IldNt
on hand were any sudden demand made
upon them to pay, particularly if the
French asked their money back.
Moratorium a Result
And that was what happened last
summer. The result was first the Hoo
yer moratorium and then the British
fall from the gold standard. Britain
was caught and America was gravely
embarrassed because neither could get
back their short-term loans from Ger
many to pay demands from France.
This situation remains today SubStan-
TALLY unchanged.
Looking to the future, the situation is
this: Germany now owes upward of
$4,000, 900. 900 in commercial credit and
debts She also still owes reparations.
The United States has no direct con-
Germ in reparations; the British regard
the Hoover moratorium as having can
celed 6ebtS-that is, allied debtS-to
America But all the financial interests
In both nations are gravely concerned
with the commercial debts. The French
have no concern with commercial and
every interest in repartionS debts Even
If all but the unconditional part of the
reparationS were wiped out, and allied
debts similarly abolished, France would
still be entitled to $l00000000 a year
from Germany under the Young plan.
But Germany, in her present condi-
ton, cannot pay either the principal or
the interest on her commercial credits
and debts, representing in interest alone
at 6 per cent upward of $500. 1000 900
annually Nor can she pay her annual
reparationS, which. in the unconditional
detail alone, amount to over Sl50,000.-
OO0 BY the process OF private borrow
ing she has now expanded her obliga-
tions to sums equal to nearly $500,0O0.-
900 annually At the same time she
has literally gone bust" at home.
UpheavaI Approaches.
In this situation there is approach
lnl an upheaval in German domestic
politics. The Bruening government has
made q last stand In its recent DEGREES