Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-06-28
American Income Taxes May Be Raised
If Foreign Debts Are Lessened
BY WILLIAM HARD.

BY WILLIAM HARD.
That German reparations may pres
emily be permanently diminished and
that thereupon the American income
tax rate will have to be raised are con-
illusions reached by widening circles of
omcial as we'll as unofficial observers
in Washington at this week end.
The 1mpelling reasons are found in
the motives and in the aft4rmaths of
the American move for the 12-month
postponement OF reparations to the al
lies and OF debts by the allies to the
United States Government.
| The motives OF the move were closely
associated with the potential injury 10
American capital from impending Ger
| man economic collapse American can
ital has risked itself in Germany to the
extent OF more than one billion dollars
In German central government and To-
cal government securities and similar
documents of indebtedness. It has addi-
tionally risked itself to the extent of
approximately one-quarter of a billion
| OF dollars worth of German industrial
plants. The total of long-term fixed
American investment in Germany Is
| probably In excess of one billion Ave
hundred thousand dollars at this
moment.
| There is also quite a large amount
OF further American money in Germany
on a short-term basis in connection, for
instance, with the daily operations of
| German banks.
! Last week 1t was gravely feared that
! instability in Germany might ultimately
! result in an incapacity by Germany to
meets its obligations to its American
private creditors These creditors we're
thereupon considerably frightened and
were driven into a deepened psychology
ical depression regarding business affairs
! everywhere, including the United States.
| Specifically, they became increasingly
indispoSed to undertake new financial
| adventures for the restoration of pros
perity on this side of the Atlantic The
German danger diverted them from
! American activity.
The move of the American Govern
/ ment for the temporary rescue of Ger
many from reparations was dictated, in
large part, by desire to restore courage
to American capital for operations in
It's own country. In other words, it was
an act designed to put a check upon
reparationS in order to facilitate Ger
man private payments to private cred
ltors IN the American financial world.
| X
This Is the root out of which II be-
| gins to seem possible, and even prob
able, that further checks upon repara-
tons will presently grow. Germany owes
the world annually two sorts of pay
ments. One Is reparations to foreign
governmental treasures. The other is
interest and the like to foreign private
pocketbooks. Today these two burdens
upon Germany are coming to be of ap-
proximately equal extent
Germany in our next fiscal year will
owe some $S80,000,000 in reparations to
| the governmental treasures of the al
lied powers. simultaneously 1t will owe
some $360,000,000 to foreign private
creditors, American, British, French,
Dutch and others.
1t is to be at this point most care
fully noted that there is no question of
4 any postponemcnt of payments to the
foreign private creditors of Germany
through any voluntary action by them.
| They come forward with no suggestion
whatsoever for any moratorium" in the
private business field. On the contrary,
they make it perfectly clear that unless
they get their money regularly and
punctually they will withdraw from all
further financing of Germany.
| Y ~
! But Germany critically needs further
financing. It is it's one hope of really
complete emergence from its present
1
hope of the world for making it pos
sible that the German prop of the
worldwide economic structure shall
again stand strongly.
That is the basic cause Of the
| worlds present willingness to abate
| reparations, in some degree, in order
that Germany's payments to its private
creditors abroad may continue Private
foreign capital in Germany, whether
| nf Araa IF IF
other nationality, is being given a
priority over the public foreign treas
uries to which Germany owes its repa-
rationS obligations. Public debts are
getting rolled out Of the path of pri-
vate debts.
That tendency, it is increasingly be-
lieved here, will get broadened and
strengthened with coming develop
foreshadowed by the extension OF
$100, 900 of temporary credit to the
German Central Bank by the Bank
of England, the Bank Of France, the
Bank for International Settlements and
the Federal Reserve banks of the
United States.
The effort will now ensue to finance
Germany, not merely temporarily, but
on a long-term basis; That was one
of the projects most earnestly pro-
NOTED by Montagu Norman, governor
of the Bank of England, during his
recent visit to this country. The with
drawals of foreign short-term credit
from Germany during the first part
of this month constituted one of the
severest blows then dealt to German
economic and political successful sur
vival. The step now contemplated Is
4 to huttress that survival with foreign
long-term abiding capital.
X 4
1t will then presently transpire tina
Germ any instead of merely owing
almost as much annually in private
debts as it owes in reparations, viii
owe more-and ultimately much more
1t will then be utterly unable to pay
it's private debts and reparations both
The pressure then for the reducing Of