Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-07-12
COMMODITY PRICE DECLINE
INCREASES GERMAN DEBT
Hoover Action Held Caused by Boost
in Obligations Based on Value of
Products Since Young Plan.

partleS DelleVe In not paying repara-
tons. The Fascists' program is to stop
paying the reparations but to continue
paying all other debts. The Com
munists, Of course, would pay no debts,
public or private.
The strength shown by these two
groups in the election of 1929 scared
German business men. bankers and
other conservatives. These, feeling their
money was unsafe In Germany, began
quietly to send it out Of the country
to Switzerland, to Holland, to the
United States.
This early flight Of the mark" was
arrested bJ realization that after all
neither the Communists nor the Pas-
ciSts had actually triumphed in the
election; that the German govern rent
was in conservative hands and that the
German people under normal condi-
| tons are an orderly and conservative
nation.
"Creditanstalt" in Crisis.
Then, about six months ago, in
neighboring Austria, great bank came
to grief, the "Creditanstalt," which did
about two-thirds of all the banking
business in Austria. The embarrass-
ment of the "Creditanstalt' put strain
en- the German banks, increased the
feeling of uneasiness in Germany and
started new fight of capital TO
America and elsewhere. This fight of
German capital to America was one of
the reasons for piling up all the gold
upon US: instead Of helping us it has,
so far. increased our economic diff
cukies.
Meantime the depression in Germany
grew worse. The German government,
In order to meet reparations payments,
was obliged to decree new and heavier
taxes. The decree. issued on June 6,
was accompanied by a manifesto. The
manifesto. addressed partly to the Ger
man people and partly to the weird.
had the effect of calling spectacular
attention to Germany's financial and
social difficulties
The next day. June 7, by an unfor-
tunate juxtaposition, was the date fixed
for a visit of the heads of the German
government TO the heads of the British
government. The world assumed that
the Germans were going to England to
declare their inability to pay repara-
tons. Actually this was not true. But
the incident increased the feeling Of
alarm about Germany.
Two Roads Seen.
| It was felt, both outside Germany
and within, that the country was des-
tined to take one or two radical roads;
either-as it has been expressed by q
German writer-'the Fascist road,
which means reparations debt repudia-
ton, or the route to thorough Com
road to complete collapse of the Ger
man social order"
In this apprehension about the politi-
cal future in Germany. the flight Of
capital became not merely a fight, but
a headlong rush. The Germans sent
their money to Switzerland, the United
States or elsewhere. Outsiders who had
loaned money to German industrial in
situations on ordinary 80 or go day notes
refused to renew the notes The
amounts ran into billions of dollars.
There was run on the Reichsbank the
equivalent of what in the United States
would be increditable, run on the Fed
eral Reserve system. The flight of capt.
tai and the paralysis of the German
banking system that had seemed i'm
minent about June 10. would have led to
complete paralysis of industry. and
paralysis of industry would have led. so
! it was universally supposed to a politi-
! cal result which would consist merely
| of contest between Fascism and Com
munism. Whichever might triumph the
effect upon the world would take COL
unns to tell.
Governments Worried.
The heads Of government in every
country in the world took alarmed no.
tice, excepting Russia, where the Soviet
leaders looked on in hopeful satisfac-
ton. The heads Of every national bank
ing system and all industrial leaders
were almost panic stricken. What the
/ collapse of the German Reiehsbank
would have meant to the banks and
banking systems Of the world (espe-
| ~ T5-or D-;G
only be imagined, probably, by those
familiar with tbs fabric of world
banking.
1t was estimated at the time that
the American banks had least to fear.
1t was thought. indeed. that the Amer
lean banking system would survive the
shock fairly readily. But 1t was very
certain that the collapse of Germany.
followed by echoes in France. Great
Britain and elsewhere, would prolons
our business depression here. Had Ger
many gone the way 1t seemed destined
to 60 about June Is, America could not
have hoped to get back to normal pros
perity for years to come.
| Indeed, the consequences upon us
might have been greater than mere
prolongation of business depression. A
member of the French cabinet In q
public speech on June IA said. THE
is civilization itself which is at stake"
On the political side some foresaw
Communism advancing to the Rhine
Those who did not see Communism
advancing to the Rhine saw Fascism
doing so. 1t was generally taken for
granted that Germany as a republic
was doomed. that it was sure to go
either Communist or Hitherto, the lat
ter meaning Fasctsn. The consequence
sensational.
Hoover Acts.
It was at this crisis that President
Hoover acted. That his action caused
startled surprise to America and the
world seems, after the event. difficult
to grasp. President Hoover, of course,
had information not available TO the
public. Some day when the message
Of President H1nIcTl&;Srg to Mr.. Hoover
is published, as we'll as the other mes
sages that raced across the Atlantic,
the world will know how imminent the
crisis was. The average American, the
newspaper reader in Spokane or Kansas
City, had no faintest knowledge % what
hung over. Il was like the veek1 pre-
ceding the opening Of the Great War
in the Summer Of 1914. This similarity
extended to the difficulty Of averttns
and the collapse Of Central Europe,
which was.
At the time, early In Juns. 1h@ Ia
; pressure was tensest. the occupant q
one OF the most important positions r.
the world. In osoniene a tempofar3
illustration Of his sz3ogta. put down DC
transatlantic telephone ene said. -
can understand now why tAs orses
War was not prevented. Hsrs ~ aSs
today confronted 6y an analogous
crisis Only international eo-orerstio,
can prevent IL. And you en- 80 hes:
hard II Is to get the co-opesDen0.