Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-07-12


there. The telling, so far, has been
from the dramatic standpoint, and dra-
matte 1t was. The full story, however
includes-indeed, starts from-a cause
that Is not dramatic, but very impor-
tant to the world and likely to be heard
from again, even in relatively placid
America.
In 1929 Owen D. Young and others
fixed $9,249 100000 (present capital
value) as the amount of reparations
Germany must pay. The amount at
the time was regarded as reasonable.
II was fixed in the spirit of reason,
chiefly by neutrals The common judg-
ment was that Germany could comfort
ably pay 1t and the interest on it in
the SO years she was given to pay the
annual installments.
Owes More Today.
Germany was required to pay IS, 249,-
900, 900. Germany up to date has actu-
ally paid 500, 900 900, as called for by
the Young plan. But Germany today
owes more than when she began-much
more.
This paradoxical statement Of the
fundamental difficulty Of Germany land
to less degree of ourselves and of the
world Is here adopted deliberately.
There need be no apology. The state
menu Is True. IL Will DC ulQOISSO Ny dIIy
economist or banker.
To understand the truth behind the
paradox It Is only necessary to reuern-
Der the changed value Of the dollar Cor
Of the reichsmark or any other gold
unit Of currency. It can be put in
way that any one can understand and
which will be particularly clear to
farmers.
In June, 1929, when ss,24s, 900 900
was fixed as what Germany must pay
a bushel Of wheat was worth, roughly
81. Il do not attempt to be exact)
But today a bushel of wheat Is worth.
roughly-let us say for the purpose of
simplicity, half dollar. Consequently,
when Germany's debt was fixed in 1929.
the debt was 9,249, 100000 bushels of
wheat Today, even after she has paid
her installments regularly for nearly
two years, her debt Is is,498, 100000
bushels Of wheat.
Twice as Much Copper.
To put it in terms Of another COM
modify, copper, Germany.s debt IN 1929
amounted to $1,000, 900, 900 pounds Of
copper at the then price Of 16 cents a
pound Today Germany's original debt
amounts to lis ,oo0.O00 900 pounds Of
copper at the present price of cents
pound.
For the purpose Of simplicity I have
stated Germany'S case worse than 1t
really is Not all commodities have
gone down so far as wheat and copper.
But all have gone down. The average.
stated very roughly, is about SO per
cent.
To explain a little further, returning
to wheat as an easily understood illus
tration, all the dollars in the world
have grown bigger. What was one
bushel dollar Is now a two-bushel dol
lar. Dollars are bigger and harder to
get.
This bears hard on all who are
obliged TO produce given number OF
dollars. Germany is not the only debtor
who suffers. Every private debtor in
the world suffers. The classic illustra-
ton is a farmer who gave a mortgage
on his farm at time when bushel OF
wheat would pay off dollar on the
mortgage-and finds the mortgage come
due Cor the interest on it, at a time
when 1t takes two bushels OF wheat to
pay dollar Of the mortgage.
Condition World Wide.
have dwelled upon this founda-
mental cause of Germany's difficulty
because the condition in varying degree
is world wide. It exists here in Amer
lea. If it should continue to exist in
such extreme degree it will give rise to
exciting politics. AS one result We
shall shortly hear of political devices
for cheapening the dollar, for increasing
the number of dollars, for making dol
lars easier to get. We shall hear, among
other things, projects for minting great
quantities Of silver into dollars. And
other projects for printing the words
lone dollar" on pieces of green paper
without reference to the paper being
transferable into gold.
The condition here described and now
existing in relatively mild degree eX-
listed in more severe degree in the
United States internationally from after
the Civil War until about 1896. 1t gave
rise to long series Of national political
contests centering about the size of the
dollar, to the ''greenbackers" (n1eaning
those who favored an abundance Of pa
per money, and the free silverites"
and their opponents, the gold bugs"
1t should be said at once that there
is no necessary reason to suppose We
shall have this kind of radical move
ment in America. There Is no necessary
reason to suppose the present high value
Of the dollar or the present low prices
of commodities will continue indefi-
nitely. If anything, the weight of prob
ability runs the other way-toward a
more normal value for the dollar, a more
| normal price range OF commodities and
more normal relation between the two.
For one reason there is now in the
United States just about half the gold
in the world. It IS more gold than we
or any other nation has had before. It
is more gold than we need or want. We
would prefer not to have so much. Other
nations for variety of causes, thrust it
| upon us.
| Gold Lowers Value.
The bearing of this excessive stock
Of gold en- what has just been said IS
this: Almost invariably. the presence
of so great stock of gold results in re-
ducing the value of the dollar and
causing prices Of commodities to go
up. A rise in the prices of commodities
may be more closely ahead of us than
we suppose.
People have short memories. The
present and recent conditions. the rise
| in the value Of the dollar and the de-
| crease In the prices OF commodities, to-
gether with accompanying depression,
has occurred before, within the mem
DRY Of every adult. It occurred In 1919
and 1920. It went to greater extremes
than 1t had gone during the last two
years. But everybody forgets that i'm,
mediately afterward. from 1921 until
1929, America had such an era Of
prosperity as 1t never had before, with
dollars easy to get and high wages sasy
to get. The price OF cotton, for ex-
ample. can double within the space Of q
year, it did 50 as recently as 1926.
BY every law Of economics We should
have ahead of US now, at a time OF
which only the beginning is uncertain
an era Of prosperity even greater than
the one from 1921 to 1929.
The beginning OF the Worldwide de.